We use a wide variety of raw materials in the manufacture of our products. Cost of sales and gross margin are subject to variability in raw material prices which continue to fluctuate for many of the raw materials we use, including copper, gold, and silver. In fiscal 2019, we purchased approximately 172 million pounds of copper, 122,000 troy ounces of gold, and 2.6 million troy ounces of silver. The following table presents the average prices incurred related to copper, gold, and silver:
In fiscal 2020, we expect to purchase approximately 170 million pounds of copper, 120,000 troy ounces of gold, and 2.4 million troy ounces of silver.

       |          |        | Fiscal
------ | -------- | ------ | -------
       | Measure  | 2019   | 2018
Copper | Lb.      | $ 2.93 | $  2.86
Gold   | Troy oz. | 1,309  | 1,281
Silver | Troy oz. | 16.42  | 17.15

use raw materials products. Cost sales gross margin prices copper gold silver. 2019 purchased 172 million pounds copper 122,000 ounces gold 2. 6 million ounces silver. average prices copper gold silver
 2020 expect purchase 170 million pounds copper 120,000 gold 2. 4 million ounces silver.
 Copper. $ 2. 93 $ 2. 86
 Gold. 1,309 1,281
 Silver. 16. 42.


Deferred taxes are recorded for temporary differences between the carrying amounts of assets and liabilities and their tax bases. The significant components of deferred tax assets and liabilities that are recorded in the consolidated balance sheets are summarized in the table below. A valuation allowance is required when it is more likely than not that all or a portion of a deferred tax asset will not be realized. As of June 30, 2019, the Company had state net operating loss carryforwards of $337.6 million expiring between 2020 and 2039. A significant portion of the state net operating loss carryforwards are subject to an annual limitation that, under current law, is likely to limit future tax benefits to approximately $3.3 million. Valuation allowances increased by $0.7 million during fiscal year 2019 primarily due to increases in net operating losses incurred in certain tax jurisdictions for which no tax benefit was recognized.
The Company does not have unrecognized tax benefits as of June 30, 2019, 2018 and 2017. The Company
recognizes interest and penalties accrued on any unrecognized tax benefits as a component of income tax expense.
All years prior to fiscal year 2013 have been settled with the Internal Revenue Service and with most significant state, local and foreign tax jurisdictions.
In December 2017, an Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the “Act”) was enacted. The Act included provisions that reduced the federal statutory income tax rate from 35 percent to 21 percent, created a territorial tax system with a one-time mandatory tax on previously deferred foreign earnings (i.e. transition tax), and changed certain business deductions including allowing for immediate expensing of certain qualified capital expenditures and limitations on deductions of interest expense. The SEC staff issued guidance on income tax accounting for the Act which allowed companies to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. In accordance with this guidance, during fiscal year 2018, we recorded a provisional tax charge of $5.0 million for the transition tax and a provisional tax benefit of $74.6 million for the remeasurement of deferred tax assets and liabilities. During fiscal year 2019, we recorded a discrete tax benefit of $0.2 million in measurement period adjustments for the transition tax offset by a discrete tax charge of $0.2 million for the remeasurement of deferred tax assets and liabilities. Our accounting for the impact of the Act was completed as of the period ending December 31, 2018. Under the Act, the transition tax is being paid over an eight year period beginning in fiscal year 2019.
The Act also established new tax provisions that became effective in fiscal year 2019, including but not limited to eliminating the corporate alternative minimum tax, creating the base erosion anti-abuse tax (“BEAT”), establishing new limitations on deductible interest expense and certain executive compensation, creating a new provision designed to tax global intangible low-tax income (“GILTI”) and generally eliminating U.S. federal income taxes on dividends from foreign subsidiaries. The Company has made an accounting policy election to treat the tax effect of GILTI as a current period expense when incurred.
Undistributed earnings of our foreign subsidiaries, totaling $77.8 million were considered permanently reinvested. Following enactment of the Act, the repatriation of cash to the U.S. is generally no longer taxable for federal income tax purposes. If these earnings were to be repatriated, approximately $0.3 million of tax expense would be incurred.

                                   | June 30, |
---------------------------------- | -------- | --------
($ in millions)                    | 2019     | 2018
Deferred tax assets:               |          |
Pensions                           | $86.9    | $66.8
Postretirement provisions          | 35.7     | 33.7
Net operating loss carryforwards   | 28.8     | 26.5
Derivatives and hedging activities | 4.1      | —
Other                              | 32.1     | 29.4
Gross deferred tax assets          | 187.6    | 156.4
Valuation allowances               | (24.6)   | (23.9)
Total deferred tax assets          | 163.0    | 132.5
Deferred tax liabilities:          |          |
Depreciation                       | (249.5)  | (235.2)
Intangible assets                  | (11.3)   | (11.9)
Inventories                        | (36.1)   | (30.5)
Derivatives and hedging activities | (0.3)    | (8.7)
Other                              | (4.3)    | (3.5)
Total deferred tax liabilities     | (301.5)  | (289.8)
Deferred tax liabilities, net      | $(138.5) | $(157.3)

Deferred taxes differences between assets liabilities tax bases. assets balance sheets summarized table. valuation allowance required deferred tax realized. June 30, 2019 Company state net operating loss carryforwards $337. 6 million expiring 2020 2039. annual limitation future tax benefits to $3. 3 million. Valuation allowances increased $0. 7 million 2019 due net operating losses tax jurisdictions benefit.
 Company unrecognized tax benefits June 30, 2019 2018 2017.
 recognizes interest penalties tax benefits.
 years prior to 2013 settled with Internal Revenue Service state tax jurisdictions.
 December 2017 Act Reconciliation enacted. income tax rate from 35 percent to 21 percent territorial tax system one-time mandatory tax deferred foreign earnings. changed business deductions capital deductions interest expense. SEC staff guidance provisional amounts one year. 2018 recorded provisional tax charge $5. 0 million transition tax tax benefit $74.million remeasurement deferred tax assets liabilities. year 2019 recorded tax benefit $0. 2 million transition tax. million. accounting Act completed December 31, 2018. transition tax paid eight year period 2019.
 established tax provisions 2019 eliminating corporate alternative minimum tax base erosion anti tax deductible interest expense executive compensation income eliminating. federal income taxes dividends foreign subsidiaries. tax effect GILTI current period expense.
 Undistributed earnings foreign subsidiaries $77. million reinvested. Act repatriation cash. taxable federal income. $0. 3 million tax expense incurred.
 Deferred tax assets
 Pensions $86. $66.
 Postretirement provisions 35. 33.
 Net operating loss carryforwards 28.
 Derivatives hedging activities.
.
 Gross deferred tax assets 187. 156.
 Valuation allowances (24.
 Total deferred tax assets 163. 132.
 Deferred tax liabilities
 Depreciation (249. 5)
 Intangible assets (11.
 Inventories. (30.
 Derivatives hedging. (8.
 (4. (3.
 deferred tax liabilities. 8)
(138.(157.


Revenues. Revenues increased by 25% to RMB105.8 billion for the fourth quarter of 2019 on a year-on-year basis. The following table sets forth our revenues by line of business for the fourth quarter of 2019 and the fourth quarter of 2018:
Revenues from VAS increased by 20% to RMB52,308 million for the fourth quarter of 2019 on a year-on-year basis. Online games revenues grew by 25% to RMB30,286 million. The increase was primarily driven by revenue growth from smart phone games in both domestic and overseas markets, including titles such as Peacekeeper Elite and PUBG Mobile, as well as revenue contributions from Supercell titles, partly offset by lower revenues from PC client games such as DnF. Social networks revenues increased by 13% to RMB22,022 million. The increase mainly reflected greater contributions from digital content services such as live broadcast and music streaming services. Total smart phone games revenues (including smart phone games revenues attributable to our social networks business) were RMB26,035 million and PC client games revenues were RMB10,359 million for the fourth quarter of 2019.
Revenues from FinTech and Business Services increased by 39% to RMB29,920 million for the fourth quarter of 2019 on a year-on-year basis. The increase was primarily due to greater revenue contributions from commercial payment, as well as revenue growth from cloud services as a result of deeper penetration in key verticals.
Revenues from Online Advertising increased by 19% to RMB20,225 million for the fourth quarter of 2019 on a year-onyear basis. Social and others advertising revenues increased by 37% to RMB16,274 million. The increase was mainly driven by advertising revenue growth from Weixin Moments and our mobile advertising network. Media advertising revenues decreased by 24% to RMB3,951 million. The decrease primarily reflected lower advertising revenues from our media platforms including Tencent Video and Tencent News due to uncertain broadcasting schedules and fewer telecasts of sports events.

                              | Unaudited                           |            |                  |
----------------------------- | ----------------------------------- | ---------- | ---------------- | ----------
                              | Three months ended                  |            |                  |
                              | 31 December 2019                    |            | 31 December 2018 |
                              |                                     | % of total |                  | % of total
                              | Amount                              | revenues   | Amount           | revenues
                              |                                     |            | (Restated)       | (Restated)
                              | (RMB in millions, unless specified) |            |                  |
VAS                           | 52,308                              | 50%        | 43,651           | 51%
FinTech and Business Services | 29,920                              | 28%        | 21,597           | 26%
Online Advertising            | 20,225                              | 19%        | 17,033           | 20%
Others                        | 3,314                               | 3%         | 2,615            | 3%
Total revenues                | 105,767                             | 100%       | 84,896           | 100%

. increased 25% RMB105. 8 billion fourth quarter 2019. table revenues line business
 Revenues increased 20% RMB52,308 million 2019. Online games revenues 25% RMB30,286 million. increase driven smart phone games Peacekeeper Elite PUBG Mobile Supercell titles lower revenues PC games. Social networks revenues increased 13% RMB22,022 million. digital content services. smart phone games revenues RMB26,035 million PC client games RMB10,359 million.
 Revenues FinTech Business Services increased 39% RMB29,920 million. increase due commercial payment growth cloud services deeper penetration.
 Online Advertising increased 19% RMB20,225 million. Social advertising revenues increased 37% RMB16,274 million. driven growth Weixin Moments mobile advertising network. Media advertising revenues decreased 24% RMB3,951 million. lower revenues Video uncertain broadcasting schedules fewer telecasts sports events.
Three months
 31 December 2019 31 December 2018
 % total
 millions
 VAS 52,308 50% 43,651 51%
 FinTech Business Services 29,920 28%
 Online Advertising 20,225 19% 17,033 20%
 Others 3,314 3%
 Total revenues 105,767 100%


ADJUSTED NET EARNINGS AND ADJUSTED EPS
The terms adjusted net earnings and adjusted EPS do not have any standardized meaning under IFRS. Therefore, they are unlikely to be comparable to similar measures presented by other issuers.
We define adjusted net earnings as net earnings attributable to common shareholders before severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and NCI. We define adjusted EPS as adjusted net earnings per BCE common share.
We use adjusted net earnings and adjusted EPS, and we believe that certain investors and analysts use these measures, among other ones, to assess the performance of our businesses without the effects of severance, acquisition and other costs, net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans, net losses (gains) on investments, early debt redemption costs and impairment charges, net of tax and NCI. We exclude these items because they affect the comparability of our financial results and could potentially distort the analysis of trends in business performance. Excluding these items does not imply they are non-recurring
The most comparable IFRS financial measures are net earnings attributable to common shareholders and EPS.
The following table is a reconciliation of net earnings attributable to common shareholders and EPS to adjusted net earnings on a consolidated basis and per BCE common share (adjusted EPS), respectively.

                                                                                | 2019  |           | 2018  |
------------------------------------------------------------------------------------------------------------------------- | ----- | --------- | ----- | ---------
                                                                                | TOTAL | PER SHARE | TOTAL | PER SHARE
Net earnings attributable to common shareholders                                                                          | 3,040 | 3.37      | 2,785 | 3.10
Severance, acquisition and other costs                                                                                | 83    | 0.10      | 100   | 0.11
Net mark-to-market losses (gains) on derivatives used to economically hedge equity settled share-based compensation plans | (101) | (0.11)    | 58    | 0.07
Net (gains) losses on investments                                                                                | 44    | 0.05      | 47    | 0.05
Early debt redemption costs                                                                                | 13    | 0.01      | 15    | 0.02
Impairment charges                                                                                | 74    | 0.08      | 146   | 0.16
Adjusted net earnings                                                                                | 3,153 | 3.50      | 3,151 | 3.51

ADJUSTED EARNINGS EPS
 standardized meaning under IFRS. unlikely comparable measures other issuers.
 define adjusted net earnings common shareholders before severance acquisition costs mark-to-market losses losses investments early debt redemption costs impairment charges net tax NCI. adjusted EPS as earnings per BCE common share.
 investors analysts use assess performance without severance acquisition costs losses early debt redemption costs impairment charges net tax NCI. exclude items affect comparability financial results distort performance. Excluding non-recurring
 comparable IFRS measures are net earnings common shareholders EPS.
 reconciliation of net earnings EPS adjusted net earnings consolidated basis per BCE common share.
 Net earnings common shareholders 3,040 3. 37 2,785.
 Severance, acquisition costs 83.10 100. 11
 losses derivatives equity compensation plans (101). 11 58.
 losses investments 44. 47.
 Early debt redemption costs 13. 15.
 charges 74. 146.
 Adjusted net earnings 3,153. 3,151.


Disaggregation of Revenue
We generate revenue from the sale of services and sale of software for end-user software products provided through direct customer downloads and through the sale of these end-user software products via partners. The following table depicts the disaggregation of revenue (in thousands) according to revenue type and is consistent with how we evaluate our financial performance:
Revenue from Contracts with Customers:

                            | Twelve months ended December 31, |
--------------------------- | -------------------------------- | -------
                            | 2019                             | 2018
Services                    | $59,545                          | $64,476
Software and other          | 3,788                            | 5,073
             Total revenue  | $63,333                          | $69,549

Disaggregation Revenue
 generate services software end-user downloads partners. table depicts disaggregation revenue type financial performance
 Revenue Contracts Customers
 Twelve months December 31,
 Services $59,545 $64,476
 Software 3,788 5,073
 Total revenue $63,333 $69,549


Net periodic benefit expense for our post-retirement benefit plans includes the following components:
We report service costs for our Combined Pension Plan and post-retirement benefit plans in cost of services and products and selling, general and administrative expenses in our consolidated statements of operations for the years ended December 31, 2019, 2018 and 2017. Additionally, a portion of the service cost is also allocated to certain assets under construction, which are capitalized and reflected as part of property, plant and equipment in our consolidated balance sheets. The remaining components of net periodic benefit expense (income) are reported in other income, net in our consolidated statements of operations. As a result of ongoing efforts to reduce our workforce, we recognized a one-time charge in 2019 of $6 million and in 2018 of $15 million for special termination benefit enhancements paid to certain eligible employees upon voluntary retirement.

                                             | Post-Retirement Plans    |      |
-------------------------------------------- | ------------------------ | ---- | ----
                                             | Years Ended December 31, |      |
                                             | 2019                     | 2018 | 2017
                                             | (Dollars in milions)     |      |
Service cost                                 | $15                      | 18   | 18
Interest cost                                | 110                      | 97   | 100
Expected return on plan assets               | (1)                      | (1)  | (2)
Recognition of prior service cost            | 16                       | 20   | 20
Net periodic post-retirement benefit expense | $140                     | 134  | 136

benefit expense post plans includes
 report service costs Combined Pension Plan expenses consolidated statements years ended December 31, 2019 2018 2017. portion service cost allocated assets under construction balance sheets. remaining reported income. workforce recognized one-time charge 2019 $6 million 2018 $15 million special termination benefit enhancements employees voluntary retirement.
 Post-Retirement Plans
 Years Ended December 31,
 2019 2018 2017
 Service cost $15  18
 Interest cost 110  97
 Expected return on plan assets
 Recognition prior service cost 16
 Net post-retirement benefit expense $140 134


NOTE 8—OTHER ASSETS
Deposits and restricted cash primarily relate to security deposits provided to landlords in accordance with facility lease agreements and cash restricted per the terms of certain contractual-based agreements.
Deferred implementation costs relate to direct and relevant costs on implementation of long-term contracts, to the extent such costs can be recovered through guaranteed contract revenues. As a result of the adoption of Topic 606, deferred implementation costs are no longer capitalized, but rather expensed as incurred as these costs do not relate to future performance obligations. Accordingly, these costs were adjusted through opening retained earnings as of July 1, 2018 (see note 3 "Revenues").
Capitalized costs to obtain a contract relate to incremental costs of obtaining a contract, such as sales commissions, which are eligible for capitalization on contracts to the extent that such costs are expected to be recovered (see note 3 "Revenues").
Investments relate to certain non-marketable equity securities in which we are a limited partner. Our interests in each of these investees range from 4% to below 20%. These investments are accounted for using the equity method. Our share of net income or losses based on our interest in these investments is recorded as a component of other income (expense), net in our Consolidated Statements of Income. During the year ended June 30, 2019, our share of income (loss) from these investments was $13.7 million (year ended June 30, 2018 and 2017 — $6.0 million and $6.0 million, respectively).
Long-term prepaid expenses and other long-term assets includes advance payments on long-term licenses that are being amortized over the applicable terms of the licenses and other miscellaneous assets.

                                                      | As of June 30, 2019 | As of June 30, 2018
----------------------------------------------------- | ------------------- | -------------------
Deposits and restricted cash                          | $13,671             | $9,479
Deferred implementation costs                         | —                   | 13,740
Capitalized costs to obtain a contract                | 35,593              | 13,027
Investments                                           | 67,002              | 49,635
Long-term prepaid expenses and other long-term assets | 32,711              | 25,386
Total                                                 | $148,977            | $111,267

NOTE
 Deposits restricted cash security deposits landlords facility lease agreements cash agreements.
 Deferred implementation costs long-term contracts recovered guaranteed contract revenues. Topic 606 deferred costs capitalized expensed incurred future obligations. adjusted earnings July 1, 2018.
 Capitalized costs contract incremental costs sales commissions eligible capitalization.
 Investments non-marketable equity securities limited partner. interests range 4% to 20%. accounted equity method. net income losses recorded Consolidated Statements Income. June 30, 2019 income (loss) $13. 7 million 2018 2017 $6. 0 million $6. 0 million.
 Long-term prepaid expenses advance payments licenses amortized miscellaneous assets.
 June 30, 2019 30 2018
 Deposits restricted cash $13,671 $9,479
 Deferred implementation costs 13,740
 Capitalized costs contract 35,593 13,027
 Investments 67,002 49,635
32,711 25,386
 $148,977 $111,267


3. Operating (loss)/profit
Detailed below are the key amounts recognised in arriving at our operating (loss)/profit
Notes: 1 The year ended 31 March 2019 included €nil (2018: €80 million credit, 2017: €127 million charge) reported in other income and expense in the consolidated income statement
2 Reported in other income and expense in the consolidated income statement.

                                                                                | 2019  | 2018  | 2017
------------------------------------------------------------------------------------------------------ | ----- | ----- | -------
                                                                                | €m    | €m    | €m
Net foreign exchange losses/(gains)1                                                                   | 1     | (65)  | 133
Depreciation of property, plant and equipment (note 11):                                               |       |       |
Owned assets                                                                                | 5,795 | 5,963 | 6,253
Leased assets                                                                                | 59    | 47    | 12
Amortisation of intangible assets (note 10)                                                            | 3,941 | 4,399 | 4,821
Impairment of goodwill in subsidiaries, associates and joint arrangements (note 4)                     | 3,525 | –     | –
Staff costs (note 23)                                                                                | 5,267 | 5,295 | 5,519
Amounts related to inventory included in cost of sales                                                 | 5,886 | 6,045 | 6,464
Operating lease rentals payable                                                                        | 3,826 | 3,788 | 3,976
Loss on disposal of property, plant and equipment and intangible assets                                | 33    | 36    | 22
Own costs capitalised attributable to the construction or acquisition of property, plant and equipment | (844) | (829) | (800)
Net gain on formation of VodafoneZiggo (note 26)2                                                      | –     | –     | (1,275)

. Operating/profit
 key amounts
 year 31 March 2019 included €nil €80 million credit 2017: €127 million charge
.
 2018 2017
 Net foreign exchange losses(gains
 Depreciation property plant equipment
 Owned assets 5,795 5,963 6,253
 Leased assets
 Amortisation intangible assets 3,941 4,399 4,821
 Impairment goodwill subsidiaries associates joint arrangements
 Staff costs 5,267 5,295 5,519
 inventory cost sales 5,886 6,045 6,464
 Operating lease rentals 3,826 3,788 3,976
 Loss disposal property plant equipment intangible assets 33 36
 costs construction acquisition
 Net gain VodafoneZiggo (1,275)


Note 6 – Accrued Expenses
Accrued expenses consisted of the following:

                                                     |         | December 31,
---------------------------------------------------- | ------- | ------------
                                                     | 2019    | 2018
Payroll and incentive compensation                   | $ 3,009 | $ 1,937
Current portion of operating lease liabilities     – | 285     | -
Real estate taxes                                    | 398     | 398
Other                                                | 395     | 442
Total accrued expenses                               | $ 4,087 | $ 2,777

Accrued Expenses
 December 31,
 Payroll incentive compensation $ 3,009 $ 1,937
 operating lease liabilities
 Real estate taxes
 expenses $ 4,087 $ 2,777


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
We account for uncertain tax positions by applying a minimum recognition threshold to tax positions before recognizing these positions in the financial statements. The reconciliation of our total gross unrecognized tax benefits is as follows:
The unrecognized tax benefits of $13.0 million, if recognized, will impact the Company’s effective tax rate. In accordance with our accounting policy, we recognize accrued interest and penalties related to unrecognized tax benefits as a component of tax expense. We had $3.0 million and $1.2 million of accrued interest and penalties at December 31, 2019 and 2018, respectively. We expect the total amount of tax contingencies will decrease by approximately $3.5 million in 2020 based on statute of limitation expiration.
With few exceptions, the Company is no longer subject to federal, state or foreign income tax examinations by tax authorities for years before 2016.

                                                                            |         | Years Ended December 31, |
--------------------------------------------------------------------------- | ------- | ------------------------ | -------
                                                                            | 2019    | 2018                     | 2017
Balance at beginning of period                                              | $13,162 | $15,990                  | $11,401
Additions based on tax positions taken during a prior period                | 484     | 94                       | 1,258
Additions based on tax positions taken during a prior period - acquisitions | 4,479   | 757                      | —
Additions based on tax positions taken during the current period            | —       | —                        | 4,433
Reductions based on tax positions taken during a prior period               | (4,295) | (153)                    | —
Reductions related to a lapse of applicable statute of limitations          | (821)   | (3,144)                  | (1,102)
Reductions related to a settlement with taxing authorities                  | —       | (382)                    | —
Balance at end of period                                                    | $13,009 | $13,162                  | $15,990

ADVANCED INDUSTRIES. FINANCIAL STATEMENTS share
 account uncertain tax positions minimum recognition threshold before. unrecognized tax benefits
 unrecognized tax benefits $13. 0 million impact effective tax rate. accrued interest penalties tax expense. $3. 0 million $1. 2 million accrued interest penalties at December 31, 2019 2018. tax contingencies decrease $3. 5 million 2020 statute limitation expiration.
 Company no longer subject federal foreign income tax examinations before 2016.
 Ended December 31,
 2019 2018 2017
 Balance $13,162  $15,990 $11,401
 Additions tax positions
 acquisitions 4,479
 Reductions positions prior period (4,295) (153)
 Reductions lapse statute of limitations (821),144
 Reductions settlement taxing
 Balance end period $13,009 $13,162 $15,990


On February 6, 2018, the Company announced that its Board of Directors had unanimously approved the pursuit of a separation of its smart camera business “Arlo” from NETGEAR (the “Separation”) to be effected by way of initial public offering (“IPO”) and spin-off. On August 2, 2018, Arlo Technologies, Inc. (“Arlo”) and NETGEAR announced the pricing of Arlo's initial public offering (“IPO”) at a price to the public of $16.00 per share, subsequently listing on the New York Stock Exchange on August 3, 2018 under the symbol "ARLO". On August 7, Arlo completed the IPO and generated proceeds of approximately $170.2 million, net of offering costs, which Arlo used for its general corporate purposes. Upon completion of the IPO, Arlo common stock outstanding amounted to 74,247,000 shares, of which NETGEAR held 62,500,000 shares, representing approximately 84.2% of the outstanding shares of Arlo common stock. On December 31, 2018, NETGEAR completed the distribution of these 62,500,000 shares of common stock of Arlo (the “Distribution”). After the completion of the Distribution, NETGEAR no longer owns any shares of Arlo common stock. The Distribution took place by way of a pro rata common stock dividend to each NETGEAR stockholder of record on the record date of the Distribution, December 17, 2018, and NETGEAR stockholders received 1.980295 shares of Arlo common stock for every share of NETGEAR common stock held as of the record date.
Upon completion of the Distribution, the Company ceased to own a controlling financial interest in Arlo and Arlo's assets, liabilities, operating results and cash flows for all periods presented have been classified as discontinued operations within the Consolidated Financial Statements.
In connection with Arlo's Separation, the Company incurred Separation expense of $34.2 million since commencing in December 2017. Separation expense primarily consists of third-party advisory, consulting, legal and professional services, IT costs and employee bonuses directly related to the separation, as well as other items that are incremental and one-time in nature that are related to the separation. The majority of these costs are reflected in the Company's consolidated statement of operations as discontinued operations for all periods presented. In addition, in the third fiscal quarter of 2018, the Company contributed $70.0 million in cash to Arlo and provided for, among other things, the transfer from NETGEAR to Arlo of assets and the assumption by Arlo of liabilities comprising its business effected through a master separation agreement between NETGEAR and Arlo. The master separation agreement governs the separation of Arlo's business from NETGEAR as well as various interim arrangements. In connection with these arrangements, during the third and fourth quarter of 2018, NETGEAR recorded a reduction to operating expenses of $6.3 million relating to the transition services, which are reflected in the Company's consolidated statement of operations as discontinued operations for the periods presented. In the third quarter of 2018, NETGEAR provided billing and collection services to Arlo in respect of its trade receivables and trade payments. As of December 31, 2018, NETGEAR had a net liability to Arlo of $12.2 million relating to these transition service, billing and collection services, and the net liability was classified within accounts payable on the consolidated balance sheets. The Company does not expect the amounts relating to such services to be material after the Distribution. Additionally, the Company entered into certain other agreements that provide a framework for the relationship between NETGEAR and Arlo after the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property rights cross-license agreement, and a registration rights agreement. In connection with Arlo's Separation, the Company incurred Separation expense of $34.2 million since commencing in December 2017. Separation expense primarily consists of third-party advisory, consulting, legal and professional services, IT costs and employee bonuses directly related to the separation, as well as other items that are incremental and one-time in nature that are related to the separation. The majority of these costs are reflected in the Company's consolidated statement of operations as discontinued operations for all periods presented. In addition, in the third fiscal quarter of 2018, the Company contributed $70.0 million in cash to Arlo and provided for, among other things, the transfer from NETGEAR to Arlo of assets and the assumption by Arlo of liabilities comprising its business effected through a master separation agreement between NETGEAR and Arlo. The master separation agreement governs the separation of Arlo's business from NETGEAR as well as various interim arrangements. In connection with these arrangements, during the third and fourth quarter of 2018, NETGEAR recorded a reduction to operating expenses of $6.3 million relating to the transition services, which are reflected in the Company's consolidated statement of operations as discontinued operations for the periods presented. In the third quarter of 2018, NETGEAR provided billing and collection services to Arlo in respect of its trade receivables and trade payments. As of December 31, 2018, NETGEAR had a net liability to Arlo of $12.2 million relating to these transition service, billing and collection services, and the net liability was classified within accounts payable on the consolidated balance sheets. The Company does not expect the amounts relating to such services to be material after the Distribution. Additionally, the Company entered into certain other agreements that provide a framework for the relationship between NETGEAR and Arlo after the separation, including a transition services agreement, a tax matters agreement, an employee matters agreement, an intellectual property rights cross-license agreement, and a registration rights agreement.
The financial results of Arlo through the Distribution date are presented as income (loss) from discontinued operations, net of tax, in the consolidated
statements of operations. The following table presents financial results of Arlo:

                                                               |           | Year Ended December 31,
-------------------------------------------------------------- | --------- | -----------------------
                                                               | 2018      | 2017
                                                               |           | (In thousands)
Net revenue                                                    | $464,649  | $367,751
Cost of net revenue                                            | 372,843   | 279,425
Gross profit                                                   | 91,806    | 88,326
Operating expenses:                                            |           |
Research and development                                       | 48,696    | 22,710
Sales and marketing                                            | 39,713    | 19,490
General and administrative                                     | 17,762    | 691
Separation expense                                             | 31,583    | 1,384
Litigation reserves, net                                       | —         | 28
Total operating expenses                                       | 137,754   | 44,303
Income (loss) from operations of discontinued operations       | (45,948)  | 44,023
Interest income, net                                           | 1,239     | —
Other income (expense), net                                    | (41)      | 467
Income (loss) from discontinued operations before income taxes | (44,750)  | 44,490
Provision (benefit) for income taxes                           | (9,095)   | 13,921
Income (loss) from discontinued operations, net of tax         | $(35,655) | $30,569

February 6, 2018 Company Board Directors approved separation smart camera business NETGEAR initial public offering spin-off. August 2, 2018 Arlo Technologies. NETGEAR initial public offering $16. 00 per share New York Stock Exchange August 3, 2018 "ARLO. August 7 Arlo completed generated proceeds $170. 2 million costs general corporate purposes. Arlo common stock 74,247,000 shares NETGEAR held 62,500,000 shares 84. 2%. December 31, 2018 NETGEAR distribution 62,500,000 shares stock. NETGEAR owns Arlo common stock. pro rata stock dividend NETGEAR stockholder 2018 received. 980295 shares Arlo.
 Company ceased interest Arlo assets liabilities operating results cash flows discontinued operations Financial Statements.
 incurred Separation expense $34. 2 million December 2017.Separation expense third-party advisory consulting legal services IT costs employee bonuses related incremental one-time. majority costs reflected in Company consolidated statement operations discontinued. third fiscal quarter 2018 Company contributed $70. 0 million cash to Arlo transfer assets assumption Arlo of liabilities master separation agreement. agreement governs separation Arlo business interim arrangements. third fourth quarter 2018 NETGEAR reduction operating expenses $6. 3 million transition services reflected in consolidated. third quarter NETGEAR provided billing collection services to Arlo trade receivables. December 31, 2018 net liability to Arlo $12. 2 million classified within accounts payable consolidated balance sheets. after Distribution. entered agreements transition services tax matters employee matters intellectual property rights cross-license registration rights. Company incurred expense $34. 2 million December 2017.Separation expense third-party consulting legal services IT costs employee bonuses related incremental one-time. majority costs reflected in Company consolidated statement operations discontinued. third fiscal quarter 2018 Company contributed $70. 0 million cash to Arlo transfer assets assumption Arlo liabilities master separation agreement. agreement governs separation Arlo business interim arrangements. third fourth quarter 2018 NETGEAR reduction operating expenses $6. 3 million transition services reflected discontinued. third quarter NETGEAR provided billing collection services to Arlo trade. December 31, 2018 net liability to Arlo $12. 2 million classified within accounts payable balance sheets. after Distribution. entered agreements transition services tax matters employee matters intellectual property rights cross-license registration rights agreement.
 financial results Arlo as income) from discontinued operations net of tax in consolidated
 statements. table financial results
 Year Ended December 31,

 Net revenue $464,649 $367,751
 Cost 372,843 279,425
 Gross profit 91,806 88,326
 Operating expenses
 Research development 48,696
 Sales marketing 39,713 19,490
 17,762
 Separation 31,583 1,384
 Litigation reserves
 operating expenses 137,754 44,303
 discontinued (45,948) 44,023
 Interest income 1,239
,750,490
 taxes (9,095) 13,921
 $(35,655) $30,569


Lockheed Martin Transaction
On August 16, 2016, a wholly-owned subsidiary of Leidos Holdings, Inc. merged with the IS&GS Business in a Reverse Morris Trust transaction (the "IS&GS Transactions").
During fiscal 2017, the Company recorded adjustments to finalize the fair value of acquired assets and liabilities assumed which resulted in a $337 million increase in goodwill. Significant changes included intangible assets, property, plant and equipment, deferred tax assets, other assets, accounts payable and accrued liabilities and deferred tax liabilities.
On January 10, 2018, the final amount of the net working capital of the IS&GS Business was determined through a binding arbitration proceeding in accordance with the Separation Agreement with Lockheed Martin. As a result, $24 million was recorded as acquisition costs in the consolidated statements of income for fiscal 2017. On January 18, 2018, the final working capital amount of $105 million was paid to Lockheed Martin, of which $24 million and $81 million was presented as cash flows from operating and investing activities, respectively, on the consolidated statements of cash flows.
During fiscal 2018, a tax indemnification liability of $23 million was paid to Lockheed Martin in accordance with the Tax Matters Agreement, which was presented as cash flows from financing activities on the consolidated statements of cash flows.
The Company incurred the following expenses related to the acquisition and integration of the IS&GS Business:
These acquisition and integration costs have been recorded within Corporate and presented in "Acquisition, integration and restructuring costs" on the consolidated statements of income.

                                        |                 | Year Ended        |
--------------------------------------- | --------------- | ----------------- | -----------------
                                        | January 3, 2020 | December 28, 2018 | December 29, 2017
                                        |                 | (in millions)     |
Acquisition costs                       | $—              | $—                | $25
Integration costs                       | 3               | 29                | 77
Total acquisition and integration costs | $3              | $29               | $102

Lockheed Martin Transaction
 August 16, 2016, Leidos Holdings. merged IS&GS Business Reverse Morris Trust transaction.
 fiscal 2017 adjustments acquired assets liabilities $337 million increase goodwill. changes intangible assets property plant equipment deferred tax assets accounts payable accrued liabilities.
 January 10, 2018 net working capital IS&GS Business determined arbitration Separation Agreement Martin. $24 million acquisition costs 2017. January 18, 2018 final working capital $105 million paid Lockheed Martin $24 million $81 million cash flows operating investing activities.
 2018 tax indemnification liability $23 million paid Lockheed Martin cash flows financing.
 incurred expenses acquisition integration IS&GS Business
 acquisition integration costs recorded consolidated statements income.
 January 3 2020 December 28, 2018 29,
 Acquisition costs
 Integration costs


8 Directors’ emoluments
Directors represent the key management personnel of the Group under the terms of IAS 24 (Related Party Disclosures). Total remuneration is shown below.
Further details of salaries and short-term benefits, post-retirement benefits, share plans and long-term share incentive plans are shown in the Annual Report on Remuneration 2019 on pages 102 to 132. The share-based payments charge comprises a charge in relation to the Performance Share Plan and the Employee Share Ownership Plan (as described in Note 23).

                                 | 2019 | 2018
-------------------------------- | ---- | ----
                                 | £m   | £m
Salaries and short-term benefits | 4.1  | 3.7
Post-retirement benefits         | 0.5  | 0.4
Share-based payments             | 1.7  | 1.3
Total Directors' remuneration    | 6.3  | 5.4

Directors’ emoluments
 key management IAS 24. Total remuneration.
 salaries short-term post-retirement share plans long-term Annual Report Remuneration 2019 pages 102 to 132. share-based payments charge Performance Share Plan Employee Share Ownership Plan Note 23.
 Salaries short-term benefits.
 Post-retirement benefits.
 Share-based payments.
 Total Directors' remuneration 6.


The following is a summary of amounts reclassified from AOCI for the years ended June 30, 2019 and 2018:
(a) Amounts in parentheses indicate debits to income/loss.
(b) These AOCI components are included in the computation of net periodic benefit cost (see Note 11 for additional details).

                                                                    |                         | Amount Reclassified from AOCI |
------------------------------------------------------------------- | ----------------------- | ----------------------------- | -------
                                                                    |                         | Years Ended June 30,          |
($ in millions) (a)                                                 | Location of gain (loss) | 2019                          | 2018
Details about AOCI Components                                       |                         |                               |
Cash flow hedging items                                             |                         |                               |
Commodity contracts                                                 | Cost of sales           | $5.1                          | $1.8
Foreign exchange contracts                                          | Net sales               | 1.0                           | (1.0)
Forward interest rate swaps                                         | Interest expense        | 0.4                           | 0.4
                                                                    | Total before tax        | 6.5                           | 1.2
                                                                    | Tax expense             | (1.6)                         | (0.4)
                                                                    | Net of tax              | $4.9                          | $0.8
Amortization of pension and other postretirement benefit plan items |                         |                               |
Net actuarial loss                                                  | (b)                     | $(12.0)                       | $(16.4)
Prior service cost                                                  | (b)                     | 3.1                           | 3.1
                                                                    | Total before tax        | (8.9)                         | (13.3)
                                                                    | Tax benefit             | 2.1                           | 4.4
                                                                    | Net of tax              | $(6.8)                        | $(8.9)

summary amounts reclassified AOCI years June 30 2019 2018:
 Amounts indicate debits income/loss.
 AOCI components net periodic benefit cost Note 11.
 Reclassified AOCI
 Years Ended June 30
 millions Location gain
 AOCI Components
 Cash flow hedging items
 Commodity contracts Cost sales. $1.
 Foreign exchange contracts Net sales.
 Forward interest rate swaps Interest expense.
 Total before tax 6.
 expense.
 Net tax $4.
 Amortization pension postretirement benefit plan items
 Net actuarial loss.
 Prior service cost 3.
 Total before tax.
 Tax benefit.
 Net tax.


RESULTS OF OPERATIONS
Revenue
(1) Reflects client arrangements (term license, cloud, and maintenance) that are subject to renewal.
We expect our revenue mix to continue to shift in favor of our subscription offerings, particularly cloud arrangements, which could result in slower total revenue growth in the near term. Revenue from cloud arrangements is generally recognized over the service period, while revenue from term and perpetual license arrangements is generally recognized upfront when the license rights become effective.
Subscription revenue
The increase in cloud revenue in 2019 reflects the shift in client preferences to cloud arrangements from other types of arrangements. The increase in term license revenue in 2019 was due to several large, multi-year term license contracts executed in 2019. This increase was partially offset by term license contracts with multi-year committed maintenance periods, where a greater portion of the contract value is allocated to maintenance.
The increase in maintenance revenue in 2019 was primarily due to the continued growth in the aggregate value of the installed base of our software and strong renewal rates in excess of 90%
Perpetual license
The decrease in perpetual license revenue in 2019 reflects the shift in client preferences in favor of our subscription offerings, particularly cloud arrangements
Consulting
Our consulting revenue fluctuates depending upon the mix of new implementation projects we perform as compared to those performed by our enabled clients or led by our partners. See "Our consulting revenue is significantly dependent upon our consulting personnel implementing new license and cloud arrangements" in Item 1A of this Annual Report for additional information.
The decrease in consulting revenue in 2019 was primarily due to a decrease in billable hours.

(Dollars in thousands) | 2019     |      | 2018     |      | Change   |
---------------------- | -------- | ---- | -------- | ---- | -------- | -----
Cloud                  | $133,746 | 15%  | 82,627   | 9%   | $51,119  | 62%
Term license           | 199,433  | 22%  | 178,256  | 20%  | 21,177   | 12%
Maintenance            | 280,580  | 30%  | 263,875  | 30%  | 16,705   | 6%
Subscription (1)       | 613,759  | 67%  | 524,758  | 59%  | 89,001   | 17%
Perpetual license      | 80,015   | 9%   | 109,863  | 12%  | (29,848) | (27)%
Consulting             | 217,609  | 24%  | 256,960  | 29%  | (39,351) | (15)%
                       | $911,383 | 100% | $891,581 | 100% | $19,802  | 2%

RESULTS OPERATIONS
 Revenue
 Reflects client arrangements license cloud maintenance renewal.
 expect revenue mix subscription offerings cloud slower revenue growth. Revenue cloud recognized over service period term perpetual license recognized upfront when license rights effective.
 Subscription
 increase cloud revenue 2019 reflects client preferences cloud. term license due large multi-year term license contracts. offset by contracts multi-year maintenance value.
 increase maintenance revenue due to growth value installed base software strong renewal rates 90%
 Perpetual
 decrease shift subscription offerings
 Consulting
 revenue fluctuates new projects. revenue dependent personnel implementing new license cloud arrangements Item 1A Annual Report.
 decrease consulting revenue 2019 due decrease billable hours.
 Cloud $133,746 15% 82,627 9% $51,119 62%
 Term license 199,433 22% 178,256 20% 21,177 12%
 Maintenance 280,580 30% 263,875 16,705 6%
Subscription 613,759 67% 524,758 89,001
 Perpetual license 80,015 109,863 (29,848
 217,609 24% 256,960,351
 $911,383 $891,581 $19,802


VALUATION AND QUALIFYING ACCOUNTS
(in millions)
Foreign exchange and other includes the impact of foreign exchange and certain immaterial reclassifications.

                                      | Allowances For        |
------------------------------------- | --------------------- | -------------------
                                      | Financing Receivables | Accounts Receivable
Year ended July 29, 2017              |                       |
Balance at beginning of fiscal year . | $375                  | $249
Provisions (benefits)                 | (35)                  | 27
Recoveries (write-offs), net .        | (49)                  | (61)
Foreign exchange and other .          | 4                     | (4)
Balance at end of fiscal year         | $295                  | $211
Year ended July 28, 2018              |                       |
Balance at beginning of fiscal year . | $295                  | $211
Provisions (benefits)                 | (89)                  | (45)
Recoveries (write-offs), net .        | (6)                   | (37)
Foreign exchange and other .          | 5                     | —
Balance at end of fiscal year         | $205                  | $129
Year ended July 27, 2019              |                       |
Balance at beginning of fiscal year   | $205                  | $129
Provisions (benefits)                 | (16)                  | 56
Recoveries (write-offs), net          | (42)                  | (50)
Foreign exchange and other  .         | (21)                  | 1
Balance at end of fiscal year         | $126                  | $136

VALUATION QUALIFYING ACCOUNTS
 millions
 Foreign exchange immaterial reclassifications.
 Allowances
 Financing Receivables
 Year ended July 29, 2017
 Balance fiscal. $375 $249
 Provisions 27
 Recoveries.
 exchange.
 end fiscal year $295 $211
 Year ended July 28, 2018
. $295 $211
 Provisions (89) (45)
 Recoveries.
 exchange.
 end fiscal year $205 $129
 ended July 27, 2019
 $205 $129
 Provisions
 Recoveries
 Foreign exchange.
 end fiscal year $126 $136


The following table summarizes net revenues by significant product and services categories:
Endpoint and information protection products include endpoint security, advanced threat protection, and information protection solutions and their related support services. Network and web security products include network security, web security, and cloud security solutions and their related support services. WSS and PKI products consist of the solutions we divested on October 31, 2017. Other products and services primarily consist of email security products, managed security services, consulting, and other professional services.
Consumer security products include Norton security, Norton Secure VPN, and other consumer security solutions. Identity and information protection products include LifeLock identity theft protection and other information protection solutions.
Products and service revenue information

                                    |                | Year Ended     |
----------------------------------- | -------------- | -------------- | --------------
(in millions)                       | March 29, 2019 | March 30, 2018 | March 31, 2017
Enterprise Security:                |                |                |
Endpoint and information protection | $1,027         | $983           | $947
Network and web security            | 748            | 782            | 451
WSS and PKI                         | -              | 238            | 422
Other products and services         | 548            | 551            | 535
Total Enterprise Security           | $2,323         | $2,554         | $2,355
Consumer Cyber Safety:              |                |                |
Consumer security                   | $1,471         | $1,504         | $1,527
Identity and information protection | 937            | 776            | 137
Total Consumer Cyber Safety         | 2,408          | 2,280          | 1,664
Total net revenues                  | $4,731         | $4,834         | $4,019

table summarizes revenues product categories
 Endpoint protection threat. Network web security. WSS PKI divested October 31, 2017. Other email security managed security consulting services.
 Consumer security Norton VPN. Identity protection LifeLock identity theft.
 revenue
 millions March 29, 2019 30 2018 31, 2017
 Enterprise Security
 Endpoint protection $1,027 $983 $947
 Network web security 748
 WSS PKI 238 422
 services
 Enterprise Security $2,323 $2,554 $2,355
 Consumer Cyber Safety
 $1,471 $1,504
 Identity information protection 937 776
 2,408 2,280 1,664
 net revenues $4,731 $4,834 $4,019


Note 15. NET INCOME (LOSS) PER SHARE
We calculate basic net income (loss) per share by dividing earnings allocated to common stockholders by the basic weighted-average number of common shares outstanding for the period.
Diluted weighted-average shares is computed using basic weighted-average number of common shares outstanding plus any potentially dilutive securities outstanding during the period using the treasury-stock-type method and the if-converted method, except when their effect is anti-dilutive. Potentially dilutive securities include stock options, restricted stock units, and the outstanding senior convertible debentures.
The following table presents the calculation of basic and diluted net income (loss) per share attributable to stockholders:
1 As a result of our net loss attributable to stockholders for fiscal 2019, 2018, and 2017, the inclusion of all potentially dilutive stock options, restricted stock units, and common shares under noted warrants and convertible debt would be anti-dilutive. Therefore, those stock options, restricted stock units and shares were excluded from the computation of the weighted-average shares for diluted net loss per share for such periods.

                                                   |                   | Fiscal Year Ended |
-------------------------------------------------- | ----------------- | ----------------- | -----------------
(In thousands, except per share amounts)           | December 29, 2019 | December 30, 2018 | December 31, 2017
Basic net income (loss) per share:                 |                   |                   |
Numerator:                                         |                   |                   |
Net income (loss) attributable to stockholders     | $22,159           | $(811,091)        | $(929,121)
Denominator:                                       |                   |                   |
Basic weighted-average common shares               | 144,796           | 140,825           | 139,370
Basic net income (loss) per share                  | $0.15             | $(5.76)           | $(6.67)
Diluted net income (loss) per share 1              |                   |                   |
Numerator:                                         |                   |                   |
Net income (loss) attributable to stockholders     | $22,159           | $(811,091)        | $(929,121)
Net income (loss) available to common stockholders | $22,159           | $(811,091)        | $(929,121)
Denominator:                                       |                   |                   |
Basic weighted-average common shares               | 144,796           | 140,825           | 139,370
Effect of dilutive securities:                     |                   |                   |
Restricted stock units                             | 2,729             | -                 | -
Dilutive weighted-average common shares:           | 147,525           | 140,825           | 139,370
Dilutive net income (loss) per share               | $ 0.15            | $ (5.76)          | $ (6.67)

. NET INCOME (LOSS) PER SHARE
 income earnings by-average shares.
 Diluted-average shares computed dilutive securities anti-dilutive. dilutive securities include stock options restricted stock units senior convertible debentures.
 table calculation diluted net income (loss per share
 2019 2018 2017 dilutive stock options restricted stock units noted warrants convertible debt anti-dilutive. excluded from diluted net loss.
 Fiscal Year
 December 29, 2019 30 2018 31, 2017
 Basic net income (loss) per share
 $22,159 $(811,091) $(929,121)
 weighted-average common shares 144,796 140,825 139,370
 net income (loss) per share $0. $(5. 76) $(6. 67)
 Diluted net income (loss) per share
income stockholders $22,159(811,091)(929,121
 $22,159(811,091),121
 weighted-average common shares 144,796 140,825 139,370
 dilutive securities
 Restricted stock units
 Dilutive shares 147,525 140,825 139,370
 Dilutive income share $.


As a result of the adoption of ASC 606, our deferred product revenues and deferred product costs for the fleet management and auto vehicle finance verticals increased as balances are now amortized over the estimated average in-service lives of these devices. Deferred income tax assets and accumulated deficit increased as a result of the changes made to our deferred product revenues and deferred product costs. The cumulative effect of the changes made to our consolidated balance sheet for the adoption of ASC 606 were as follows (in thousands):
(1) Deferred product costs included in Prepaid expenses and other current assets and Other assets amounted to $5.4 million and $6.0 million, respectively, as of March 1, 2018.

                                              | Balance at                           | ASC 606     | Balance at
--------------------------------------------- | ------------------------------------ | ----------- | -------------
                                              | February 28, 2018                    | Adjustments | March 1, 2018
                                              | Assets                               |             |
Prepaid expenses and other current assets (1) | $12,000                              | 1,891       | $13,891
Deferred income tax assets                    | 31,581                               | 532         | 32,113
Other assets (1)                              | 18,829                               | 3,145       | 21,974
                                              |                                      |             |
                                              | Liabilities and Stockholders' Equity |             |
Deferred revenue                              | $17,757                              | 2,156       | 19,913
Other non-current liabilities                 | 24,249                               | 5,007       | 29,256
                                              |                                      |             |
                                              | Stockholders' equity                 |             |

ASC 606 deferred revenues costs fleet management auto vehicle finance increased amortized-service lives. Deferred income tax assets deficit increased. cumulative
 Deferred product costs Prepaid expenses $5. 4 million $6. 0 million March 1, 2018.
 ASC 606
 February 28, 2018 Adjustments March 1 2018
 Assets
 Prepaid expenses current assets $12,000 1,891 $13,891
 Deferred income tax assets 31,581 32,113
 Other assets 18,829 3,145 21,974
 Liabilities Stockholders' Equity
 Deferred revenue $17,757 2,156 19,913
 non-current liabilities 24,249,007


Intangible Assets
Internal software development costs of $2,526 and $12,666 were capitalized during the years ended December 31, 2019 and 2018, respectively, and are classified within software development costs as an intangible asset. Amortization expense related to the capitalized internally developed software was $7,464 and $3,832 for the years ended December 31, 2019 and 2018, respectively, and is included in cost of revenues, sales and marketing and general and administrative expenses in the accompanying Consolidated Statements of Operations and Comprehensive Loss.
Expressed in US $000's except share and per share amounts

                                | December 31, 2018 |                          |
------------------------------- | ----------------- | ------------------------ | --------------
                                | Cost              | Accumulated amortization | Net book value
                                | $                 | $                        | $
Acquired technology             | 15,556            | 7,875                    | 7,681
Software development costs      | 24,963            | 9,226                    | 15,737
Acquired customer relationships | 495               | 346                      | 149
Purchased software              | 6,973             | 4,503                    | 2,470
Other intangible assets         | 591               | 556                      | 35
                                | 48,578            | 22,506                   | 26,072

Intangible Assets
 software costs $2,526 $12,666 December 2019 2018 intangible asset. Amortization $7,464 $3,832 2019 revenues sales marketing administrative expenses Consolidated Statements Operations Loss.
 US $000's
 Accumulated amortization Net book value
 Acquired technology 15,556 7,681
 Software costs 24,963 9,226 15,737
 Acquired customer relationships
 Purchased software 6,973 4,503 2,470
 Other intangible assets 591
 48,578 22,506 26,072


Note 6 — Accounts Receivable, net
The Company’s net accounts receivable consists of:
At December 31, 2019 and 2018, the Company had recorded allowances for doubtful accounts of $1.8 million and $1.3 million, respectively, against Restaurant/Retail segment accounts receivable. Write-offs of accounts receivable during fiscal years 2019 and 2018 were $0.3 million and $0.4 million, respectively. The bad debt expense which is recorded in the consolidated statements of operations was $0.8 million and $0.8 million in 2019 and 2018, respectively.
Receivables recorded as of December 31, 2019 and 2018 all represent unconditional rights to payments from customers.

                           | December 31,   |
-------------------------- | -------------- | -------
                           | (in thousands) |
                           | 2019           | 2018
Government segment:        |                |
Billed                     | $11,608        | $9,100
Advanced billings          | (608)          | (563)
                           | 11,000         | 8,537
Restaurant/Retail segment: |                |
Accounts receivable - net  | 30,774         | 17,682
                           | $41,774        | $26,219

6 Accounts Receivable
 December 31, 2019 2018 allowances doubtful accounts $1. 8 million $1. 3 million against Restaurant/Retail accounts. Write-offs 2019 $0. 3 million. 4 million. bad debt expense consolidated statements $0. 8 million. 8 million 2018.
 Receivables unconditional rights payments customers.
 Government segment
 $11,608 $9,100
 Advanced billings
 Restaurant/Retail segment
 Accounts receivable 30,774
 $41,774 $26,219


ASSUMPTIONS USED IN STOCK OPTION PRICING MODEL
The fair value of options granted was determined using a variation of a binomial option pricing model that takes into account factors specific to the share incentive plans, such as the vesting period. The following table shows the principal assumptions used in the valuation.
Expected dividend growth is commensurate with BCE’s dividend growth strategy. Expected volatility is based on the historical volatility of BCE’s share price. The risk-free rate used is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options

                                               | 2019  | 2018
---------------------------------------------- | ----- | -----
Weighted average fair value per option granted | $2.34 | $2.13
Weighted average share price                   | $58   | $57
Weighted average exercise price                | $58   | $56
Expected dividend growth                       | 5%    | 5%
Expected volatility                            | 14%   | 12%
Risk-free interest rate                        | 2%    | 2%
Expected life (years)                          | 4     | 4

OPTION PRICING MODEL
 fair value options determined binomial option pricing model. table assumptions valuation.
 dividend growth BCE’s strategy. volatility based historical volatility share price. risk-free rate equal yield Government Canada bonds grant life options
 average fair value per option $2. 34.
 share price $58 $57
 exercise price $58 $56
 dividend growth 5%
 volatility 14%
 Risk-free interest rate 2%
 life (years 4


The reconciliation between U.S. federal income taxes at the statutory rate and income tax expense (benefit) was as follows:
(1) The U.S. federal statutory rate was 21% for fiscal 2019, 24.58% for fiscal 2018, and 35%
for fiscal 2017.
(2) Excludes items which are separately presented.
The income tax benefit for fiscal 2019 included a $216 million income tax benefit related to the tax impacts of certain measures of the Switzerland Federal Act on Tax Reform and AHV Financing (“Swiss Tax Reform”), a $90 million income tax benefit related to the effective settlement of a tax audit in a non-U.S. jurisdiction, and $15 million of income tax expense associated with the tax impacts of certain legal entity restructurings and intercompany transactions. See “Swiss Tax Reform” below for additional information regarding Swiss Tax Reform.
The income tax benefit for fiscal 2018 included a $1,222 million net income tax benefit associated with the tax impacts of certain legal entity restructurings and intercompany transactions that occurred in the quarter ended September 28, 2018. The net income tax benefit of $1,222 million related primarily to the recognition of certain non-U.S. loss carryforwards and basis differences in subsidiaries expected to be utilized against future taxable income, partially offset by a $46 million increase in the valuation allowance for certain U.S. federal tax credit carryforwards. The income tax benefit for fiscal 2018 also included $567 million of income tax expense related to the tax impacts of the Tax Cuts and Jobs Act (the “Act”) and a $61 million net income tax benefit related to the tax impacts of certain legal entity restructurings that occurred in the quarter ended December 29, 2017. See “Tax Cuts and Jobs Act” below for additional information regarding the Act.
The income tax expense for fiscal 2017 included a $52 million income tax benefit associated with the tax impacts of certain intercompany transactions and the corresponding reduction in the valuation allowance for U.S. tax loss carryforwards, a $40 million income tax benefit related to share-based payments and the adoption of ASU No. 2016-09, and a $14 million income tax benefit associated with pre-separation tax matters.

                                                                   |        | Fiscal        |
------------------------------------------------------------------ | ------ | ------------- | -----
                                                                   | 2019   | 2018          | 2017
                                                                   |        | (in millions) |
Notional U.S. federal income tax expense at the statutory rate (1) | $ 406  | $ 551         | $ 602
Adjustments to reconcile to the income tax expense (benefit):      |        |               |
U.S. state income tax benefit, net                                 | (5)    | (7)           | (4)
Tax law changes                                                    | 15     | 638           | 7
Tax credits                                                        | (22)   | (8)           | (8)
Non-U.S. net earnings(2)                                           | (166)  | (213)         | (355)
Change in accrued income tax liabilities                           | (61)   | 13            | 24
Valuation allowance                                                | (163)  | 33            | (1)
Legal entity restructuring and intercompany transactions           | 3      | (1,329)       | (40)
Excess tax benefits from share-based payments                      | (8)    | (24)          | (40)
Other                                                              | (14)   | 2             | (5)
Income tax expense (benefit)                                       | $ (15) | $ (344)       | $ 180

reconciliation U. S. federal income taxes expense
. statutory rate 21% 2019. 58% 2018 35%
 2017.
.
 income tax benefit 2019 $216 million Switzerland Federal Act Tax Reform AHV Financing $90 million benefit settlement tax audit non-U. S. jurisdiction $15 million expense legal entity restructurings intercompany transactions. “Swiss Tax.
 income tax benefit 2018 $1,222 million legal entity restructurings transactions September 28, 2018. non-U. S. loss carryforwards basis differences subsidiaries income offset $46 million increase valuation allowance U. S. federal tax credit carryforwards. $567 million expense Tax Cuts and Jobs Act $61 million net benefit legal entity restructurings December 29, 2017. Cuts and Jobs.
 income tax expense 2017 $52 million benefit intercompany transactions reduction valuation allowance U. S. tax loss carryforwards $40 million benefit share-based payments ASU No.2016-09 $14 million income tax benefit pre-separation tax.
 2019 2018 2017
 millions
. federal income tax expense statutory rate $ 406 $ 551 $ 602
 Adjustments income tax expense
. state income tax benefit
 Tax law changes
 Tax credits
 Non. net (166) (213) (355)
 accrued income tax liabilities (61
 Valuation allowance
 Legal entity restructuring transactions,329)
 Excess tax benefits share-based payments
 Income tax expense $ (344) 180


Information about VMware’s payments for such arrangements during the periods presented consisted of the following (table in millions):
1) Amount includes indirect taxes that were remitted to Dell during the periods presented.
VMware also purchases Dell products through Dell’s channel partners. Purchases of Dell products through Dell’s channel partners were not significant during the periods presented.
From time to time, VMware and Dell also enter into joint marketing, sales, branding and product development arrangements, for which both parties may incur costs.
During the fourth quarter of fiscal 2020, VMware entered into an arrangement with Dell to transfer approximately 250 professional services employees from Dell to VMware. These employees are experienced in providing professional services delivering VMware technology and this transfer centralizes these resources within the Company in order to serve its customers more efficiently and effectively. The transfer was substantially completed during the fourth quarter of fiscal 2020 and did not have a material impact to the consolidated financial statements. VMware also expects that Dell will resell VMware consulting solutions.
During the third quarter of fiscal 2019, VMware acquired technology and employees related to the Dell EMC Service Assurance Suite, which provides root cause analysis management software for communications service providers, from Dell. The purchase of the Dell EMC Service Assurance Suite was accounted for as a transaction by entities under common control. The amount of the purchase price in excess of the historical cost of the acquired assets was recognized as a reduction to retained earnings on the consolidated balance sheets. Transition services were provided by Dell over a period of 18 months, starting from the date of the acquisition, which were not significant.
During the second quarter of fiscal 2018, VMware acquired Wavefront, Inc. (“Wavefront”). Upon closing of the acquisition, Dell was paid $20 million in cash for its non-controlling ownership interest in Wavefront.

                                                              |                  | For the Year Ended |
------------------------------------------------------------- | ---------------- | ------------------ | ----------------
                                                              | January 31, 2020 | February 1, 2019   | February 2, 2018
Purchases and leases of products and purchases of services(1) | $242             | $200               | $142
Dell subsidiary support and administrative costs              | 119              | 145                | 212

VMware’s payments for arrangements
 includes indirect taxes to Dell.
 VMware purchases Dell products through channel partners. not significant.
 VMware Dell joint marketing sales branding product development arrangements incur costs.
 fourth quarter fiscal 2020 VMware 250 professional services employees. experienced transfer centralizes resources. transfer completed fourth quarter 2020 consolidated financial statements. expects Dell resell consulting solutions.
 third quarter fiscal 2019 VMware acquired technology employees Dell EMC Service Assurance Suite from Dell. transaction common control. purchase price recognized as reduction to retained earnings. Transition services provided 18 months not significant.
 second quarter fiscal 2018 VMware acquired Wavefront, Inc. Dell paid $20 million cash for non-controlling ownership interest in Wavefront.
 Year Ended
 January 31, 2020 February 1, 2019 February 2, 2018
 Purchases leases of products services(1) $242 $200 $142
Dell subsidiary costs 145


Earnings per share presents the amount of profit generated for the reporting period attributable to shareholders divided by the weighted average number of shares on issue. The potential for any share rights issued by the Group to dilute existing shareholders’ ownership when the share rights are exercised are also presented.
(1) Weighted average number of shares has been adjusted to remove shares held in trust by Woolworths Custodian Pty Ltd (as trustee of various employee share trusts)
(2) Includes 8.0 million (2018: 3.4 million) shares deemed to be issued for no consideration in respect of employee performance rights.
In 2019, the weighted average number of ordinary shares used in the calculation of EPS included the effect of the off-market share buy-back that was completed on 27 May 2019, resulting in 58.7 million ordinary shares being cancelled. Refer to Note 4.3 for further details on the share buy-back.

                                                                                | 2019     | 2018
----------------------------------------------------------------------------------- | -------- | --------
                                                                                | 53 WEEKS | 52 WEEKS
Profit for the period attributable to equity holders of the parent entity used in   |          |
earnings per share ($M)                                                             |          |
Continuing operations                                                               | 1,493    | 1,605
Discontinued operations                                                             | 1,200    | 119
                                                                                | 2,693    | 1,724
Weighted average number of shares used in earnings per share (shares, millions) (1) |          |
Basic earnings per share                                                            | 1,305.7  | 1,300.5
Diluted earnings per share (2)                                                      | 1,313.7  | 1,303.9
Basic earnings per share (cents per share) (1)                                      |          |
Continuing operations                                                               | 114.3    | 123.4
Discontinued operations                                                             | 91.9     | 9.2
                                                                                | 206.2    | 132.6
Diluted earnings per share (cents per share) (1,2)                                  |          |
Continuing operations                                                               | 113.6    | 123.1
Discontinued operations                                                             | 91.3     | 9.2
                                                                                | 204.9    | 132.3

Earnings per share profit period shareholders divided by weighted average shares. potential share rights dilute ownership.
 adjusted remove shares Woolworths Custodian Pty Ltd trustee employee trusts
 Includes 8. million (2018. million shares issued employee performance rights.
 2019 off-market share buy-back 27 May 2019 58. 7 million shares cancelled. Note 4. details share buy-back.
 53 WEEKS 52 WEEKS
 Profit equity holders parent entity
 earnings per share ($M
 1,493 1,605
 Discontinued operations 1,200 119
 2,693 1,724
 Weighted average shares earnings per
 earnings per 1,305. 1,300. 5
 Diluted earnings per 1,313. 1,303.
 earnings
 114. 123.
 Discontinued 91.
 206. 132.
 Diluted earnings per
 113. 123.
 91. 9.
204. 132.


Goodwill
The following table summarizes the changes in the carrying amount of goodwill during the periods presented (table in millions):

                                                      | January 31, 2020 | February 1, 2019
----------------------------------------------------- | ---------------- | ----------------
Balance, beginning of the year                        | $7,418           | $6,660
Increase in goodwill related to business combinations | 1,911            | 784
Other adjustment                                      | —                | (26)
Balance, end of the year                              | $9,329           | $7,418

 table summarizes changes goodwill
 January 31, 2020 February 1, 2019
 $7,418 $6,660
 Increase goodwill business combinations 1,911 784
 end year $9,329 $7,418


30. Financial instruments and financial risk management continued
b) Credit risk continued
The composition of trade receivables at 31 December is as follows:
The Group closely monitors amounts due from customers and performs activities such as credit checks and reviews of payment history and has put in place appropriate credit approval limits. Based on these procedures, management assessed the quality of those receivables that are past due but not impaired as low risk.
The receivables’ provision is based on expected credit losses. The movement on the provision during the year is given in note 20. The value of impaired trade receivables is $1.4 million (2018 $0.9 million). For all other financial assets, the maximum exposure to credit risk is represented by the carrying amount.

                              | 2019      | 2018
----------------------------- | --------- | ---------
                              | $ million | $ million
Neither impaired nor past due | 115.3     | 99.8
Past due but not impaired:    |           |
– Less than 30 days overdue   | 8.6       | 16.8
– 30 to 60 days               | 3.6       | 3.2
– Over 60 days                | 1.2       | 3.6
Trade receivables             | 128.7     | 123.4

. Financial instruments risk management
 Credit risk
 composition trade receivables 31 December
 Group monitors due credit checks credit approval limits. assessed quality receivables past due not impaired low risk.
 provision based credit losses. movement note 20. value impaired receivables $1. 4 million (2018 $0. 9 million. maximum exposure credit risk carrying amount.
 Neither impaired past due.
 due not impaired
 Less than 30 days overdue.
 30 to 60 days.
 Over 60 days.
 Trade receivables.


Research and Development Expenses: research and development expenses consist primarily of personnel related expenditures. We intend to continue to invest significantly in our research and development efforts because, in our judgment, they are essential to maintaining our competitive position.
(1) Excluding stock-based compensation
On a constant currency basis, total research and development expenses were flat in fiscal 2019, as lower employee related expenses including lower variable compensation were offset by an increase in stock-based compensation expenses .

Year Ended May 31,           |        |        |                |
---------------------------- | ------ | ------ | -------------- | ------
                             |        |        | Percent Change |
(Dollars in millions)        | 2019   | Actual | Constant       | 2018
Research and development (1) | $5,063 | -2%    | 0%             | $5,163
Stock-based compensation     | 963    | 5%     | 5%             | 921
Total expenses               | $6,026 | -1%    | 0%             | $6,084
% of Total Revenues          | 15%    |        |                | 15%

Research Development Expenses personnel expenditures. continue invest essential competitive position.
 Excluding stock-based compensation
 research development expenses flat 2019 lower expenses offset stock-based compensation.
 Year Ended May 31,
 Percent Change
 millions 2019 2018
 Research development $5,063 -2% 0% $5,163
 Stock-based compensation 963 5%
 Total expenses $6,026 -1% 0% $6,084
 % Total Revenues 15%


AMERICAN TOWER CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
20. SUPPLEMENTAL CASH FLOW INFORMATION
Supplemental cash flow information and non-cash investing and financing activities are as follows for the years ended December 31,:
(1) Related to the note extinguishment with TV Azteca, S.A. de C.V. in 2018.

                                                                                | 2019   | 2018   | 2017
-------------------------------------------------------------------------------------------------------------------------------- | ------ | ------ | ------
Supplemental cash flow information:                                                                                |        |        |
Cash paid for interest                                                                                | $750.2 | $789.7 | $712.1
Cash paid for income taxes (net of refunds of $11.2, $25.0 and $20.7, respectively)                                              | 147.5  | 163.9  | 136.5
Non-cash investing and financing activities:                                                                                |        |        |
(Decrease) increase in accounts payable and accrued expenses for purchases of property and equipment and construction activities | (21.0) | 8.3    | 34.0
Purchases of property and equipment under finance leases, perpetual easements and capital leases                                 | 81.3   | 57.8   | 54.8
Fair value of debt assumed through acquisitions                                                                                | 329.8  | —      | —
Acquisition of Commercialization Rights (1)                                                                                | —      | 24.8   | —
Conversion of third-party debt to equity                                                                                | —      | —      | 48.2
Debt financed acquisition of communication sites                                                                                | —      | 54.2   | —

AMERICAN TOWER CORPORATION SUBSIDIARIES FINANCIAL STATEMENTS
. SUPPLEMENTAL CASH FLOW
 non investing financing activities years December 31,
 extinguishment TV Azteca. 2018.
 cash flow
 interest $750. $789. $712.
 income taxes refunds $11. $25. $20. 147. 163. 136.
 Non-cash investing financing activities
 accounts payable accrued expenses purchases property equipment construction activities. 34.
 Purchases property equipment leases easements capital leases 81. 57. 54.
 debt assumed acquisitions 329.
 Acquisition Commercialization Rights.
 Conversion third-party debt equity.
 acquisition communication sites.


5. Income taxes: (Continued)
In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing
authorities. The Company evaluates all uncertain tax positions to assess whether the position will more likely than not
be sustained upon examination. If the Company determines that the tax position is not more likely than not to be
sustained, the Company records a liability for the amount of the benefit that is not more likely than not to be realized
when the tax position is settled. The Company does not have a liability for uncertain tax positions at December 31,
2019 and does not expect that its liability for uncertain tax positions will materially increase during the twelve months
ended December 31, 2020, however, actual changes in the liability for uncertain tax positions could be different than
currently expected. If recognized, changes in the Company's total unrecognized tax benefits would impact the
Company's effective income tax rate.
In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing authorities. The Company evaluates all uncertain tax positions to assess whether the position will more likely than not be sustained upon examination. If the Company determines that the tax position is not more likely than not to be sustained, the Company records a liability for the amount of the benefit that is not more likely than not to be realized when the tax position is settled. The Company does not have a liability for uncertain tax positions at December 31, 2019 and does not expect that its liability for uncertain tax positions will materially increase during the twelve months ended December 31, 2020, however, actual changes in the liability for uncertain tax positions could be different than currently expected. If recognized, changes in the Company's total unrecognized tax benefits would impact the Company's effective income tax rate. In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing authorities. The Company evaluates all uncertain tax positions to assess whether the position will more likely than not be sustained upon examination. If the Company determines that the tax position is not more likely than not to be sustained, the Company records a liability for the amount of the benefit that is not more likely than not to be realized when the tax position is settled. The Company does not have a liability for uncertain tax positions at December 31, 2019 and does not expect that its liability for uncertain tax positions will materially increase during the twelve months ended December 31, 2020, however, actual changes in the liability for uncertain tax positions could be different than currently expected. If recognized, changes in the Company's total unrecognized tax benefits would impact the Company's effective income tax rate. In the normal course of business the Company takes positions on its tax returns that may be challenged by taxing authorities. The Company evaluates all uncertain tax positions to assess whether the position will more likely than not be sustained upon examination. If the Company determines that the tax position is not more likely than not to be sustained, the Company records a liability for the amount of the benefit that is not more likely than not to be realized when the tax position is settled. The Company does not have a liability for uncertain tax positions at December 31, 2019 and does not expect that its liability for uncertain tax positions will materially increase during the twelve months ended December 31, 2020, however, actual changes in the liability for uncertain tax positions could be different than currently expected. If recognized, changes in the Company's total unrecognized tax benefits would impact the Company's effective income tax rate.
The Company or one of its subsidiaries files income tax returns in the US federal jurisdiction and various state and foreign jurisdictions. The Company is subject to US federal tax and state tax examinations for years 2004 to 2019. The Company is subject to tax examinations in its foreign jurisdictions generally for years 2005 to 2019.
The following is a reconciliation of the Federal statutory income taxes to the amounts reported in the financial statements (in thousands).

                                              |           | Years Ended December 31, |
--------------------------------------------- | --------- | ------------------------ | ---------
                                              | 2019      | 2018                     | 2017
Federal income tax expense at statutory rates | $(11,061) | $(8,690)                 | $(10,892)
Effect of:                                    |           |                          |
State income taxes, net of federal benefit    | (2,973)   | (2,665)                  | (2,244)
Impact of foreign operations                  | (11)      | (146)                    | 74
Non-deductible expenses                       | (592)     | (1,274)                  | (1,350)
Federal tax rate change                       | —         | —                        | (9,046)
Tax effect of TCJA from foreign earnings      | (28)      | (130)                    | (2,296)
Other                                         | (581)     | (645)                    | 239
Changes in valuation allowance                | 92        | 835                      | 273
Income tax expense                            | $(15,154) | $(12,715)                | $(25,242)

5. Income taxes (Continued
 normal business Company takes positions on tax returns challenged by taxing
 authorities. evaluates uncertain tax positions
. If position not likely
 records liability for benefit not likely realized
 when settled. Company liability for uncertain tax positions at December 31,
 2019 expect liability increase twelve months
 ended December 31, 2020 changes in liability could different
. If changes tax benefits impact
 effective income tax rate.
 takes positions tax returns challenged by authorities. evaluates uncertain tax positions. If not likely records liability for benefit not likely not realized when settled. liability for uncertain tax positions at December 31, 2019 expect liability increase twelve months ended December 31, 2020 changes in liability could different. If recognized changes tax benefits impact effective income tax rate. takes positions tax returns challenged. evaluates uncertain tax positions.Company determines tax position not likely sustained records liability for benefit settled. liability for uncertain tax positions at December 31, 2019 expect increase twelve months ended December 31, 2020 changes liability could. changes tax benefits impact effective income tax rate. Company takes positions on tax returns challenged by taxing authorities. evaluates uncertain tax positions. not likely records liability for benefit not likely settled. liability for uncertain tax positions at December 31, 2019 expect increase twelve months December 2020 changes could. changes unrecognized tax benefits impact effective income tax rate.
 Company files income tax returns in US federal state foreign jurisdictions. subject to US federal state tax examinations years 2004 to 2019. tax examinations foreign jurisdictions 2005 to 2019.
 reconciliation of Federal statutory income taxes to financial statements.
 Years Ended December 31,
 2019 2018 2017
income tax(11,061)(8,690,892)
 State taxes federal benefit (2,973 (2,665),244)
 foreign operations
 Non-deductible expenses (1,274) (1,350
 Federal tax rate change (9
 TCJA foreign earnings (2,296
 Changes valuation allowance
 Income tax expense(15,154),715)(25,242)


8.1 CAPITAL STRUCTURE
The table below summarizes debt-related financial ratios over the last two fiscal years and the fiscal 2020 guidelines:
(1) Based on mid-range guidelines. (2) Excludes amortization of deferred transaction costs and commitment fees but includes the impact of interest rate swaps. Potential variations in the US LIBOR rates in fiscal 2020 have not been considered. (3) Taking into consideration the interest rate swaps in effect at the end of each fiscal year. (4) Net indebtedness is defined as the aggregate of bank indebtedness, balance due on business combinations and principal on long-term debt, less cash and cash equivalents. (5) Adjusted EBITDA and financial expense for fiscal year 2018 include only eight months of MetroCast operations. (6) Specific guidance on interest coverage cannot be provided given that financial expense guidance is not provided.
In fiscal 2019, the financial leverage ratio relating to net indebtedness over adjusted EBITDA has declined as a result of the sale of Cogeco Peer 1 on April 30, 2019 for a net cash consideration of $720 million and to a lesser extent growing adjusted EBITDA and a reduction in net indebtedness from generated free cash flow. In fiscal 2020, prior to the adoption of IFRS 16 Leases, the financial leverage ratio relating to net indebtedness over adjusted EBITDA should continue to decline as a result of growing adjusted EBITDA and a projected reduction in net indebtedness from generated free cash flow.

Years ended August 31,                   | 2020 Guidelines(1) | 2019 | 2018
---------------------------------------- | ------------------ | ---- | ----
Average cost of indebtedness(2)          | 4.4%               | 4.4% | 4.4%
Fixed rate indebtedness(3)               | 78%                | 78%  | 72%
Average term: long-term debt (in years)  | 3.9                | 4.9  | 5.7
Net indebtedness(4) / adjusted EBITDA(5) | 2.3                | 2.6  | 3.8
Adjusted EBITDA / financial expense(5)   | N/A (6)            | 6.3  | 5.4

. CAPITAL STRUCTURE
 table summarizes debt-related financial ratios last two years 2020 guidelines
 mid-range guidelines. Excludes amortization deferred costs fees includes interest rate swaps. US LIBOR rates 2020 not considered. interest rate swaps. Net indebtedness bank indebtedness balance business combinations long-term debt less cash equivalents. Adjusted EBITDA financial expense 2018 include eight months MetroCast operations. interest coverage financial expense.
 2019 financial leverage ratio net indebtedness EBITDA declined sale Cogeco Peer 1 $720 million growing adjusted EBITDA reduction indebtedness cash flow. 2020 IFRS 16 Leases leverage ratio growing adjusted EBITDA reduction.
 Years ended August 31, 2020
 Average cost.
 Fixed rate indebtedness(3) 78%
 long-term debt 3.
 Net indebtedness(4) adjusted EBITDA(5).
 EBITDA financial expense(5).