KEMET CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
A summary of the expenses aggregated on the Consolidated Statements of Operations line item “Restructuring charges” in the fiscal years ended March 31, 2019, 2018 and 2017, is as follows (amounts in thousands):
Fiscal Year Ended March 31, 2019
The Company incurred $8.8 million in restructuring charges in the fiscal year ended March 31, 2019, including $2.8 million in personnel reduction costs and $6.0 million in relocation and exit costs. The personnel reduction costs of $2.8 million were primarily due to $0.9 million in costs related to headcount reductions in the TOKIN legacy group across various internal and operational functions, $0.3 million in severance charges related to personnel reductions in the Film and Electrolytic reportable segment resulting from a reorganization of the segment's management structure, and $1.6 million in costs related to reorganization in the Solid Capacitors reportable segment due to a permanent structural change driven by a decline of MnO2 products. The relocation and exit costs of $6.0 million were primarily due to $3.4 million in costs related to the Company's relocation of its tantalum powder equipment from Carson City, Nevada to its plant in Matamoros, Mexico and $2.3 million in costs related to the relocation of axial electrolytic production equipment from Granna, Sweden to its plant in Evora, Portugal.
Fiscal Year Ended March 31, 2018
The Company incurred $14.8 million in restructuring charges in the fiscal year ended March 31, 2018, including $12.6 million related to personnel reduction costs and $2.3 million of relocation and exit costs. The personnel reduction costs of $12.6 million were due to $5.2 million related to a voluntary reduction in force in the Film and Electrolytic reportable segment's Italian operations; $4.4 million related to a headcount reduction in the TOKIN legacy group across various internal and operational functions; $2.7 million in severance charges across various overhead functions in the Simpsonville, South Carolina office as these functions were relocated to the Company's new corporate headquarters in Fort Lauderdale, Florida; and $0.2 million in headcount reductions related to a European sales reorganization. The relocation and exit costs of $2.3 million included $0.9 million in lease termination penalties related to the relocation of global marketing, finance and accounting, and information technology functions to the Company's Fort Lauderdale office, $0.8 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant, $0.4 million in exit costs related to the shut-down of operations for KFM, and $0.1 million related to the transfer of certain Tantalum production from Simpsonville, South Carolina to Victoria, Mexico.
Fiscal Year Ended March 31, 2017
The Company incurred $5.4 million in restructuring charges in the fiscal year ended March 31, 2017, including $2.2 million related to personnel reduction costs and $3.2 million of relocation and exit costs. The personnel reduction costs of $2.2 million corresponded with the following: $0.3 million related to the consolidation of certain Solid Capacitor manufacturing in Matamoros, Mexico; $0.4 million for headcount reductions related to the shut-down of operations for KFM; $0.3 million related to headcount reductions in Europe (primarily Italy and Landsberg, Germany) corresponding with the relocation of certain production lines and laboratories to lower cost regions; $0.3 million for overhead reductions in Sweden; $0.3 million in U.S. headcount reductions related to the relocation of global marketing functions to the Company’s Fort Lauderdale, Florida office; $0.3 million in headcount reductions related to the transfer of certain Tantalum production from Simpsonville, South Carolina to Victoria, Mexico; $0.2 million in overhead reductions for the relocation of research and development operations from Weymouth, England to Evora, Portugal; and $0.1 million in manufacturing headcount reductions related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant. The relocation and exit costs of $3.2 million included $1.9 million in expenses related to contract termination costs related to the shut-down of operations for KFM; $0.6 million in expenses related to the relocation of the K-Salt operations to the existing Matamoros, Mexico plant; $0.6 million for transfers of Film and Electrolytic production lines and R&D functions to lower cost regions; and $0.1 million related to the transfer of certain Tantalum production from Simpsonville, South Carolina to Victoria, Mexico.

                          |        | Fiscal Years Ended March 31, |
------------------------- | ------ | ---------------------------- | ------
                          | 2019   | 2018                         | 2017
Personnel reduction costs | $2,823 | $12,587                      | $2,214
Relocation and exit costs | 5,956  | 2,256                        | 3,190
Restructuring charges     | $8,779 | $14,843                      | $5,404

KEMET CORPORATION SUBSIDIARIES
 Consolidated Financial Statements
 expenses Statements years 2019 2018 2017
 2019
 incurred $8. 8 million restructuring charges $2. 8 million personnel reduction $6. million relocation exit costs. personnel reduction costs. million $0. 9 million headcount reductions TOKIN. 3 million severance charges Film Electrolytic $1. 6 million Solid Capacitors MnO2. relocation exit costs $6. million $3. 4 million tantalum powder equipment Carson City Nevada Matamoros Mexico $2. 3 million axial electrolytic equipment Granna Evora.
 March 2018
 incurred $14. 8 million restructuring charges $12. 6 million personnel reduction $2. 3 million relocation exit costs. personnel reduction costs $12. 6 million $5. 2 million reduction Film Electrolytic $4. 4 million headcount reduction TOKIN.7 million severance charges Simpsonville South Carolina Fort Lauderdale. 2 million headcount reductions European sales reorganization. relocation exit costs $2. 3 million. 9 million lease termination penalties marketing finance Fort Lauderdale. 8 million K-Salt Matamoros Mexico. 4 million exit costs shut-down KFM. 1 million transfer Tantalum production Simpsonville Victoria Mexico.
 incurred $5. 4 million restructuring charges $2. 2 million personnel reduction $3. 2 million relocation exit costs. personnel reduction costs $2. 2 million. million consolidation Solid Capacitor manufacturing Matamoros Mexico. 4 million headcount reductions shut KFM. million headcount reductions Europe. million overhead reductions Sweden. million. headcount reductions marketing Fort Lauderdale. million transfer Tantalum. 2 million overhead reductions research development Weymouth Evora Portugal. 1 million manufacturing headcount reductions relocation K-Salt Matamoros.relocation exit $3. 2 million $1. 9 million contract termination KFM. 6 million K-Salt Matamoros. million Film Electrolytic lower cost. 1 million Tantalum production Simpsonville Victoria Mexico.
 Years Ended March
 Personnel reduction $2,823 $12,587 $2,214
 Relocation exit 2,256 3,190
 Restructuring charges $8,779 $14,843 $5,404


Operating expenses
nm—not meaningful
Research and development expenses
Research and development expenses increased $19.6 million in the year ended March 31, 2019 compared to the year ended March 31, 2018, which was primarily attributable to increases in personnel-related costs of $11.8 million, share-based compensation expense of $3.6 million and information technology and facility costs of $1.6 million.
Research and development expenses for the year ended March 31, 2019 as compared to the year ended March 31, 2018 were positively impacted by approximately $0.5 million primarily as a result of the strengthening of the U.S. dollar relative to the British pound.
Personnel-related cost increased primarily as a result of salaries and benefits associated with increased headcount throughout the year, share-based compensation expense increased primarily as a result of share option grants since the prior year and information technology and facility costs increased primarily as a result of increased headcount.
Sales and marketing expenses
Sales and marketing expenses increased $17.9 million in the year ended March 31, 2019 compared to the year ended March 31, 2018, which was primarily attributable to increases in information technology and facilities costs of $5.3 million, personnel-related costs of $4.0 million, share-based compensation expense of $3.4 million, professional services of $2.7 million, travel and other costs of $1.2 million and marketing costs of $1.1 million.
Sales and marketing expenses for the year ended March 31, 2019 as compared to the year ended March 31, 2018 were positively impacted by approximately $1.5 million primarily as a result of the strengthening of the U.S. dollar relative to the Australian dollar, South African rand and British pound. Information technology and facilities costs and travel and other costs increased primarily as a result of increased headcount.
Personnel-related costs increased primarily as a result of salaries and benefits associated with increased headcount and commissions, partially offset by the impact of adopting ASC 606, which resulted in capitalizing $13.8 million of commissions that would have been expensed under the prior accounting rules. Share-based compensation expense increased primarily as a result of share option grants since the prior year. Professional services costs increased primarily due to increased consulting fees.
General and administrative expenses
General and administrative expenses increased $16.8 million in the year ended March 31, 2019 compared to the year ended March 31, 2018, which was primarily attributable to increases in personnel-related costs of $6.3 million, share-based compensation expense of $5.8 million, information technology and facilities costs of $1.9 million, professional services costs of $1.2 million and litigation-related expenses of $1.0 million. Personnel-related costs increased primarily as a result of salaries and benefits associated with increased headcount.
Share-based compensation expense increased primarily as a result of share option grants since the prior year and to a lesser extent the impact of share option modifications. Information technology and facility costs increased primarily as a result of increased headcount. Professional services costs increased primarily due to acquisition-related expenses.
Restructuring and Impairment of long-lived assets
In the second quarter of fiscal 2019, we recorded a revision to restructuring expense of $0.2 million related to the exit of our Watertown, Massachusetts corporate office space. In the fourth quarter of fiscal 2018, upon the exit of our Watertown, Massachusetts corporate office space, we recorded a restructuring charge of $0.8 million for the remaining non-cancelable rent and estimated operating expenses for the vacated premises, net of sublease rentals and we recorded a non-cash impairment charge of $1.7 million primarily related to leasehold improvements.

                                    | Year ended March 31, |          | Period-to-period change |
----------------------------------- | -------------------- | -------- | ----------------------- | --------
                                    | 2019                 | 2018     | Amount                  | % Change
                                    |                      |          | (dollars in thousands)  |
Operating expenses:                 |                      |          |                         |
Research and development            | $57,939              | $38,373  | $19,566                 | 51%
Sales and marketing                 | 139,194              | 121,246  | 17,948                  | 15%
General and administrative          | 53,759               | 36,989   | 16,770                  | 45%
Impairment of long-lived assets     | —                    | 1,712    | (1,712)                 | nm
Restructuring                       | (170)                | 832      | (1,002)                 | nm
Total operating expenses            | $250,722             | $199,152 | $51,570                 | 26%

Operating expenses
 Research development expenses
 increased $19. 6 million March 31, 2019 personnel-related costs $11. 8 million share-based compensation expense $3. 6 million information technology facility costs $1. 6 million.
 impacted $0. 5 million strengthening U. dollar.
 Personnel-related cost salaries increased headcount share-based compensation expense share option grants information technology facility costs headcount.
 Sales marketing expenses
 increased $17. 9 million information technology facilities costs $5. 3 million personnel-related costs $4. 0 million share-based compensation expense $3. 4 million professional services $2. 7 million travel other costs $1. 2 million marketing costs $1. 1 million.
 impacted $1. 5 million strengthening. dollar rand. Information technology facilities travel increased increased headcount.
 Personnel-related costs salaries benefits headcount commissions adopting ASC $13. 8 million commissions. Share-based compensation expense increased share option grants. Professional services costs consulting fees.
administrative expenses
 increased $16. 8 million March 2019 2018 personnel $6. 3 million share-based compensation $5. 8 million information technology facilities $1. 9 million professional services $1. 2 million litigation $1. 0 million. Personnel salaries benefits headcount.
 Share-based compensation share option grants modifications. Information technology facility headcount. Professional services acquisition expenses.
 Restructuring Impairment-lived assets
 second quarter 2019 restructuring expense $0. 2 million exit Watertown Massachusetts office. fourth quarter 2018 restructuring charge $0. 8 million-cancelable rent vacated premises non impairment charge $1. 7 million leasehold improvements.
 March Period-period change
 %
 Operating expenses
 Research development $57,939 $38,373  $19,566 51%
 Sales marketing 139,194
 General administrative 53,759 36,989 16,770 45%
assets 1,712
 Restructuring 832
 operating expenses $250,722 $199,152 $51,570 26%


Cash flows
The following table summarizes our cash flow activities in fiscal 2019 compared to fiscal 2018.
Our cash flow activities in fiscal 2018 compared to fiscal 2017 were discussed under Liquidity, Capital Resources and Cash Requirement in Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the fiscal year ended March 30, 2018.

                                                 | Fiscal Year |
------------------------------------------------ | ----------- | --------
(In millions)                                    | 2019        | 2018
Net cash provided by (used in):                  |             |
Operating activities                             | $1,495      | $957
Investing activities                             | $(241)      | $(21)
Financing activities                             | $(1,209)    | $(3,475)
Increase (decrease) in cash and cash equivalents | $17         | $(2,473)

 table summarizes 2019 2018.
 discussed Liquidity Capital Resources Cash Requirement Item 7. Analysis Financial Condition Results Operations Annual Report Form 10-K year March 30 2018.
 millions
 Net cash
 Operating $1,495 $957
 Investing $(241)
 Financing $(1,209)(3,475)
 Increase cash equivalents $17 $(2,473)


Item 6. Selected Financial Data
The following table sets forth selected consolidated financial data for each of the fiscal years ended June 30, 2019, 2018, 2017, 2016 and 2015 derived from the Company’s audited financial statements (in thousands, except per share amounts). The consolidated financial data as of and for the years ended June 30, 2015 are derived from the audited financial statements which have not been adjusted for the adoption of Accounting Standards update 2014- 09, Revenue from Contracts with Customers (Topic 606). These tables should be reviewed in conjunction with the Consolidated Financial Statements in Item 8 and related Notes, as well as Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Historical results may not be indicative of future results.
(1) Operating income (loss) include the following operating expenses (in thousands):
(2)  The significant increase in net revenues during the year ended June 30, 2018 was primarily due to the acquisitions of the Campus Fabric and Data Center Businesses.

                                                                |           | Year Ended June 30, |          |           |
--------------------------------------------------------------- | --------- | ------------------- | -------- | --------- | ---------
                                                                | 2019      | 2018                | 2017     | 2016      | 2015
Consolidated Statements of Operations Data:                     |           |                     |          |           |
Net revenues                                                    | $995,789  | $983,142 (2)        | $607,084 | $519,834  | $552,940
Operating income (loss) (1)                                     | $(14,726) | $(38,210)           | $6,040   | $(30,029) | $(62,994)
Net loss                                                        | $(25,853) | $(46,792)           | $(1,744) | $(36,363) | $(71,643)
Net loss per share – basic                                      | $(0.22)   | $(0.41)             | $(0.02)  | $(0.35)   | $(0.72)
Net loss per share – diluted                                    | $(0.22)   | $(0.41)             | $(0.02)  | $(0.35)   | $(0.72)
Shares used in per share calculation – basic                    | 117,954   | 114,221             | 108,273  | 103,074   | 99,000
Shares used in per share calculation – diluted                  | 117,954   | 114,221             | 108,273  | 103,074   | 99,000

6. Selected Financial Data
 table consolidated financial data fiscal years June 2019 2018 2017 2016 2015 audited financial statements. data 2015 not adjusted Accounting Standards update 2014- 09 Revenue Contracts Customers 606). tables reviewed Consolidated Financial Statements Item 8 Item 7 Discussion Analysis Financial Condition Results Operations. Historical results future results.
 Operating income expenses
 increase net revenues June 30 2018 due acquisitions Campus Fabric Data Center Businesses.
 June 30
 2019 2018 2017 2016 2015
 Consolidated Statements Operations Data
 Net revenues $995,789 $983,142 $607,084 $519,834 $552,940
 Operating income (loss $(14,726) $(38,210),994)
 Net loss $(25,853) $(46,792),363(71,643)
 Net loss per share.
 diluted.. 02. 35. 72
 117,954 114,221 108,273 103,074 99,000
 diluted 117,954 114,221 108,273 103,074 99,000


The following table summarizes the Qdoba results for each period (in thousands, except per share data):
Selling, general and administrative expenses presented in the table above include corporate costs directly in support of Qdoba operations. All other corporate costs were classified in results of continuing operations. Our credit facility required us to make a mandatory prepayment (“Qdoba Prepayment”) on our term loan upon the closing of the Qdoba Sale, which was $260.0 million. Interest expense associated with our credit facility was allocated to discontinued operations based on our estimate of the mandatory prepayment that was made upon closing of the Qdoba Sale.
Lease guarantees — While all operating leases held in the name of Qdoba were part of the Qdoba Sale, some of the leases remain guaranteed by the Company pursuant to one or more written guarantees (the “Guarantees”). In the event Qdoba fails to meet its payment and performance obligations under such guaranteed leases, we may be required to make rent and other payments to the landlord under the requirements of the Guarantees. Should we, as guarantor of the lease obligations, be required to make any lease payments due for the remaining term of the subject lease(s) subsequent to March 21, 2018, the maximum amount we may be required to pay is approximately$32.1 million as ofSeptember 29, 2019. The lease terms extend for a maximum of approximately16 more years as of September 29, 2019, and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods. In the event that we are obligated to make payments under the Guarantees, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. Qdoba continues to meet its obligations under these leases and there have not been any events that would indicate that Qdoba will not continue to meet the obligations of the leases. As such, we have not recorded a liability for the Guarantees as of September 29, 2019 as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.

                                                                           | 2019   | 2018      | 2017
-------------------------------------------------------------------------- | ------ | --------- | ---------
Company restaurant sales                                                   | $—     | $192,620  | $436,558
Franchise revenues                                                         | —      | 9,337     | 20,065
Company restaurant costs (excluding depreciation and amortization)         | —      | (166,122) | (357,370)
Franchise costs (excluding depreciation and amortization)                  | —      | (2,338)   | (4,993)
Selling, general and administrative expenses                               | 174    | (19,286)  | (36,706)
Depreciation and amortization                                              | —      | (5,012)   | (21,500)
Impairment and other charges, net                                          | (262)  | (2,305)   | (15,061)
Interest expense, net                                                      | —      | (4,787)   | (9,025)
Operating (loss) earnings from discontinued operations before income taxes | (88)   | 2,107     | 11,968
(Loss) gain on Qdoba Sale                                                  | (85)   | 30,717    | —
(Loss) earnings from discontinued operations before income taxes           | (173)  | 32,824    | 11,968
Income tax benefit (expense)                                               | 2,863  | (15,726)  | (4,518)
Earnings from discontinued operations, net of income taxes                 | $2,690 | $17,098   | $7,450
Net earnings per share from discontinued operations:                       |        |           |
Basic                                                                      | $0.10  | $0.60     | $0.24
Diluted                                                                    | $0.10  | $0.59     | $0.24

table summarizes Qdoba results each period share
 Selling general administrative expenses include corporate costs Qdoba operations. other corporate costs classified results continuing operations. credit facility required mandatory prepayment (“Qdoba on term loan Sale $260. 0 million. Interest expense allocated to discontinued operations based estimate prepayment.
 Lease guarantees operating leases Qdoba part Sale some guaranteed Company. Qdoba fails meet payment obligations leases may required make rent payments to landlord under. payments 2018 maximum approximately$32. 1 million as ofSeptember 29, 2019. lease terms extend approximately16 more years as September 29, 2019 remain guarantor extended renewal periods. obligated payments under Guarantees exposure limited due to contractual protections recourse lease agreements Qdoba Purchase Agreement requirement landlord mitigate damages default indemnity from Buyer. Qdoba continues obligations under leases events.recorded liability Guarantees September 29, 2019 Qdoba defaulting less probable.
 restaurant sales $192,620 $436,558
 Franchise revenues 9,337 20,065
 restaurant costs (166,122 (357,370
 costs (2,338) (4,993)
 Selling administrative expenses (19,286) (36,706)
 Depreciation amortization (5,012) (21,500
 Impairment charges (2,305) (15,061)
 Interest expense (4,787) (9,025)
 earnings discontinued operations taxes 11,968
 Qdoba Sale 30,717
 earnings 32,824 11,968
 Income tax benefit 2,863 (15,726) (4,518)
 Earnings net taxes $2,690 $17,098 $7,450
 earnings share
.
.


Billings
Billings represent the value of products and services invoiced to customers after receiving a purchase order from the customer and delivering products and services to them, or for which there is no right to a refund. Billings do not equate to statutory revenue.

                                      | Year-ended 31 March 2019 | Year-ended 31 March 2018 Restated See note 2
------------------------------------- | ------------------------ | --------------------------------------------
                                      | $M                       | $M
Revenue                               | 710.6                    | 639.0
Net deferral of revenue (see note 23) | 49.7                     | 129.6
Billings                              | 760.3                    | 768.6
Currency revaluation                  | 25.9                     | 18.7
Constant currency billings            | 786.2                    | 787.3

Billings
 represent value products services invoiced no refund. equate statutory revenue.
 Year-ended 31 March 2019 March 2018
 Revenue 710. 6 639.
 deferral 49. 7 129. 6
 760. 3. 6
 Currency revaluation 25. 9 18. 7
 billings 786. 2 787.


5. Operating Expenses
Notes: (1) Includes equipment costs related to ICT services.
(2) Includes supplies and services, as well as rentals of properties and mobile base stations.

                                     | Group    |
------------------------------------ | -------- | --------
                                     | 2019     | 2018
                                     | S$ Mil   | S$ Mil
Cost of equipment sold (1)           | 3,106.1  | 2,696.7
Other cost of sales                  | 2,767.1  | 2,499.2
Staff costs                          | 2,597.3  | 2,760.1
Selling and administrative costs (2) | 2,472.6  | 2,536.6
Traffic expenses                     | 1,573.4  | 1,615.8
Repair and maintenance               | 388.0    | 367.9
                                     | 12,904.5 | 12,476.3

. Operating Expenses
 equipment ICT services.
 supplies services rentals mobile base stations.
 equipment 3,106. 2,696.
 2,767. 2,499.
 Staff 2,597. 2,760.
 Selling administrative costs 2,472. 2,536.
 Traffic expenses 1,573. 1,615.
 Repair maintenance 388.
 12,904. 12,476.


5. Remuneration continued
Remuneration at a glance 2019
How we performed
The above figures exclude the acquisition of Thermocoax.

Remuneration key performance indicator  | 2019 actual | 2019 threshold | 2019 target | 2019 maximum | Remuneration measure
--------------------------------------- | ----------- | -------------- | ----------- | ------------ | ----------------------
Group operating profit (£m)             | 277.3       | 256.7          | 270.3       | 283.8        | Annual Incentive Plan
Group cash generation (£m)              | 296.4       | 270.7          | 285.0       | 299.2        | Annual Incentive Plan
Group ROCE (%)                          | 54.5        | 50.1           | 52.7        | 55.3         | Annual Incentive Plan
2017-2019 EPS (%)                       | 57.5        | 27.6           | N/A         | 52.3         | Performance Share Plan
2017-2019 relative TSR (percentile TSR) | 94th        | 50th           | N/A         | 75th         | Performance Share Plan

. Remuneration
 2019
 figures exclude acquisition Thermocoax.
 performance threshold target maximum
 Group operating profit (£m 277. 256. 270. 283. 8 Incentive
 cash generation (£m 296. 270. 7 285. 299. 2
 ROCE 54. 5 50. 52. 7 55. 3
 EPS (%) 57. 5 27. 6 52. 3 Share Plan
 TSR 94th 50th/A 75th


Note 8 Income taxes
The following table shows the significant components of income taxes deducted from net earnings.

FOR THE YEAR ENDED DECEMBER 31                                                   | 2019    | 2018
-------------------------------------------------------------------------------- | ------- | -----
Current taxes                                                                    |         |
Current taxes                                                                    | (761)   | (775)
Uncertain tax positions                                                          | 6       | 8
Change in estimate relating to prior periods                                     | 22      | 12
Deferred taxes                                                                   |         |
Deferred taxes relating to the origination and reversal of temporary differences | (322)   | (352)
Change in estimate relating to prior periods                                     | (8)     | 8
Recognition and utilization of loss carryforwards                                | (106)   | 44
Effect of change in provincial corporate tax rate                                | 27      | –
Uncertain tax positions                                                          | 9       | 60
Total income taxes                                                               | (1,133) | (995)

Income taxes
 table shows deducted net earnings.
 YEAR ENDED DECEMBER 31 2019
 Current taxes
 (761) (775)
 Uncertain tax positions
 Change estimate periods
 Deferred taxes
 differences (322) (352)
 Recognition loss carryforwards (106)
 provincial corporate tax rate
 Uncertain tax positions 9
 Total income taxes (1,133)


Other intangible assets at fiscal year ends 2019 and 2018 consisted of the following:
Goodwill, trademarks and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. The Company’s retail reporting unit recorded intangible asset (trademarks and tradenames) impairment charges of approximately $2.9 million during fiscal 2019 and goodwill impairment charges of approximately $1.9 million during fiscal 2018 when it was determined that the carrying values of these assets exceeded their fair values. These impairment charges arose from a range of considerations including, but not limited to, heightened competition in the industry, retail sector market conditions, and earning shortfalls which impacted the Company’s projections of future cash flows to be generated. These impairment charges were recorded in the Company’s consolidated statement of operations as a component of operating income.
Goodwill recorded on the Company’s consolidated balance sheet represents amounts allocated to its wholesale reporting unit which totaled $4.4 million at both September 2019 and September 2018. The Company determined that the estimated fair value of its wholesale reporting unit exceeded its carrying value at both September 2019 and September 2018.

                                                                                | September 2019 | September 2018
------------------------------------------------------------------------------------------------------------------------------------------------- | -------------- | --------------
Trademarks and tradenames (Retail Segment)                                                                                | $500,000       | $3,373,269
ustomer relationships (Wholesale Segment) (less accumulated amortization of approximately $2.1 million at both September 2019 and September 2018) | —              | 41,667
                                                                                | $  500,000     | $3,414,936

intangible assets 2019 2018
 Goodwill trademarks tradenames indefinite lives no amortization. retail reporting unit recorded $2. 9 million 2019 goodwill $1. 9 million 2018 carrying values exceeded fair values. charges competition retail market conditions earning shortfalls future cash flows. recorded consolidated statement operating income.
 Goodwill wholesale reporting unit totaled $4. 4 million September 2019 2018. estimated fair value exceeded carrying value 2019 2018.
 Trademarks tradenames (Retail $500,000 $3,373,269
 ustomer relationships (Wholesale Segment accumulated amortization $2. 1 million September 2019 2018) 41,667
 500,000 $3,414,936


Share Repurchase
In September 2015, our Board of Directors authorized a program to repurchase up to $150.0 million of our common stock over a thirty-month period. In November 2017, our Board of Directors approved an extension of the share repurchase program to December 2019 from its original maturity of March 2018. In May 2018, our Board of Directors approved a $50 million increase in its authorization to repurchase shares of our common stock under this same program.
On December 18, 2019, the Board of Directors authorized to remove the expiration date to the Company’s share repurchase program and increase the authorized amount by $25.1 million. As of December 31, 2019, the Company is authorized to repurchase shares of the Company’s common stock of up to a total of $50.0 million.
ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
In order to execute the repurchase of shares of our common stock, the Company periodically enters into stock repurchase agreements. During the years ended December 31, 2019, 2018 and 2017 the Company has repurchased the following shares of common stock:

                                         |      | Years Ended December 31, |
---------------------------------------- | ---- | ------------------------ | -------
(in thousands, except per share amounts) | 2019 | 2018                     | 2017
Amount paid to repurchase shares         | $  — | $95,125                  | $29,993
Number of shares repurchased             | —    | 1,696                    | 422
Average repurchase price per share       | $  — | $56.07                   | $71.07

Share Repurchase
 September 2015, Board authorized repurchase $150. 0 million common stock thirty-month period. November 2017 approved extension repurchase program December 2019 March 2018. May 2018 approved $50 million increase authorization repurchase.
 December 18, 2019 expiration date share repurchase program amount $25. 1 million. December 31, 2019 authorized repurchase $50. 0 million.
 ADVANCED ENERGY INDUSTRIES. CONSOLIDATED FINANCIAL STATEMENTS
 Company enters stock repurchase agreements. December 31, 2019 2018 2017 repurchased shares
 Amount paid repurchase shares $95,125  $29,993
 shares repurchased 1,696  422
 Average repurchase price per share $56. $71.


OPERATING EXPENSES
(1) Fiscal 2019 average foreign exchange rate used for translation was 1.3255 USD/CDN.
(2) 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.
(3) Fiscal 2019 actuals are translated at the average foreign exchange rate of fiscal 2018 which was 1.2773 USD/CDN.
Fiscal 2019 operating expenses increased by 7.3% (5.4% in constant currency) mainly from:
• growth in the American broadband services segment mainly due to the impact of the MetroCast acquisition which was included in operating expenses for only an eight-month period in the prior year combined with higher programming costs, additional headcount to support growth, higher marketing initiatives to drive primary service units growth and the FiberLight acquisition; and
• additional costs in Inter-segment eliminations and other resulting from the timing of corporate projects and initiatives; partly offset by
• lower operating expenses in the Canadian broadband services segment mainly attributable to lower programming costs resulting from a lower level of primary service units and lower compensation expenses resulting from an operational optimization program implemented in the first half of fiscal 2019, partly offset by higher marketing initiatives, additional headcount costs in the first quarter of fiscal 2019 to support the stabilization phase of the new customer management system as well as retroactive costs related to higher rates than expected established by the Copyright Board of Canada.
For further details on the Corporation’s operating expenses, please refer to the "Segmented operating and financial results" section.

Years ended August 31,                        | 2019 (1)  | 2018 (2)  | Change | Change in constant currency (3) | Foreign exchange impact (3)
--------------------------------------------- | --------- | --------- | ------ | ------------------------------- | ---------------------------
(in thousands of dollars, except percentages) | $         | $         | %      | %                               | $
Canadian broadband services                   | 606,286   | 618,886   | (2.0)  | (2.2)                           | 1,102
American broadband services                   | 571,208   | 478,172   | 19.5   | 15.2                            | 20,522
Inter-segment eliminations and other          | 26,486    | 24,567    | 7.8    | 7.8                             | 12
                                              | 1,203,980 | 1,121,625 | 7.3    | 5.4                             | 21,636

OPERATING EXPENSES
 Fiscal 2019 average foreign exchange rate 1. 3255 USD/CDN.
 Fiscal 2018 restated IFRS 15 change accounting policy results Cogeco Peer 1 discontinued
 operations. consult "Accounting policies "Discontinued operations sections.
 Fiscal 2019 translated average foreign exchange rate 1. 2773 USD/CDN.
 operating expenses increased 7. 3% (5. 4% constant currency
 growth American broadband services segment MetroCast acquisition higher programming costs headcount marketing initiatives FiberLight acquisition
 additional costs Inter-segment eliminations corporate projects initiatives offset
 lower operating expenses Canadian broadband services lower programming costs compensation expenses operational optimization program marketing initiatives additional headcount costs retroactive costs higher rates Copyright Board Canada.
 "Segmented operating financial results section.
 Years ended August 31, 2019 2018 Change constant currency Foreign exchange impact
 Canadian broadband services 606,286 618,886.1,102
 broadband,208,172 19. 15. 20,522
 26,486 24,567 7. 12
 1,203,980 1,121,625. 21,636


NOTE L – INCOME TAXES
On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact the Company: (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; (4) limiting the deductibility of certain executive compensation; and (5) limiting certain other deductions.
The Company follows ASC 740-10 “Income Taxes” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.
A reconciliation of tax expense computed at the statutory federal tax rate on loss from operations before income taxes to the actual income tax (benefit) /expense is as follows:

                                                      | 2019       | 2018
----------------------------------------------------- | ---------- | ----------
Tax benefit computed at the statutory rate            | $(427,244) | $(631,497)
State taxes                                           | 6,525      | 6,874
Book expenses not deductible for tax purposes         | 2,980      | 2,882
Rate Change                                           | 45,656     | –
Other                                                 | 2,517      | (27,286)
                                                      | (369,566)  | (649,027)
Change in valuation allowance for deferred tax assets | 269,203    | 658,650
Income tax (benefit) expense                          | $(100,363) | $9,623

INCOME TAXES
 December 22, 2017 U. government enacted tax Tax Cuts Jobs Act. tax code. federal corporate income tax rate 35 percent to 21 percent alternative minimum tax deductible interest expense executive compensation deductions.
 Company follows ASC 740-10 deferred tax liabilities assets future tax consequences. deferred tax liabilities assets determined financial statements tax bases tax rates.
 reconciliation tax expense statutory federal tax rate
 2019 2018
 Tax benefit $(427,244) $(631,497)
 State taxes 6,525 6,874
 expenses not deductible 2,980 2,882
 Rate Change 45,656
 2,517,286)
 (369,566 (649,027)
 valuation allowance deferred tax assets 269,203 658,650
 Income tax (benefit expense $(100,363) $9,623


The employee pension plan mandated by the Labor Standards Act of the R.O.C. is a defined benefit plan. The pension benefits are disbursed based on the units of service years and average monthly salary prior to retirement according to the Labor Standards Act. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year and the total units will not exceed 45 units.
The Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited with the Bank of Taiwan under the name of a pension fund supervisory committee. The pension fund is managed by the government’s designated authorities and therefore is not included in the Company’s consolidated financial statements. For the years ended December 31, 2017, 2018 and 2019, total pension expenses of NT$80 million, NT$69 million and NT$59 million, respectively, were recognized by the Company.
Movements in present value of defined benefit obligation during the year:

                                                                | For the years ended December 31, |
--------------------------------------------------------------- | -------------------------------- | ------------------
                                                                | 2018                             | 2019
                                                                | $NT (In Thousands)               | $NT (In Thousands)
Defined benefit obligation at beginning of year                 | $(5,671,058)                     | $(5,620,509)
Items recognized as profit or loss:                             |                                  |
Service cost                                                    | (24,477)                         | (21,043)
Interest cost                                                   | (61,247)                         | (51,146)
Subtotal                                                        | (85,724)                         | (72,189)
Remeasurements recognized in other comprehensive income (loss): |                                  |
Arising from changes in financial assumptions                   | (91,350)                         | (114,976)
Experience adjustments                                          | (5,907)                          | 180,095
Subtotal                                                        | (97,257)                         | 65,119
Benefits paid                                                   | 233,530                          | 216,510

employee pension plan Labor Standards Act. defined benefit. benefits disbursed service years average salary retirement. Two units first 15 years one after 15th year total not exceed 45.
 Company contributes 2% salaries wages pension fund Bank of Taiwan. managed not included financial statements. 2017 2018 2019 pension expenses NT$80 million NT$69 million NT$59 million recognized.
 value defined benefit obligation
 benefit obligation beginning year $(5,671,058) $(5,620,509)
 profit loss
 Service cost (24,477)
 Interest cost (61,247) (51,146
 Subtotal (85,724) (72,189
 Remeasurements
 changes financial assumptions (91,350) (114,976)
 Experience adjustments (5,907) 180,095
 Subtotal (97,257) 65
 Benefits paid 233,530


Selling, General and Administrative
The increase in selling, general and administrative in fiscal 2019 compared to fiscal 2018 was primarily due to higher variable costs on increased sales volumes, primarily related to increases in headcount costs and employee incentive compensation, as well as additional costs from the FRT acquisition, offset partially by a decrease in the amortization of intangible assets.

                                    |                   | Fiscal Year Ended      |          |
----------------------------------- | ----------------- | ---------------------- | -------- | --------
                                    | December 28, 2019 | December 29, 2018      | $ Change | % Change
                                    |                   | (Dollars in thousands) |          |
Selling, general and administrative | $106,335          | $99,254                | $7,081   | 7.1 %
% of revenues                       | 18.0 %            | 18.7 %                 |          |
                                    |                   | Fiscal Year Ended      |          |
                                    | December 29, 2018 | December 30, 2017      | $ Change | % Change
                                    |                   | (Dollars in thousands) |          |
Selling, general and administrative | $99,254           | $95,489                | $3,765   | 3.9 %
% of revenues                       | 18.7 %            | 17.4 %                 |          |

Selling General Administrative
 increase 2019 2018 due higher variable costs increased sales volumes headcount costs employee incentive compensation FRT acquisition amortization intangible assets.
 Fiscal Year Ended
 December 28, 2019 December 29, 2018
 Selling administrative $106,335 $99,254 $7,081. %
 18.
 Fiscal Year Ended
 December 29, 2018 30, 2017
 Selling administrative $99,254 $95,489 $3,765 3. 9 %
 18. 7 % 17. 4 %


* 2019 results were impacted by Red Hat purchase accounting and acquisition-related activity.
Total expense and other (income) increased 13.7 percent in the fourth quarter with an expense-to-revenue ratio of 32.6 percent compared to 28.7 percent in the fourth quarter of 2018. The year-to-year increase was a result of higher spending (15 points) driven by Red Hat (15 points) and higher acquisitionrelated charges and amortization of acquired intangible assets associated with the Red Hat transaction (4 points), partially offset by higher divestiture gains (3 points) and lower non-operating retirement-related costs (3 points).
Total operating (non-GAAP) expense and other income increased 14.7 percent year to year primarily driven by the higher spending, partially offset by the divestiture gains, as described above.

($ in millions)                                 |        |        |
----------------------------------------------- | ------ | ------ | ----------------------------------
For the fourth quarter:                         | 2019   | 2018   | Yr.-to-Yr. Percent/ Margin Change*
Total consolidated expense and other (income)   | $7,107 | $6,253 | 13.7%
Non-operating adjustments                       |        |        |
Amortization of acquired intangible assets      | (294)  | (106)  | 176.0
Acquisition-related charges                     | (27)   | (13)   | 104.7
Non-operating retirement related (costs)/income | (196)  | (387)  | (49.4)
Operating (non-GAAP) expense and other (income) | $6,591 | $5,746 | 14.7%
Total consolidated expense-to-revenue ratio     | 32.6%  | 28.7%  | 3.9pts
Operating (non-GAAP) expense-to-revenue ratio   | 30.3%  | 26.4%  | 3.9pts

2019 results impacted Red Hat acquisition.
 expense increased. 7 percent fourth quarter-to-revenue ratio 32. 6 percent 28. 7 percent 2018. increase higher spending Red Hat charges amortization assets offset divestiture gains lower non retirement costs.
 operating (non-GAAP expense income increased. 7 percent higher spending divestiture gains.
 fourth quarter 2018.
 consolidated expense $7,107 $6,253 13. 7%
 Non-operating adjustments
 Amortization intangible assets.
 Acquisition charges.
 Non-operating retirement.
 Operating (non-GAAP expense $6,591 $5,746 14. 7%
 consolidated expense-to ratio 32. 6% 28. 7%.
 (non-GAAP expense-to-revenue ratio. 3% 26. 4%.


Upon adoption, the Company recorded a cumulative effect adjustment of $139.4 million, net of tax adjustment of $21.0 million, which increased the June 25, 2018 opening retained earnings balance on the Condensed Consolidated Balance Sheet, primarily as a result of changes in the timing of recognition of system sales. Under ASC 606, the Company recognizes revenue from sales of systems when the Company determines that control has passed to the customer which is generally (1) for products that have been demonstrated to meet product specifications prior to shipment upon shipment or delivery; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized upon completion of installation and receipt of customer acceptance; (3) for transactions where legal title does not pass upon shipment or delivery and the Company does not have a right to payment, revenue is recognized when legal title passes to the customer and the Company has a right to payment, which is generally at customer acceptance.
The impact of adoption of ASC 606 on the Company’s Consolidated Statement of Operations and Consolidated Balance Sheet was as follows:
Except as disclosed above, the adoption of ASC 606 did not have a significant impact on the Company’s Consolidated Statement of Operations for the year ended June 30, 2019.
In January 2016, the FASB released ASU 2016-01, “Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities.” The FASB issued a subsequent amendment to the initial guidance in February 2018 within ASU 2018-03. These amendments change the accounting for and financial statement presentation of equity investments, other than those accounted for under the equity method of accounting or those that result in consolidation of the investee. The amendments provide clarity on the measurement methodology to be used for the required disclosure of fair value of financial instruments measured at amortized cost on the balance sheet and clarifies that an entity should evaluate the need for a valuation allowance on deferred tax assets related to available-for-sale securities in combination with the entity’s other deferred tax assets, among other changes. The Company’s adoption of this standard in the first quarter of fiscal year 2019 did not have a material impact on its Consolidated Financial Statements.
In August 2016, the FASB released ASU 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments.” The amendment provides and clarifies guidance on the classification of certain cash receipts and cash payments in the statement of cash flows to eliminate diversity in practice. The Company adopted the standard update in the first quarter of fiscal year 2019, using a retrospective transition method. The Company’s adoption of this standard did not have a material impact on its Consolidated Financial Statements.
In October 2016, the FASB released ASU 2016-16, “Income Tax – Intra-Entity Transfers of Assets Other than Inventory.” This standard update improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The Company adopted this standard in the first quarter of fiscal year 2019 using a modified-retrospective approach through a cumulative-effect adjustment directly to retained earnings. The Company’s adoption of this standard resulted in a $0.4 million decrease to retained earnings and a corresponding $0.4 million offset to other assets on its Consolidated Financial Statements.
In November 2016, the FASB released ASU 2016-18, “Statement of Cash Flows – Restricted Cash.” This standard update requires that restricted cash and restricted cash equivalents be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The Company adopted this standard in the first quarter of fiscal year 2019, using a retrospective transition method to each period presented. The adoption of this standard did not have a material impact on its Consolidated Financial Statements.
In February 2018, the FASB released ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard update addresses a specific consequence of the Tax Cuts and Jobs Act (“U.S. Tax Reform”) and allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from U.S. tax reform. Consequently, the update eliminates the stranded tax effects that were created as a result of the historical U.S. federal corporate income tax rate to the newly enacted U.S. federal corporate income tax rate. The Company adopted this standard in the first quarter of fiscal year 2019 using a modified-retrospective approach through a cumulative-effect adjustment directly to retained earnings. The adoption of this standard resulted in a $2.2 million increase to retained earnings, with a corresponding $2.2 million decrease to other comprehensive income.
In August 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to eliminate, integrate, update or modify certain of its disclosure requirements. The amendments are part of the SEC’s efforts to improve disclosure effectiveness and were focused on eliminating disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded. The Company adopted these amendments in the first quarter of fiscal Year 2019. The adoption of these amendments resulted in minor changes within its Consolidated Financial Statements.

                   |             | Year Ended                 |
------------------ | ----------- | -------------------------- | -------------------------------
                   |             | June 30, 2019              |
                   | As Reported | Without Adoption of ASC606 | Effect of Change Higher/(Lower)
                   |             | (in thousands)             |
Revenue            | $9,653,559  | $9,049,790                 | $603,769
Cost of goods sold | $5,295,100  | $5,016,679                 | $278,421

adoption Company recorded effect adjustment $139. 4 million net tax adjustment $21. 0 million increased June 25, 2018 earnings balance Condensed Consolidated Balance Sheet changes timing recognition system sales. ASC 606 Company recognizes revenue from sales systems when control passed to customer products specifications products revenue recognized upon installation customer acceptance transactions legal title shipment revenue recognized when legal title passes customer customer acceptance.
 impact adoption ASC 606 Consolidated Statement of Operations Balance Sheet
 ASC significant impact Consolidated Statement Operations year ended June 30, 2019.
 January 2016, FASB released ASU 2016-01 “Financial Instruments Recognition Measurement Financial Assets Liabilities. issued amendment February 2018. amendments change accounting financial statement presentation equity investments. amendments clarity measurement methodology disclosure fair value financial instruments amortized cost balance need valuation allowance deferred tax assets available-for-sale securities.adoption 2019 Consolidated Financial Statements.
 August 2016, FASB released ASU 2016-15 Cash Flows Classification Cash Receipts Payments. cash receipts. adopted first quarter 2019 retrospective transition method. Consolidated Financial Statements.
 October 2016, FASB released ASU 2016-16 Tax Intra-Entity Transfers Assets Inventory. improves accounting transfers. adopted first quarter 2019 modified-retrospective approach cumulative-effect adjustment retained earnings. $0. 4 million decrease retained earnings $0. 4 million offset assets Consolidated Financial Statements.
 November 2016, FASB released ASU 2016-18 Cash Flows Restricted Cash. restricted cash equivalents reconciling beginning end-period amounts cash flows. adopted first quarter 2019 retrospective transition method. Consolidated Financial Statements.
 February 2018 FASB released ASU 2018-02 Tax Effects Accumulated Income. addresses Tax Cuts Jobs Act.Tax allows reclassification to earnings for stranded tax effects. update eliminates stranded tax effects. Company adopted standard first quarter 2019 modified-retrospective approach cumulative-effect adjustment retained earnings. $2. 2 million increase retained earnings $2. 2 million decrease income.
 August 2018 Securities Exchange Commission adopted amendments eliminate disclosure requirements. redundant duplicative overlapping outdated superseded. Company adopted amendments first quarter 2019. minor changes Consolidated Financial Statements.
 Year
 June 30, 2019
 Adoption ASC606 Effect Change
 Revenue $9,653,559  $9,049,790  $603,769
 Cost of goods sold $5,295,100  $5,016,679  $278,421


CTS CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Earnings (in thousands)
The accompanying notes are an integral part of the consolidated financial statements.

                                                        |         | Years Ended December 31, |
------------------------------------------------------- | ------- | ------------------------ | -------
                                                        | 2019    | 2018                     | 2017
Net earnings                                            | $36,146 | $46,532                  | $14,448
Other comprehensive earnings (loss):                    |         |                          |
Changes in fair market value of derivatives, net of tax | (509)   | 795                      | 110
Changes in unrealized pension cost, net of tax          | 6,439   | (1,830)                  | 13,687
Cumulative translation adjustment, net of tax           | 83      | (311)                    | 437
Other comprehensive earnings (loss)                     | $6,013  | $(1,346)                 | $14,234
Comprehensive earnings                                  | $42,159 | $45,186                  | $28,682

CTS CORPORATION SUBSIDIARIES Statements Earnings
 notes financial statements.
 Ended December 31,
 2019 2018 2017
 Net earnings $36,146 $46,532 $14,448
 earnings
 market value derivatives
 unrealized pension cost 6,439 13,687
 translation adjustment tax
 earnings $6,013,346) $14,234
 earnings $42,159 $45,186 $28,682


Operating Income (Loss) by Business Unit
Percentages reflect operating income (loss) as a percentage of revenue for each business unit.
CNBU operating income for 2019 decreased from 2018 primarily due to declines in pricing and higher R&D costs, partially offset by cost reductions. MBU operating income for 2019 decreased from 2018 primarily due to declines in pricing partially offset by increases in sales of high-value managed NAND products and manufacturing cost reductions. SBU operating margin for 2019 declined from 2018 primarily due to declines in pricing, which were partially offset by manufacturing cost reductions and increases in sales volumes. SBU operating results for 2019 and 2018 were adversely impacted by the underutilization charges at IMFT. EBU operating income for 2019 decreased from 2018 as a result of declines in pricing and higher R&D costs partially offset by manufacturing cost reductions and increases in sales volumes.
CNBU operating income for 2018 improved from 2017 primarily due to improved pricing and higher sales volumes resulting from strong demand for our products combined with manufacturing cost reductions. MBU operating income for 2018 improved from 2017 primarily due to increases in pricing and sales volumes for LPDRAM products, higher sales of high-value managed NAND products, and manufacturing cost reductions. SBU operating income for 2018 improved from 2017 primarily due to manufacturing cost reductions enabled by our execution in transitioning to 64-layer TLC 3D NAND products and improvements in product mix. SBU operating income for 2018 was adversely impacted by higher costs associated with IMFT's production of 3D XPoint memory products at less than full capacity. EBU operating income for 2018 increased as compared to 2017 as a result of increases in average selling prices, manufacturing cost reductions, and increases in sales volumes, partially offset by higher R&D costs.

For the year ended | 2019   | 2019  | 2018    | 2018 | 2017   | 2017
------------------ | ------ | ----- | ------- | ---- | ------ | ----
CNBU               | $4,645 | 47%   | $9,773  | 64%  | $3,755 | 44%
MBU                | 2,606  | 41%   | 3,033   | 46%  | 927    | 21%
SBU                | (386)  | (10)% | 964     | 19%  | 552    | 12%
EBU                | 923    | 29%   | 1,473   | 42%  | 975    | 36%
All Other          | 13     | 18%   | —       | —%   | 23     | 35%
                   | $7,801 |       | $15,243 |      | $6,232 |

Operating Income) Business Unit
 Percentages reflect unit.
 CNBU income 2019 decreased declines pricing higher R&D costs offset cost reductions. MBU decreased pricing high NAND manufacturing cost reductions. SBU margin 2019 declined pricing offset manufacturing cost reductions sales volumes. impacted underutilization charges IMFT. EBU income decreased declines pricing higher R&D costs offset manufacturing cost reductions sales volumes.
 CNBU income 2018 improved improved pricing higher sales volumes reductions. MBU improved pricing LPDRAM sales high-value NAND manufacturing cost reductions. SBU improved manufacturing cost reductions 64-layer TLC 3D NAND product mix. impacted higher costs IMFT production 3D XPoint memory. EBU income 2018 increased selling prices manufacturing cost reductions sales volumes offset higher R&D costs.
 year 2019
 CNBU $4,645  47% $9,773  64% $3,755
MBU 2,606 41% 927 21%
 SBU 964 12%
 EBU 29% 1,473 42% 975 36%
 18% 35%
 $7,801 $15,243 $6,232


Capital management
The following table summarises the capital of the Group at 31 March:
Note: 1 Financial liabilities under put option arrangements comprise liabilities for payments due to holders of the equity shares in Kabel Deutschland AG under the terms of a domination and profit and loss transfer agreement; the amounts at 31 March 2018 were previously presented within short-term borrowings
The Group’s policy is to borrow centrally using a mixture of long-term and short-term capital market issues and borrowing facilities to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries. The Board has approved three internal debt protection ratios being: net interest to operating cash flow (plus dividends from associates); retained cash flow (operating cash flow plus dividends from associates less interest, tax, dividends to non-controlling shareholders and equity dividends) to net debt; and operating cash flow (plus dividends from associates) to net debt. These internal ratios establish levels of debt that the Group should not exceed other than for relatively short periods of time and are shared with the Group’s debt rating agencies being Moody’s, Fitch Ratings and Standard & Poor’s.

                                                     | 2019   | 2018
---------------------------------------------------- | ------ | -------
                                                     | €m     | €m
Net debt                                             | 27,033 | 29,631
Financial liabilities under put option arrangements1 | 1,844  | 1,838
Equity                                               | 63,445 | 68,607
Capital                                              | 92,322 | 100,076

Capital management
 table summarises capital Group at 31 March
 Financial liabilities under put option arrangements payments equity Kabel Deutschland AG domination transfer agreement amounts at 31 March short-term borrowings
 policy centrally long-term short-term capital market issues funding. borrowings cash loaned internally contributed equity to subsidiaries. Board approved debt protection ratios net interest cash flow dividends retained cash flow. ratios establish debt shared with Moody’s Fitch Ratings Standard & Poor’s.
 Net debt 27,033 29,631
 Financial liabilities under put option 1,844
 Equity 63,445 68,607
 Capital 92,322 100,076


ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our common stock as of March 1, 2020 for (i) each of our directors, (ii) each of our executive officers, (iii) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, and (iv) all of our executive officers and directors as a group.
* Less than 1%.
(1) Unless otherwise indicated, we believe that all persons named in the above table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them. Unless otherwise indicated the address for each listed beneficial owner is c/o Network-1 Technologies, Inc., 445 Park Avenue, Suite 912, New York, New York 10022.
(2) A person is deemed to be the beneficial owner of shares of common stock that can be acquired by such person within 60 days from March 1, 2020 upon the exercise of options or restricted stock units that vest within such 60 day period. Each beneficial owner's percentage ownership is determined by assuming that all stock options and restricted stock units held by such person (but not those held by any other person) and which are exercisable or vested within 60 days from March 1, 2020 have been exercised and vested. Assumes a base of 24,032,941 shares of our common stock outstanding as of March 1, 2020.
(3) Includes (i) 3,549,369 shares of common stock held by Mr. Horowitz, (ii) 500,000 shares of common stock subject to currently exercisable stock options held by Mr. Horowitz, (iii) 2,157,097 shares of common stock held by CMH Capital Management Corp., an entity solely owned by Mr. Horowitz, (iv) 134,275 shares of common stock owned by the CMH Capital Management Corp. Profit Sharing Plan, of which Mr. Horowitz is the trustee, (v) 67,470 shares of common stock owned by Donna Slavitt, the wife of Mr. Horowitz, (vi) an aggregate of 452,250 shares of common stock held by two trusts and a custodian account for the benefit of Mr. Horowitz’s three children, and (vii) 2,291 shares of common stock held by Horowitz Partners, a general partnership of which Mr. Horowitz is a partner. Does not include 250,000 shares of common stock subject to restricted stock units that do not vest within 60 days of March 1, 2020.
(4) Includes 2,157,097 shares of common stock owned by CMH Capital Management Corp. and 134,275 shares of common stock owned by CMH Capital Management Corp. Profit Sharing Plan. Corey M. Horowitz, by virtue of being the sole officer, director and shareholder of CMH Capital Management Corp. and the trustee of the CMH Capital Management Corp. Profit Sharing Plan, has the sole power to vote and dispose of the shares of common stock owned by CMH Capital Management Corp. and the CMH Capital Management Corp. Profit Sharing Plan.
(5) Includes (i) 242,235 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of March 1, 2020. Does not include 11,250 shares of common stock subject to restricted stock units that do not vest within 60 days from March 1, 2020.
(6) Includes (i) 108,309 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of March 1, 2020. Does not
include 11,250 shares of common stock subject to restricted stock units that do not vest within 60 days from March 1, 2020.
(7) Includes 94,160 shares of common stock. Does not include 27,500 shares of common stock subject to restricted stock units owned by Mr. Kahn that do not vest within 60 days from March 1, 2020.
(8) Includes (i) 72,061 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of March 1, 2020. Does not include 11,250 shares of common stock subject to restricted stock units that do not vest within 60 days from March 1, 2020.
(9) Includes 67,499 shares of common stock. Does not include 35,000 shares of common stock subjected to restricted stock units owned by Mr. Greene that do not vest within 60 days from March 1, 2020.
(10) Includes 585,233 shares of common stock owned by Mr. Heinemann and 2,242,582 shares of common stock owned by Goose Hill Capital LLC. Goose Hill Capital LLC is an entity in which Mr. Heinemann is the sole member. Mr. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon Amendment No. 7 to Schedule 13G filed by Mr. Heinemann with the SEC on February 11, 2019. The address for Mr. Heinemann is c/o Goose Hill Capital, LLC, 12378 Indian Road, North Palm Beach, Florida 33408.
(11) Includes 2,242,582 shares of common stock. Steven D. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon Amendment No. 7 to Schedule 13G filed by Mr. Heinemann with the SEC on February 11, 2019. The address for Goose Hill Capital LLC is 12378 Indian Road, North Palm Beach, Florida 33408.
(12) Includes 1,200,130 shares of common stock. The aforementioned beneficial ownership is based upon a Schedule 13G filed by Mr. Herzog with the SEC on February 10, 2016. The address of Mr. Herzog is 824 Harbor Road, Southport, Connecticut 06890-1410.

NAME AND ADDRESS OF BENEFICIAL OWNER               | AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(1)(2) | PERCENTAGE OF COMMON STOCK BENEFICIALLY OWNED(2)
-------------------------------------------------- | ----------------------------------------------- | ------------------------------------------------
Executive Officers and Directors:                  |                                                 |
Corey M. Horowitz(3)                               | 6,862,752                                       | 28.0%
CMH Capital Management Corp(4)                     | 2,291,372                                       | 9.5%
Niv Harizman(5)                                    | 245,985                                         | 1.0%
Emanuel Pearlman (6)                               | 112,059                                         | *
David C. Kahn(7)                                   | 94,160                                          | *
Allison Hoffman(8)                                 | 75,811                                          | *
Jonathan E. Greene(9)                              | 67,499                                          | *
All officers and directors as a group  (6 Persons) | 7,458,266                                       | 30.4%
5% Stockholders:                                   |                                                 |
Steven D. Heinemann(10)                            | 2,827,815                                       | 11.8%
Goose Hill Capital LLC(11)                         | 2,242,582                                       | 9.3%
John Herzog(12)                                    | 1,200,130                                       | 5.0%

ITEM 12. SECURITY OWNERSHIP BENEFICIAL OWNERS MANAGEMENT STOCKHOLDER MATTERS
 table beneficial ownership common stock March 1, 2020 directors executive officers 5% shares stock officers directors.
 Less than 1%.
 persons have sole voting investment power shares common stock. address owner c/o Network-1 Technologies,. 445 Park Avenue Suite 912 New York 10022.
 person beneficial owner shares stock acquired within 60 days March 1, 2020 exercise options stock units. percentage ownership determined stock options restricted stock units vested within 60 days March 1 2020 exercised vested. Assumes base 24,032,941 shares common stock as March 1, 2020.
 Includes 3,549,369 shares. Horowitz 500,000 shares options. 2,157,097 shares CMH Capital Management Corp. 134,275 shares CMH Capital Management Corp. Profit Sharing Plan.Horowitz trustee 67,470 shares common stock Donna Slavitt wife. Horowitz 452,250 shares two trusts custodian account. Horowitz’s three children 2,291 shares Horowitz Partners. Horowitz partner. include 250,000 shares common stock restricted stock units 60 days March 1, 2020.
 Includes 2,157,097 shares CMH Capital Management Corp. 134,275 shares. Profit Sharing Plan. Horowitz sole officer director shareholder CMH Capital. trustee. sole power vote dispose.
 Includes 242,235 shares 3,750 shares restricted units 60 days March 1, 2020. include 11,250 shares 60.
 Includes 108,309 shares 3,750 shares restricted units 60 days March 1, 2020.
 include 11,250 shares 60 1 2020.
 Includes 94,160 shares. include 27,500 shares restricted stock units. Kahn vest 60 days March 1, 2020.
Includes 72,061 shares common 3,750 restricted units 60 days March 1, 2020. include 11,250 shares 60 days March 1 2020.
 Includes 67,499 shares common stock. include 35,000 shares units. Greene 60 days March 1 2020.
 Includes 585,233 shares. Heinemann 2,242,582 shares Goose Hill Capital LLC. Heinemann sole member. power vote dispose. based Amendment. 7 Schedule 13G. Heinemann SEC February 11 2019. address. Goose Hill Capital 12378 Indian Road North Palm Beach Florida 33408.
 Includes 2,242,582 shares. power vote dispose. Amendment. 7 Schedule 13G. 2019. address Goose Hill Capital 12378 Indian Road North Palm Beach Florida 33408.
 Includes 1,200,130 shares common stock. ownership Schedule 13G. Herzog SEC February 10, 2016. address. 824 Harbor Road Southport Connecticut 06890-1410.
ADDRESS OWNER PERCENTAGE STOCK
 Officers Directors
 Corey. 6,862,752.
 CMH Capital Management 2,291,372.
 Harizman(5) 245,985.
 Emanuel Pearlman 112,059
 David. Kahn 94,160
 Allison Hoffman 75,811
 Jonathan. Greene(9) 67,499
 officers directors,266 30.
 Stockholders
 Steven. 2,827,815. 8%
 Goose Hill Capital LLC 2,242,582.
 John 1,200,130.


Cost of Revenue and Operating Expenses
Cost of subscription and maintenance revenue includes the labor costs of providing product support to our subscription and maintenance customers, including allocated IT and facilities costs, professional services fees related to operating our network and cloud infrastructure, royalties, depreciation expense and operating lease payments associated with computer equipment, data center costs, salaries, related expenses of network operations, and stock-based compensation expense.
Cost of other revenue includes labor costs associated with product setup, costs of consulting and training services contracts, and collaborative project management services contracts. Cost of other revenue also includes stock-based compensation expense, direct material and overhead charges, allocated IT and facilities costs, professional services fees and royalties. Direct material and overhead charges include the cost associated with electronic and physical fulfillment.
Cost of revenue, at least over the near term, is affected by the volume and mix of product sales, fluctuations in consulting costs, amortization of developed technology, new customer support offerings, royalty rates for licensed technology embedded in our products and employee stock-based compensation expense
Marketing and sales expenses include salaries, bonuses, benefits and stock-based compensation expense for our marketing and sales employees, the expense of travel, entertainment and training for such personnel, sales and dealer commissions, and the costs of programs aimed at increasing revenue, such as advertising, trade shows and expositions, and various sales and promotional programs. Marketing and sales expenses also include payment processing fees, the cost of supplies and equipment, gains and losses on our operating expense cash flow hedges, allocated IT and facilities costs, and labor costs associated with sales and order management.
Research and development expenses, which are expensed as incurred, consist primarily of salaries, bonuses, benefits and stock-based compensation expense for research and development employees, the expense of travel, entertainment and training for such personnel, professional services such as fees paid to software development firms and independent contractors, gains and losses on our operating expense cash flow hedges, and allocated IT and facilities costs.
General and administrative expenses include salaries, bonuses, acquisition-related transition costs, benefits and stock-based compensation expense for our CEO, finance, human resources and legal employees, as well as professional fees for legal and accounting services, certain foreign business taxes, gains and losses on our operating expense cash flow hedges, expense of travel, entertainment and training, net IT and facilities costs, and the cost of supplies and equipment.

                                        | Fiscal year ended January 31, 2019 | Change compared to prior fiscal year |       | Fiscal year ended January 31, 2018 | Management comments
--------------------------------------- | ---------------------------------- | ------------------------------------ | ----- | ---------------------------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
(in millions)                           |                                    | $                                    | %     |                                    |
Cost of revenue:                        |                                    |                                      |       |                                    |
Subscription and maintenance            | $216.0                             | $1.6                                 | 1%    | $214.4                             | Up primarily due to an increase in cloud hosting costs partially offset by a decrease in royalty and depreciation expense.
Other (1)                               | 54.4                               | (18.2)                               | (25)% | 72.6                               | Down primarily due to lower employee-related costs from reduced headcount associated with the Fiscal 2018 Plan restructuring and lower professional fees.
Amortization of developed technology    | 15.5                               | (0.9)                                | (5)%  | 16.4                               | Down as previously acquired developed technologies continue to become fully amortized.
Total cost of revenue                   | $285.9                             | $(17.5)                              | (6)%  | $303.4                             |
Marketing and sales                     | $1,183.9                           | $96.6                                | 9%    | $1,087.3                           | Up due to increased employee-related costs driven by higher headcount, as well as higher cloud hosting costs and professional fees.
Research and development                | 725.0                              | (30.5)                               | (4)%  | 755.5                              | Down due to a decrease in employee-related costs from lower headcount associated with the Fiscal 2018 plan restructuring partially offset by higher professional fees.
General and administrative              | 340.1                              | 34.9                                 | 11%   | 305.2                              | Up primarily due to higher professional fees, employee-related costs and facilities costs, partially offset by lower employee benefits costs.
Amortization of purchased intangibles   | 18.0                               | (2.2)                                | (11)% | 20.2                               | Down as previously acquired intangible assets continue to become fully amortized.
Restructuring and other exit costs, net | 41.9                               | (52.2)                               | (55)% | 94.1                               | Down as we substantially completed the reduction in force and facilities consolidation of the Fiscal 2018 Plan.
                                        | $ 2,308.9                          | $46.6                                | 2%    | $2,262.3                           |

Revenue Operating Expenses
 subscription maintenance revenue includes labor IT facilities costs professional services royalties depreciation lease payments data center costs salaries network operations stock-based compensation expense.
 other revenue labor product setup consulting training project management. stock-based compensation expense material overhead charges IT facilities costs professional services fees royalties. overhead charges electronic physical fulfillment.
 affected by volume product sales consulting costs amortization technology new support royalty rates technology employee stock-based compensation expense
 Marketing sales expenses include salaries bonuses benefits compensation travel entertainment training commissions advertising. payment processing fees supplies equipment gains losses operating cash flow hedges IT facilities costs labor costs sales order management.
 Research development expenses salaries bonuses benefits compensation travel entertainment training professional services gains losses cash flow hedges IT facilities costs.
administrative expenses include salaries bonuses transition costs benefits stock compensation CEO finance human resources legal employees professional fees foreign business taxes gains losses operating cash flow hedges travel entertainment training IT facilities costs supplies equipment.
 Fiscal year January 31, 2019 prior January 31, 2018 Management comments
 millions
 Cost revenue
 Subscription maintenance $216. $1. $214. cloud hosting costs offset royalty depreciation expense.
 54. lower employee costs reduced headcount Fiscal 2018 Plan restructuring professional fees.
 Amortization technology 15. amortized.
 Total cost revenue $285. $303.
 Marketing sales $1,183. $96. $1,087. increased employee costs higher headcount cloud hosting costs professional fees.
 Research development 725. 755. Down employee costs headcount Fiscal 2018 plan restructuring professional fees.
 340. 34.11% 305. due professional fees facilities costs offset benefits.
 Amortization intangibles 18. (11)% 20. assets amortized.
 Restructuring exit costs 41. (52. (55)% 94. reduction facilities consolidation Fiscal 2018 Plan.
 2,308. $46. $2,262.


The following table reconciles the expected income tax expense, computed by applying our combined German tax rate of 26.4% (2018: 26.4%; 2017: 26.4%), to the actual income tax expense. Our 2019 combined German tax rate includes a corporate income tax rate of 15.0% (2018: 15.0%; 2017: 15.0%), plus a solidarity surcharge of 5.5% (2018: 5.5%; 2017: 5.5%) thereon, and trade taxes of 10.6% (2018: 10.6%; 2017: 10.6%).
Relationship Between Tax Expense and Profit Before Tax

€ millions, unless otherwise stated                                                                | 2019  | 2018  | 2017
-------------------------------------------------------------------------------------------------- | ----- | ----- | -----
Profit before tax                                                                                | 4,596 | 5,600 | 5,029
Tax expense at applicable tax rate of 26.4% rate of 26.4% (2018: 26.4%; 2017: 26.4%)               | 1,212 | 1,478 | 1,327
Tax effect of:                                                                                |       |       |
Foreign tax rates                                                                                | –209  | –147  | –403
Changes in tax laws and tax rates                                                                  | 10    | 0     | –212
Non-deductible expenses                                                                            | 116   | 106   | 82
Tax-exempt income                                                                                | –93   | –38   | –95
Withholding taxes                                                                                | 138   | 91    | 131
Research and development and foreign tax credits                                                   | –89   | –33   | –26
Prior-year taxes                                                                                | 80    | –17   | –26
Reassessment of deferred tax assets, research and development tax credits, and foreign tax credits | 48    | 58    | 185
Other                                                                                | 13    | 13    | 20
Total income tax expense                                                                           | 1,226 | 1,511 | 983
Effective tax rate (in %)                                                                          | 26.7  | 27.0  | 19.5

table expected income tax expense combined German tax rate 26. 4%. actual income tax expense. 2019 tax rate includes corporate income tax rate 15. 0%. solidarity surcharge 5. 5%. trade taxes 10. 6%.
 Relationship Between Tax Expense Profit Before Tax
 millions 2019 2018
 Profit before tax 4,596  5,600 5,029
 Tax expense 26. 1,212 1,478 1,327
 Tax effect
 Foreign tax rates –209
 Changes tax laws rates
 Non-deductible expenses
 Tax-exempt income
 Withholding taxes
 Research development foreign tax credits
 Prior-year taxes
 Reassessment deferred tax assets credits credits
 Total income tax expense 1,226  1,511  983
 Effective tax rate %) 26. 27.


8. Income Per Share
Basic income per share is calculated by dividing net earnings by the weighted average number of common shares outstanding for the applicable period. Diluted income per share is calculated after adjusting the denominator of the basic income per share calculation for the effect of all potential dilutive common shares outstanding during the period. The following table sets forth the computation of basic and diluted income per share:
For fiscal 2019, options and RSUs of 83,939 were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive. For fiscal 2018 and fiscal 2017, the Company had no options or RSUs that were excluded from the computation of diluted net income per shares. RSAs for 594,382 shares in fiscal 2019, 363,413 shares in fiscal 2018 and 779,000 shares in fiscal 2017 were excluded from the calculation of diluted net income per share as these awards contain performance conditions that would not have been achieved as of the end of each reporting period had the measurement period ended as of that date.

                                                                 | April 27, 2019 | April 28, 2018 | April 29, 2017
---------------------------------------------------------------- | -------------- | -------------- | --------------
Numerator:                                                       |                |                |
Net Income (in millions)                                         | $91.6          | $57.2          | $92.9
Denominator:                                                     |                |                |
Denominator for Basic Earnings Per Share-Weighted Average Shares |                |                |
Outstanding and Vested/Unissued Restricted Stock Units           | 37,405,298     | 37,281,630     | 37,283,096
Dilutive Potential Common Shares-Employee Stock Options,         |                |                |
Restricted Stock Awards and Restricted Stock Units               | 264,262        | 260,269        | 202,605
Denominator for Diluted Earnings Per Share                       | 37,669,560     | 37,541,899     | 37,485,701
Basic and Diluted Income Per Share:                              |                |                |
Basic Income Per Share                                           | $2.45          | $1.54          | $2.49
Diluted Income Per Share                                         | $2.43          | $1.52          | $2.48

. Income Per Share
 Basic calculated net earnings weighted average common shares. Diluted income calculated adjusting denominator potential dilutive shares. table computation diluted income
 2019 options RSUs 83,939 excluded anti-dilutive. 2018 2017 no options RSUs excluded.,382 2019 363,413 2018 779,000 2017 excluded performance conditions.
 April 27, 2019 28, 2018 April 29, 2017
 Net Income millions) $91. $57. $92.
 Denominator
 Basic Earnings Per Share-Weighted Average Shares
 Outstanding Vested Restricted Stock Units 37,405,298 37,281,630
 Dilutive Potential Common Shares-Employee Stock Options
 Restricted Stock Awards Units 264,262 260,269 202,605
 Diluted Earnings Per Share 37,669,560 37,541,899 37,485,701
 Basic Diluted Income Per Share
 $2. $1.$2.
 Income Share $2. $2.


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for share and per share data)
NOTE 6 — Retirement Plans
We have a number of noncontributory defined benefit pension plans ("pension plans") covering approximately 3% of our active employees. Pension plans covering salaried employees provide pension benefits that are based on the employees´ years of service and compensation prior to retirement. Pension plans covering hourly employees generally provide benefits of stated amounts for each year of service.
We also provide post-retirement life insurance benefits for certain retired employees. Domestic employees who were hired prior to 1982 and certain former union employees are eligible for life insurance benefits upon retirement. We fund life insurance benefits through term life insurance policies and intend to continue funding all of the premiums on a pay-as-you-go basis.
We recognize the funded status of a benefit plan in our consolidated balance sheets. The funded status is measured as the difference between plan assets at fair value and the projected benefit obligation. We also recognize, as a component of other comprehensive earnings, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit/cost.
The measurement dates for the pension plans for our U.S. and non-U.S. locations were December 31, 2019, and 2018.
During 2017, we offered certain former vested employees in our U.S. pension plan a one-time option to receive a lump sum distribution of their benefits from pension plan assets. The pension plan made approximately $23,912 in lump sum payments to settle its obligation to these participants. These settlement payments decreased the projected benefit obligation and plan assets by $23,912, and resulted in a non-cash settlement charge of $13,476 related to unrecognized net actuarial losses that were previously included in accumulated other comprehensive loss. The measurement date of this settlement was December 31, 2017.
In February 2020, the CTS Board of Directors authorized and empowered management to explore termination of our U.S. based pension plans at management's discretion, subject to certain conditions. Management has not yet made a final decision on whether to pursue a plan termination and the potential timing thereof.
The measurement dates for the post-retirement life insurance plan were December 31, 2019, and 2018. The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the post-retirement life insurance plan at those measurement dates.

                                                               | Post-Retirement Life Insurance Plan |
-------------------------------------------------------------- | ----------------------------------- | --------
                                                               | 2019                                | 2018
Accumulated benefit obligation                                 | $4,766                              | $4,595
Change in projected benefit obligation:                        |                                     |
Projected benefit obligation at January 1                      | $4,595                              | $5,134
Service cost                                                   | 1                                   | 2
Interest cost                                                  | 170                                 | 156
Benefits paid                                                  | (145)                               | (157)
Actuarial loss (gain)                                          | 145                                 | (540)
Projected benefit obligation at December 31                    | $4,766                              | $4,595
Change in plan assets:                                         |                                     |
Assets at fair value at January 1                              | $—                                  | $—
Actual return on assets                                        | —                                   | —
Company contributions                                          | 145                                 | 157
Benefits paid                                                  | (145)                               | (157)
Other                                                          | —                                   | —
Assets at fair value at December 31                            | $—                                  | $—
Funded status (plan assets less projected benefit obligations) | $(4,766)                            | $(4,595)

NOTES CONSOLIDATED FINANCIAL STATEMENTS share data
 NOTE 6 Retirement Plans
 noncontributory defined benefit pension plans 3% active employees. benefits based years service compensation retirement. provide benefits year service.
 post-retirement life insurance benefits retired employees. Domestic employees hired 1982 former union employees eligible life insurance benefits retirement. fund funding premiums pay-as-you-go.
 funded status benefit plan balance sheets. measured difference assets fair value projected benefit obligation. gains losses prior service costs credits.
 measurement dates plans. non-U. December 31, 2019 2018.
 2017 offered former vested employees.-time option sum distribution benefits. $23,912 sum payments. decreased projected benefit obligation plan assets $23,912 non settlement charge $13,476 unrecognized net actuarial losses. measurement date settlement December 31, 2017.
 February 2020 CTS Board Directors explore termination U. S. pension plans.Management plan termination potential timing.
 measurement dates post-retirement life insurance plan December 2019 2018. table benefit obligation assets funded status.
 Accumulated benefit obligation $4,766 $4,595
 benefit obligation
 January 1 $4,595 $5,134
 Service cost
 Interest cost 170
 Benefits paid
 Actuarial loss 145
 obligation December 31 $4,766 $4,595
 Change assets
 January 1
 return assets
 Company contributions 145
 Benefits paid
 Assets value December 31
 Funded status assets less benefit obligations $(4,766) $(4,595)


The majority of the Company's revenues are generated from U.S. government contracts, either as a prime contractor or as a subcontractor to other contractors. Revenues from the U.S. government can be adversely impacted by spending caps or changes in budgetary priorities of the U.S. government, as well as delays in program start dates or the award of a contract.
Disaggregated revenues by contract-type were as follows:

Year Ended January 3, 2020                         |                   |        |        |
-------------------------------------------------- | ----------------- | ------ | ------ | -------
                                                   | Defense Solutions | Civil  | Health | Total
(in millions)                                      |                   |        |        |
Cost-reimbursement and fixed-price-incentive-fee   | $3,697            | $1,997 | $234   | $5,928
Firm-fixed-price                                   | 1,203             | 1,075  | 1,296  | 3,574
Time-and-materials and fixed-price-level-of-effort | 466               | 564    | 444    | 1,474
Total                                              | $5,366            | $3,636 | $1,974 | $10,976

Company revenues. government contracts. impacted spending caps budgetary priorities. delays program contract.
 revenues contract-type
 Ended January 3 2020
 Defense Solutions Civil Health
 millions
 Cost-reimbursement fixed-price-incentive-fee $3,697 $1,997 $234 $5,928
 Firm-fixed-price 1,203 1,075 1,296 3,574
 Time-materials fixed-price-level-effort 466 444 1,474
 Total $5,366 $3,636 $1,974 $10,976