4. Prepaid expenses
Prepaid expenses consisted of the following:

October 31,            |         |
---------------------- | ------- | -------
                       | 2019    | 2018
(In thousands)         |         |
Parts and supplies     | $33,617 | $28,287
Prepaid insurance      | 8,859   | 8,232
Other prepaid expenses | 14,455  | 6,721
Total prepaid expenses | $56,931 | $43,240

. Prepaid expenses
 October 31,
 2018
 Parts supplies $33,617 $28,287
 insurance 8,859,232
 Other expenses 14,455
 Total $56,931 $43,240


Uncertain Tax Positions
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Out of $2.1 million of unrecognized tax benefits, there are no unrecognized tax benefits that would result in a change in the Company's effective tax rate if recognized in future years. The accrued interest and penalties related to uncertain tax positions was not significant for December 29, 2019, December 30, 2018 and December 31, 2017.
The Company is not currently under tax examination and the Company’s historical net operating loss and credit carryforwards may be adjusted bythe Internal Revenue Service, and other tax authorities until the statute closes on the year in which such tax attributes are utilized. The Company estimates that its unrecognized tax benefits will not change significantly within the next twelve months.
The Company is subject to U.S. federal income tax as well as income taxes in many U.S. states and foreign jurisdictions in which the Company operates. The U.S. tax years from 1999 forward remain effectively open to examination due to the carryover of unused net operating losses and tax credits.

                                                        | December 29, 2019 | December 30,2018 | December 31, 2017
------------------------------------------------------- | ----------------- | ---------------- | -----------------
Beginning balance of unrecognized tax benefits          | $2,161            | $2,107           | $2,014
Additions for tax positions related to the prior year   | (46)              | (2)              | 16
Additions for tax positions related to the current year | 88                | 125              | 77
Lapse of statutes of limitations                        | (86)              | (69)             | —
Ending balance of unrecognized tax benefits             | $2,117            | $2,161           | $2,107

Uncertain Tax Positions
 reconciliation unrecognized tax benefits
 $2. 1 million no Company tax rate. accrued interest penalties not significant December 29, 2019 30 2018 31, 2017.
 Company not under tax examination net operating loss credit carryforwards adjusted Internal Revenue Service statute closes. unrecognized tax benefits change twelve months.
 subject. federal income tax taxes. states foreign jurisdictions. tax years 1999 open examination unused net operating losses tax credits.
 2019 31, 2017
 Beginning balance unrecognized tax benefits $2,161 $2,107 $2,014
 Additions prior year
 current year 125
 Lapse statutes of limitations (86)
 Ending balance tax benefits $2,117 $2,161 $2,107


Profitability Measures
Net income:
The net income in the fiscal year ended February 28, 2018 was $16.6 million as compared to a net loss of $7.9 million in the same period last year. The increase is primarily the result of the $28.3 million non-operating gain from the legal settlement with a former supplier of LoJack, which was recognized during fiscal 2018. This gain was partially offset by higher tax expense in fiscal 2018 due to U.S. and foreign taxes on the $28.3 million legal settlement gain as well as the revaluation of our net deferred income tax assets that occurred in the fourth quarter of fiscal 2018 as we adopted the provisions of the Tax Cuts and Jobs Act which was enacted on December 22, 2017.
Adjusted EBITDA:
Adjusted EBITDA for Telematics Systems in the fiscal year ended February 28, 2018 increased $1.5 million compared to the same period last year due to higher MRM products revenue. Adjusted EBITDA for Software and Subscription Services increased $5.2 million compared to the same period last year due primarily to lower selling and marketing expenses and lower general and administrative expenses.
See Note 20 for a reconciliation of Adjusted EBITDA by reportable segments and a reconciliation to GAAP-basis net income (loss).

                                 | Fiscal years ended |         |          |
-------------------------------- | ------------------ | ------- | -------- | --------
                                 | February 28,       |         |          |
(In thousands)                   | 2018               | 2017    | $ Change | % Change
Segment                          |                    |         |          |
Telematics Systems               | $48,943            | $47,432 | $1,511   | 3.2%
Software & Subscription Services | 8,233              | 3,075   | 5,158    | 167.7%
Satellite                        | -                  | 2,447   | (2,447)  | (100.0%)
Corporate Expense                | (4,794)            | (3,586) | (1,208)  | 33.7%
Total Adjusted EBITDA            | $52,382            | $49,368 | $3,014   | 6.1%

Profitability Measures
 Net income
 year 2018 $16. million $7. 9 million last year. increase $28. 3 million non-operating gain legal settlement LoJack 2018. offset by higher tax expense. foreign taxes. million settlement revaluation deferred income tax assets Tax Cuts Jobs Act December 22, 2017.
 Adjusted EBITDA
 Telematics Systems increased $1. 5 million higher MRM products revenue. Software Subscription Services increased $5. 2 million lower selling marketing expenses general administrative expenses.
 Note 20 reconciliation Adjusted EBITDA GAAP net income.
 Fiscal years
 Telematics Systems $48,943 $47,432 $1,511. 2%
 Software Subscription Services 8,233 3,075 5,158. 7%
 Satellite (2,447).
 Corporate Expense (4,794) (3,586). 7%
 Total Adjusted EBITDA $52,382 $49,368 $3,014.


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
In February 2018, Advanced Energy acquired Trek Holding Co., LTD ("Trek"), a privately held company with operations in Tokyo, Japan and Lockport, New York, for $6.1 million, net of cash acquired. Trek has a 95% ownership interest in its U.S. subsidiary which is also its primary operation.
The components of the fair value of the total consideration transferred for our 2018 acquisitions are as follows:

                          | Trek    | Electrostatic Product Line | LumaSense | Total
------------------------- | ------- | -------------------------- | --------- | ---------
Cash paid for acquisition | $11,723 | $3,000                     | $94,946   | $ 109,669
Less cash acquired        | (5,651) | —                          | (10,262)  | (15,913)
Total purchase price      | $6,072  | $3,000                     | $84,684   | $ 93,756

ADVANCED INDUSTRIES. FINANCIAL STATEMENTS
 February 2018 acquired Trek Holding. Tokyo Lockport New York $6. 1 million. 95% ownership U. S. subsidiary primary.
 acquisitions
 Trek Electrostatic Product Line LumaSense
 Cash $11,723 $3,000 $94,946 109,669
 Less cash acquired (5,651) (10 (15,913)
 purchase price $6,072 $3,000 $84,684 93,756


NOTE 7 — PROPERTY AND EQUIPMENT
The components of property and equipment were as follows:
During fiscal years 2019, 2018, and 2017, depreciation expense was $9.7 billion, $7.7 billion, and $6.1 billion, respectively. We have committed $4.0 billion for the construction of new buildings, building improvements, and leasehold improvements as of June 30, 2019.

(In millions)                   |           |
------------------------------- | --------- | ---------
June 30,                        | 2019      | 2018
Land                            | $ 1,540   | $ 1,254
Buildings and improvements      | 26,288    | 20,604
Leasehold improvements          | 5,316     | 4,735
Computer equipment and software | 33,823    | 27,633
Furniture and equipment         | 4,840     | 4,457
Total, at cost                  | 71,807    | 58,683
Accumulated depreciation        | (35,330)  | (29,223)
Total, net                      | $  36,477 | $  29,460

PROPERTY EQUIPMENT
 2019 2017 depreciation expense $9. billion $7. $6. billion. committed $4. billion buildings leasehold improvements June 30 2019.
 Land 1,540 1,254
 Buildings improvements 26,288 20,604
 Leasehold improvements 5,316 4
 Computer equipment 33,823 27,633
 Furniture equipment
 71,807 58,683
 depreciation (35,330
 $ 36,477


A.2.6 Calculation of return on capital employed
For purposes of calculating ROCE in interim periods, income before interest after tax is annualized. Average capital employed is determined using the average of the respective balances as of the quarterly reporting dates for the periods under review.
[1] Item Other interest expenses / income, net primarily consists of interest relating to corporate debt, and related hedging activities, as well as interest income on corporate assets.

(in millions of €)                                                         | 2019   | 2018
-------------------------------------------------------------------------- | ------ | ------
Net income                                                                 | 5,648  | 6,120
Less: Other interest expenses / income, net 1                              | (529)  | (482)
Plus: SFS Other interest expenses / income                                 | 763    | 721
Plus: Net interest expenses related to provisions for pensions and similar |        |
obligations                                                                | 148    | 164
Less: Interest adjustments                                                 |        |
(discontinued operations)                                                  | –      | –
Less: Taxes on interest adjustments                                        |        |
(tax rate (flat) 30%)                                                      | (115)  | (121)
(I) Income before interest after tax                                       | 5,916  | 6,401
(II) Average capital employed                                              | 53,459 | 50,715
(I) / (II) ROCE                                                            | 11.1 % | 12.6 %

. Calculation return capital employed
 ROCE income before after tax annualized. Average capital employed determined balances quarterly reporting dates.
 interest expenses corporate debt hedging activities corporate assets.
 millions € 2019 2018
 Net income 5,648 6,120
 Other interest expenses (529) (482)
 763 721
 pensions
 obligations 148 164
 Interest adjustments
 Taxes interest adjustments
 rate 30% (115)
 Income before after tax 5,916 6,401
 Average capital employed 53,459 50,715
 ROCE. 1 %. 6


Segment Financial Results
Revenues
The following table sets forth revenues by segment for the periods presented (in millions):
(1) Revenues for Corporate and Other represent deferred revenue purchase accounting adjustments recorded in accordance with GAAP.
Software Solutions
Revenues were $962.0 million in 2018 compared to $904.5 million in 2017, an increase of $57.5 million, or 6%. Our servicing software solutions revenues increased 7%, or $52.5 million, primarily driven by loan growth on MSP® from new and existing  clients. Our origination software solutions revenues increased 3%, or $5.0 million, primarily driven by growth in our loan origination system solutions and a software license fee in our Lending Solutions business, partially offset by the effect of lower volumes on our Exchange and eLending platforms primarily as a result of the 26% decline in refinancing originations as reported by the Mortgage Bankers Association.
Data and Analytics
Revenues were $154.5 million in 2018 compared to $151.6 million in 2017, an increase of $2.9 million, or 2%. The increase was primarily driven by growth in our property data and multiple listing service businesses, partially offset by upfront revenues from long-term strategic license deals in 2017.

                       | Year ended December 31 |          | Variance |
---------------------- | ---------------------- | -------- | -------- | --
                       | 2018                   | 2017     | $        | %
Software Solutions     | $962.0                 | $904.5   | $57.5    | 6%
Data and Analytics     | 154.5                  | 151.6    | 2.9      | 2%
Corporate and Other(1) | (2.5)                  | (4.5)    | 2.0      | NM
Total                  | $1,114.0               | $1,051.6 | $62.4    | 6%

Segment Financial Results
 Revenues
 table revenues segment
 Revenues Corporate Other deferred revenue adjustments GAAP.
 Software Solutions
 Revenues $962. million 2018 $904. million 2017 increase $57. million 6%. servicing software increased 7% $52. million loan growth. origination software increased 3% $5. million loan origination system software license fee Lending offset lower Exchange eLending 26% decline refinancing originations.
 Data Analytics
 Revenues $154. 5 million 2018 $151. million 2017 increase $2. million 2%. increase driven property data listing service businesses offset upfront revenues-term license deals 2017.
 Year December 31
 Software Solutions $962. $904. 6%
 Data Analytics.
 Corporate.
 $1,114. $1,051. $62. 6%


Free Cash Flow
Free cash flow is a non-IFRS financial measure that we calculate as net cash provided by operating activities less net cash used in investing activities for capital expenditures.
Free cash flow increased by $140.9 million during the fiscal year ended June 30, 2019 due to a $154.9 million increase of net cash provided by operating activities, offset by a $14.0 million increase of capital expenditures as we continue to invest in our facilities.
For more information about net cash provided by operating activities, please see “Liquidity and Capital Resources”.

                                          |          | Fiscal Year Ended June 30, |
----------------------------------------- | -------- | -------------------------- | --------
                                          | 2019     | 2018                       | 2017
Net cash provided by operating activities | $466,342 | $311,456                   | $199,381
Less: Capital expenditures                | (44,192) | (30,209)                   | (15,129)
Free cash flow                            | $422,150 | $281,247                   | $184,252

Free Cash Flow
 non-IFRS measure less.
 increased $140. 9 million fiscal year June 30 2019 $154. 9 million increase offset $14. 0 million increase capital expenditures.
 Capital.
 Fiscal Year Ended June 30
 Net cash operating activities $466,342 $311,456 $199,381
 Capital expenditures (44,192) (30,129
 Free cash flow $422,150 $281,247 $184,252


Note 3: Balance Sheet Components
Prepaid expenses and other consist of the following (in thousands):

December 31,                     |        |
-------------------------------- | ------ | ------
                                 | 2019   | 2018
Prepaid expenses                 | $2,303 | $1,780
Other current assets             | 193    | 167
Total prepaid expenses and other | $2,496 | $1,947

Balance Sheet Components
 Prepaid expenses
 December 31,
 Prepaid expenses $2,303 $1,780
 assets 167
 expenses $2,496 $1,947


Seasonality
The Company’s sales, income and cash flow from operations vary between quarters, and are generally lowest in the first quarter of the from operations vary between quarters, and are generally lowest in the first quarter of the year and highest in the fourth quarter. This is mainly a result of the seasonal purchase patterns of network operators.

Most recent three-year average seasonality |               |                |               |
------------------------------------------ | ------------- | -------------- | ------------- | --------------
                                           | First quarter | Second quarter | Third quarter | Fourth quarter
Sequential change, sales                   | -25%          | 11%            | 4%            | 17%
Share of annual sales                      | 22%           | 24%            | 25%           | 29%

Seasonality
 sales income cash flow vary quarters lowest first highest fourth quarter. result seasonal purchase patterns network operators.
 three-year average seasonality
 First quarter Second Third Fourth quarter
 Sequential change sales -25% 11% 4% 17%
 annual sales 22% 24% 25% 29%


IFRS cash flow
The key drivers of the decrease in cash and cash equivalents of £35.8 million in the year are discussed below.
Cash flows from operating activities of £11.1 million were £91.5 million lower than 2018, largely due to the reduction in underlying earnings of £65.9 million (see income statement section) and the early settlement of interest rate swaps of £52.4 million, partially offset by improvements in working capital of £32.2 million.
Cash flows from investing activities mainly reflected cash inflows related to the part disposal of intu Derby of £96.7 million and other sundry disposals of £75.3 million, partially offset by capital expenditure during the year of £127.7 million.
Cash flows from financing activities primarily reflected net borrowings repaid in the year (see debt activity section on page 36).

m                                       | 2019    | 2018
--------------------------------------- | ------- | ------
Cash flows from:                        |         |
operating activities                    | 11.1    | 102.6
investing activities                    | 75.5    | (0.4)
financing activities                    | (122.4) | (90.8)
Net change in cash and cash equivalents | (35.8)  | 11.4

IFRS cash flow
 cash equivalents £35. 8 million.
 flows operating £11. 1 million £91. 5 million lower 2018 reduction earnings £65. 9 million early settlement interest rate swaps £52. 4 million offset improvements working capital £32. 2 million.
 investing disposal Derby £96. 7 million £75. 3 million offset capital expenditure £127. 7 million.
 flows financing net borrowings repaid debt activity.
 Cash flows
 operating.
 investing.
 financing.
 change cash equivalents.


The tax effect of temporary differences and carryforwards that give rise to significant portions of deferred tax assets and liabilities consisted of the following:
The liability for gross unrecognized tax benefits at May 26, 2019 was $44.1 million, excluding a related liability of $11.7 million for gross interest and penalties. Included in the balance at May 26, 2019 are $1.0 million of tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, the disallowance of the shorter deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing authority to an earlier period. Any associated interest and penalties imposed would affect the tax rate. As of May 27, 2018, our gross liability for unrecognized tax benefits was $32.5 million, excluding a related liability of $7.7 million for gross interest and penalties. Interest and penalties recognized in the Consolidated Statements of Operations was an expense of $1.2 million in fiscal 2019, an expense of $1.6 million in fiscal 2018, and a benefit of $0.3 million in fiscal 2017.
Notes to Consolidated Financial Statements - (Continued) Fiscal Years Ended May 26, 2019, May 27, 2018, and May 28, 2017 (columnar dollars in millions except per share amounts)

                                                               | May 26, 2019 |             | May 27, 2018 |
-------------------------------------------------------------- | ------------ | ----------- | ------------ | -----------
                                                               | Assets       | Liabilities | Assets       | Liabilities
Property, plant and equipment                                  | $—           | $240.7      | $—           | $141.0
Inventory                                                      | 15.2         | —           | 2.6          | —
Goodwill, trademarks and other intangible assets               | —            | 1,187.0     | —            | 406.2
Accrued expenses                                               | 11.8         | —           | 15.5         | —
Compensation related liabilities                               | 35.9         | —           | 34.1         | —
Pension and other postretirement benefits                      | 54.6         | —           | 45.8         | —
Investment in unconsolidated subsidiaries                      | —            | 185.4       | —            | 165.8
Other liabilities that will give rise to future tax deductions | 123.5        | —           | 109.7        | —
Net capital and operating loss carryforwards                   | 766.5        | —           | 762.5        | —
Federal credits                                                | 18.0         | —           | 3.5          | —
Other                                                          | 37.6         | 24.0        | 23.6         | 9.5
                                                               | 1,063.1      | 1,637.1     | 997.3        | 722.5
Less: Valuation allowance                                      | (738.1)      | —           | (739.6)      | —
Net deferred taxes                                             | $325.0       | $1,637.1    | $257.7       | $722.5

tax effect temporary differences carryforwards deferred tax assets liabilities
 liability unrecognized tax benefits May 26, 2019 $44. 1 million excluding $11. 7 million interest penalties. $1. 0 million tax positions deductibility certain uncertainty timing. disallowance shorter deductibility period affect annual tax rate payment cash. associated interest penalties affect tax rate. May 27, 2018 gross liability unrecognized tax benefits $32. 5 million excluding liability $7. 7 million interest penalties. Interest penalties Consolidated Statements Operations $1. 2 million 2019 $1. 6 million 2018 $0. 3 million 2017.
 Consolidated Financial Statements Fiscal Years May 26, 2019 27, 2018 May 28, 2017
 Assets Liabilities
 Property plant equipment.
 Inventory.
 Goodwill trademarks intangible assets.
 Accrued expenses.
 Compensation related liabilities.34.
 Pension benefits 54. 6 45. 8
 subsidiaries 185. 4 165. 8
 tax deductions 123. 5 109. 7
 capital loss carryforwards 766. 5.
 Federal credits 18. 3. 5
 37. 24. 23.
 1,063. 1,637. 722.
 Valuation allowance (738. 6)
 deferred taxes $325. $1,637. $257. $722.


Long-lived assets by geographic area, which primarily include property and equipment, net, as of the periods presented were as follows (table in millions):
No individual country other than the U.S. accounted for 10% or more of these assets as of January 31, 2020 and February 1, 2019
VMware’s product and service solutions are organized into three main product groups:
• Software-Defined Data Center
• Hybrid and Multi-Cloud Computing
• Digital Workspace—End-User Computing
VMware develops and markets product and service offerings within each of these three product groups. Additionally, synergies are leveraged across these three product areas. VMware’s products and service solutions from each of its product groups may also be bundled as part of an enterprise agreement arrangement or packaged together and sold as a suite. Accordingly, it is not practicable to determine revenue by each of the three product groups described above.

              | January 1, 2020 | February 1, 2019
------------- | --------------- | ----------------
United States | $860            | $849
International | 209             | 113
Total         | $1,069          | $962

Long-lived assets property equipment
 No country U. S. accounted 10% assets January 31, 2020 February 1, 2019
 VMware’s product solutions three groups
 Software-Defined Data Center
 Hybrid Multi-Cloud Computing
 Digital Workspace—End-User Computing
 develops markets. synergies leveraged across. bundled enterprise sold suite. not practicable determine revenue.
 January 1, 2020 February 1, 2019
 United States $860  $849
 International
 Total $1,069 $962


Geographic information
The Group is domiciled in the UK and the following tables detail external revenue by location of customers, trade receivables and non-current assets (excluding deferred tax) by geographic area:
Due to the large number of customers the Group serves, there are no individual customers whose revenue is greater than 10% of the Group’s total revenue in all periods presented in these financial statements.

              | 2019  | 2018
------------- | ----- | -----
Revenue       | £m    | £m
UK            | 349.9 | 324.9
Ireland       | 5.2   | 5.2
Total revenue | 355.1 | 330.1

 Group domiciled UK tables detail revenue location trade receivables non-current assets deferred tax
 large number no customers revenue greater 10% total revenue periods statements.
 Revenue £m
 UK 349. 9 324.
 Ireland 5.
 Total revenue 355. 330.


The Systems gross profit margin increased 3.2 points to 53.1 percent in 2019 compared to the prior year. The increase was driven by actions taken in 2018 to better position the cost structure over the longer term, a mix to IBM Z hardware and operating systems and margin improvement in Storage Systems.
Pre-tax income of $701 million declined 22.4 percent and pre-tax margin of 8.4 percent decreased 1.8 points year to year driven by the declines in Power Systems and Storage Systems revenue and the continued investment in innovation across the Systems portfolio, mitigated by the benefit from the new hardware launches in the second-half 2019.

($ in millions)                                         |        |        |
------------------------------------------------------- | ------ | ------ | --------------------------------
For the year ended December 31:                         | 2019   | 2018   | Yr.-to-Yr Percent/ Margin Change
Systems                                                 |        |        |
External Systems Hardware gross profit                  | $2,622 | $2,590 | 1.2%
External Systems Hardware gross profit margin           | 44.3%  | 40.7%  | 3.6pts.
External Operating Systems Software gross profit        | $1,412 | $1,412 | 0.0%
External Operating Systems Software gross profit margin | 83.8%  | 84.5%  | (0.7)pts.
External total gross profit                             | $4,034 | $4,002 | 0.8%
External total gross profit margin                      | 53.1%  | 49.8%  | 3.2pts.
Pre-tax income                                          | $701   | $904   | (22.4)%
Pre-tax margin                                          | 8.4%   | 10.2%  | (1.8)pts.

Systems profit margin increased. points 53. 1 percent 2019. driven cost structure IBM Z hardware operating systems margin improvement Storage Systems.
 Pre-tax income $701 million declined. 4 percent pre-tax margin 8. 4 percent decreased. points declines Power Storage Systems revenue investment innovation new hardware launches 2019.
 year December 31 2019. Margin Change
 Hardware gross profit $2,622 $2,590.
 margin 44. 3% 40. 7%.
 Software profit $1,412.
 margin 83. 8% 84. 5%.
 total gross profit $4,034 $4,002.
 53. 1% 49. 8%.
 Pre-tax income $701 $904.
 margin 8. 4%.


This section presents the Group’s contractual obligation to make a payment in the future in relation to purchases of property, plant and equipment, and lease commitments.
Capital expenditure and operating lease commitments of the Group at the reporting date are as follows:
The commitments set out above do not include contingent turnover rentals, which are charged on many retail premises leased by the Group. These rentals are calculated as a percentage of the turnover of the store occupying the premises, with the percentage and turnover threshold at which the additional rentals commence varying with each lease agreement.
The Group leases retail premises and warehousing facilities which are generally for periods up to 40 years. The operating lease commitments include leases for the Norwest office and distribution centres. Generally the lease agreements are for initial terms of between five and 25 years and most include multiple renewal options for additional five to 10-year terms. Under most leases, the Group is responsible for property taxes, insurance, maintenance, and expenses related to the leased properties. However, many of the more recent lease agreements have been negotiated on a gross or semi-gross basis, which eliminates or significantly reduces the Group’s exposure to operational charges associated with the properties.
From 1 July 2019, the Group adopted AASB 16 Leases and as a result the operating lease commitments set out above have been recognised in the Consolidated Statement of Financial Position, with the exception of the service component of lease payments. Refer to Note 1.2.6 for a reconciliation between the operating lease commitments at 30 June 2019 and the lease liabilities recognised at 1 July 2019.

                                                                        | 2019   | 2018
----------------------------------------------------------------------- | ------ | ------
                                                                        | $M     | $M
Capital expenditure commitments                                         |        |
Estimated capital expenditure under firm contracts, payable:            |        |
Not later than one year                                                 | 398    | 416
Later than one year, not later than two years                           | –      | –
Later than two years, not later than five years                         | –      | –
Total capital expenditure commitments                                   | 398    | 416
Operating lease commitments                                             |        |
Future minimum rentals under non-cancellable operating leases, payable: |        |
Not later than one year                                                 | 1,998  | 2,089
Later than one year, not later than five years                          | 7,415  | 7,484
Later than five years                                                   | 12,378 | 13,331
Total operating lease commitments                                       | 21,791 | 22,904
Total commitments for expenditure                                       | 22,189 | 23,320

section presents Group’s obligation payment future purchases property equipment lease commitments.
 Capital expenditure operating lease commitments reporting date
 include contingent turnover rentals retail premises leased. rentals calculated percentage turnover.
 Group leases retail warehousing facilities up to 40 years. lease include Norwest office distribution centres. lease agreements five 25 years multiple renewal options five 10-year terms. Group responsible property taxes insurance maintenance expenses. recent lease agreements gross semi-gross exposure operational charges.
 1 July 2019 adopted AASB 16 Leases operating lease commitments recognised in Consolidated Statement Financial Position exception service component lease payments. Note 1. 2. 6 reconciliation operating lease commitments 30 June 2019 lease liabilities 1 July 2019.
 Capital expenditure commitments
 Estimated capital expenditure firm contracts payable
 later one year
 two
capital expenditure 398 416
 lease
 rentals leases
 one year 1,998 2,089
 five,484
 12,378 13,331
 operating lease commitments 21,791 22,904
 expenditure 22,189 23,320


During the year ended December 31, 2019, the Company completed a reorganization of certain of its foreign subsidiaries that resulted in the derecognition of the related deferred tax assets for net operating losses which were subject to a valuation allowance. As a result, the Company reduced both its net operating loss deferred tax assets and valuation allowance by approximately $19.7 million.
The Company accrued $2.7 million as of both December 31, 2019 and 2018, excluding penalties and interest, for the liability for unrecognized tax benefits, which was included in “Long-term income tax liabilities” in the accompanying Consolidated Balance Sheets. Had the Company recognized these tax benefits, approximately $2.7 million, along with the related interest and penalties, would have favorably impacted the effective tax rate in both 2019 and 2018. The Company does not anticipate that any of the unrecognized tax benefits will be recognized in the next twelve months.
The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes. The Company had $1.1 million and $0.6 million accrued for interest and penalties as of December 31, 2019 and 2018, respectively. Of the accrued interest and penalties at December 31, 2019 and 2018, $0.6 million and $0.4 million, respectively, relate to statutory penalties. The amount of interest and penalties, net, included in the provision for income taxes in the accompanying Consolidated Statements of Operations for the years ended December 31, 2019, 2018 and 2017 was $0.4 million, $0.7 million and $(9.5) million, respectively.
The tabular reconciliation of the amounts of unrecognized net tax benefits is presented below (in thousands):

                                                            |        | Years Ended December 31, |
----------------------------------------------------------- | ------ | ------------------------ | --------
                                                            | 2019   | 2018                     | 2017
Balance at the beginning of the period                      | $2,720 | $1,342                   | $8,531
Current period tax position increases                       | —      | 2,950                    | —
Decreases from settlements with tax authorities             | —      | (191)                    | (10,865)
Decreases due to lapse in applicable statute of limitations | —      | (1,310)                  | (466)
Foreign currency translation increases (decreases)          | (9)    | (71)                     | 4,142
Balance at the end of the period                            | $2,711 | $2,720                   | $1,342

December 31, 2019 Company reorganization foreign subsidiaries deferred tax assets. reduced net operating loss deferred tax assets valuation allowance $19. 7 million.
 accrued $2. 7 million December 31, 2019 2018 excluding penalties unrecognized tax benefits-term income tax Consolidated Balance Sheets. $2. 7 million impacted effective tax rate 2019 2018. tax benefits next twelve months.
 recognizes interest penalties tax benefits. $1. 1 million $0. 6 million accrued December 31, 2019 2018. $0. 6 million $0. 4 million statutory penalties. interest penalties taxes Consolidated Statements Operations December 31, 2019 2018 2017 $0. 4 million $0. 7 million $. million.
 tabular reconciliation unrecognized net tax benefits
 Years December
 Balance $2,720 $1,342 $8,531
 period tax position increases 2,950
 Decreases settlements tax authorities,865
statute (1,310) (466)
 Foreign currency 4,142
 Balance end period $2,711 $2,720 $1,342


Disaggregation of Revenue
The tables below present the Company’s revenue disaggregated by type of revenue. Refer to Note 13, Reportable Segment Information, for disaggregated revenue by type and reportable segment. The majority of the Company’s revenue is earned domestically, with revenue from customers outside the United States comprising less than 1% of total revenue.

                            | Year Ended June 30, |            |
--------------------------- | ------------------- | ---------- | ----------
                            | 2019                | 2018       | 2017
Processing                  | $594,202            | $550,058   | $506,555
Outsourcing & Cloud         | 405,359             | 361,922    | 327,738
Product Delivery & Services | 231,982             | 251,743    | 256,794
In-House Support            | 321,148             | 307,074    | 297,203
Services & Support          | 958,489             | 920,739    | $881,735
Total Revenue               | $1,552,691          | $1,470,797 | $1,388,290

Revenue
 tables. Note 13,. majority domestically outside less 1% revenue.
 Ended June 30
 Processing $594,202 $550,058 $506,555
 Outsourcing Cloud 405,359 361,922 327,738
 Product Delivery 231,982 251,743 256,794
 In-House Support 321,148 307,074,203
 958,489 920,739 $881,735
 Revenue $1,552,691 $1,470,797 $1,388,290


Assumptions used
The last triennial actuarial valuation of the Scheme was performed by an independent professional actuary at 30 April 2018 using the projected unit method of valuation. For the purposes of IAS 19 (revised) the actuarial valuation as at 30 April 2018 has been updated on an approximate basis to 31 March 2019. There have been no changes in the valuation methodology adopted for this year’s disclosures compared to the prior year’s disclosures.
The principal financial assumptions used to calculate the liabilities under IAS 19 (revised) are as follows:
The financial assumptions reflect the nature and term of the Scheme’s liabilities.

                                     | 2019 | 2018
------------------------------------ | ---- | ----
                                     | %    | %
Discount rate for scheme liabilities | 2.45 | 2.60
CPI inflation                        | 2.35 | 2.25
RPI inflation                        | 3.45 | 3.35
Pension increases                    |      |
Pre 1988 GMP                         | –    | –
Post 1988 GMP                        | 2.10 | 2.10
Pre 2004 non GMP                     | 5.00 | 5.00
Post 2004                            | 3.35 | 3.25

 last triennial actuarial valuation Scheme performed independent actuary 30 April 2018 projected unit method. 19 valuation updated to 31 March 2019. no changes in valuation methodology disclosures prior.
 principal financial assumptions liabilities IAS 19
 reflect nature term Scheme’s liabilities.
 Discount rate scheme liabilities 2. 45 2. 60
 CPI inflation. 35. 25
 RPI inflation 3. 45.
 Pension increases
 1988 GMP
 2. 10.
 2004 5.
 3.


6. Goodwill and Other Intangible Assets
The Company completed its annual impairment test for goodwill and indefinite-lived intangible assets during the fourth quarter of fiscal year 2019 and determined the fair values of the reporting units and the indefinite-lived intangible assets were in excess of the carrying values and that no impairment existed as of the date of the impairment test.
The following table presents the changes in goodwill allocated to the Company’s reportable segments, Electronics Manufacturing Services (“EMS”) and Diversified Manufacturing Services (“DMS”), during the fiscal years ended August 31, 2019 and 2018 (in thousands):
(1) Includes $8.2 million of goodwill reallocated between DMS and EMS during fiscal year 2018.

                                          | EMS     | DMS      | Total
----------------------------------------- | ------- | -------- | --------
Balance as of August 31, 2017             | $52,574 | $555,610 | $608,184
Acquisitions and adjustments(1)           | 30,763  | (8,186)  | 22,577
Change in foreign currency exchange rates | (667)   | (2,349)  | (3,016)
Balance as of August 31, 2018             | 82,670  | 545,075  | 627,745
Change in foreign currency exchange rates | (702)   | (4,788)  | (5,490)
Balance as of August 31, 2019             | $81,968 | $540,287 | $622,255

. Goodwill Intangible Assets
 Company impairment test goodwill assets quarter 2019 no impairment.
 changes goodwill Electronics Diversified Manufacturing Services 2019 2018
 Includes $8. 2 million goodwill reallocated DMS EMS 2018.
 Balance August 31, 2017 $52,574 $555,610 $608,184
 Acquisitions 30,763  (8,186) 22,577
 foreign currency exchange rates (667) (2,349)
 Balance August 31, 2018 82,670 545,075 627,745
 (702) (4,788) (5,490)
 Balance August 31, 2019 $81,968 $540,287 $622,255


Audit and Non-Audit Fees
The following table presents fees billed for professional audit services rendered by PricewaterhouseCoopers LLP for the audit of the Company’s annual financial statements for the years ended June 29, 2019 and June 30, 2018 respectively, and fees billed for other services rendered by PricewaterhouseCoopers LLP and during those periods.
(1) Audit Fees are related to professional services rendered in connection with the audit of the Company’s annual financial statements, the audit of internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002, reviews of financial statements included in the Company’s Quarterly Reports on Form 10-Q, and audit services provided in connection with other statutory and regulatory filings. Audit Fees in fiscal 2019 include fees for services performed by PricewaterhouseCoopers LLP in connection with the acquisitions of RPC Photonics, Inc. (“RPC”) and 3Z Telecom, Inc. (“3Z”). Audit Fees in fiscal 2018 include fees for the acquisitions of the AvComm and Wireless businesses of Cobham plc (“AW”) and Trilithic Inc. (“Trilithic”).
(2) Audit-Related Fees are related to due diligence services for our acquisition activities incurred in fiscal 2018.
(3) Tax Fees for fiscal 2019 and 2018 include professional services rendered in connection with transfer pricing consulting, tax audits, planning services and other tax consulting.
(4) All Other Fees are related to certain software subscription fees.
For fiscal year 2019, the Audit Committee considered whether audit-related services and services other than audit-related services provided by PricewaterhouseCoopers LLP are compatible with maintaining the independence of PricewaterhouseCoopers LLP and concluded that the independence of PricewaterhouseCoopers LLP was maintained.

                       | Fiscal 2019 | Fiscal 2018
---------------------- | ----------- | -----------
Audit Fees (1)         | $3,631,575  | $3,784,488
Audit-Related Fees (2) | 0           | 359,000
Tax Fees (3)           | 169,776     | 61,592
All Other Fees (4)     | 4,500       | 3,600
Total                  | $3,805,851  | $4,208,680

Audit Non-Audit Fees
 table presents services PricewaterhouseCoopers LLP annual financial statements June 29, 2019 June 30, 2018 other services.
 Audit Fees annual financial statements internal control 404 Sarbanes-Oxley Act 2002 reviews financial statements Quarterly Reports Form 10-Q statutory regulatory filings. 2019 RPC Photonics. 3Z Telecom. 2018 AvComm Wireless Cobham plc Trilithic Inc.
 Audit-Related Fees due diligence services acquisition activities 2018.
 Tax Fees 2019 2018 transfer pricing consulting tax audits planning services consulting.
 Other Fees software subscription fees.
 2019 Audit Committee PricewaterhouseCoopers LLP independence PricewaterhouseCoopers LLP independence.
 2019 2018
 Audit Fees (1) $3,631,575 $3,784,488
 Audit-Related Fees (2) 359,000
 Tax Fees (3) 169,776 61,592
Fees 4,600
 $3,805,851,208,680


21 Called up share capital and reserves
Other reserves in the Consolidated Statement of Changes in Equity on pages 151 to 152 are made up as follows:
The change in translation reserve includes a £1.4m credit transferred from retained earnings.

                               | 1st January 2019 | Change in year | 31st December 2019
------------------------------ | ---------------- | -------------- | ------------------
                               | £m               | £m             | £m
Translation reserve            | 30.3             | (45.0)         | (14.7)
Net investment hedge reserve   | (7.4)            | 12.9           | 5.5
Cash flow hedges reserve       | –                | 3.3            | 3.3
Capital redemption reserve     | 1.8              | –              | 1.8
Employee Benefit Trust reserve | (2.5)            | (4.0)          | (6.5)
Total other reserves           | 22.2             | (32.8)         | (10.6)

share capital reserves
 Consolidated Statement Changes Equity pages 151 152
 change reserve £1. 4m credit transferred earnings.
 1st January 2019 31st December 2019
 Translation reserve 30. (14.
 investment hedge reserve. 12.
 Cash flow hedges reserve.
 Capital redemption reserve.
 Employee Benefit Trust reserve (2. (6.
 reserves 22. 8) (10.


In November 2016, the FASB issued guidance that requires entities to show the changes in the total of cash, cash equivalents, restricted cash and restricted cash equivalents in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
In October 2016, the FASB issued guidance that requires companies to recognize the income tax effects of intercompany sales and transfers of assets, other than
inventory, in the period in which the transfer occurs. The guidance is effective for annual reporting periods and interim periods within those annual reporting
periods beginning after December 15, 2017, our fiscal 2019. The modified retrospective transition method should be applied. We adopted this guidance in the first
quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
In August 2016, the FASB issued guidance that aims to eliminate diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. The retrospective transition method should be applied. We adopted this guidance in the first quarter of fiscal 2019 and it did not have a material impact on our consolidated financial statements.
n January 2016, the FASB issued guidance that requires most equity investments be measured at fair value, with subsequent other changes in fair value recognized in net income. The guidance also impacts financial liabilities under the fair value option and the presentation and disclosure requirements on the classification and measurement of financial instruments. The guidance is effective for annual reporting periods and interim periods within those annual reporting periods beginning after December 15, 2017, our fiscal 2019. It should be applied by means of a cumulative-effect adjustment to the balance sheet as of the beginning of the fiscal year of adoption, unless equity securities do not have readily determinable fair values, in which case the amendments should be applied prospectively. We adopted this guidance in the first quarter of fiscal 2019. We did not use prospective amendments for any investments and adoption did not have a material impact on our consolidated financial statements.
The following reconciliations provide the effect of the reclassification of the net periodic benefit cost from operating expenses to other (income) expense in our consolidated statements of income for fiscal year 2018 and 2017 (in millions):

Twelve Months Ended September 29, 2018: | As Previously Reported | Adjustments | As Recast
--------------------------------------- | ---------------------- | ----------- | ---------
Cost of Sales                           | $34,926                | $30         | $34,956
Selling, General and Administrative     | $2,071                 | $(7)        | $2,064
Operating Income                        | $3,055                 | $(23)       | $3,032
Other (Income) Expense                  | $310                   | $(23)       | $287
Twelve Months Ended September 30, 2017: | As Previously Reported | Adjustments | As Recast
Cost of Sales                           | $33,177                | $21         | $33,198
Selling, General and Administrative     | $2,152                 | $(11)       | $2,141
Operating Income                        | $2,931                 | $(10)       | $2,921
Other (Income) Expense                  | $303                   | $(10)       | $293

November 2016, FASB show changes cash equivalents restricted statement cash flows. effective interim periods after December 15 2017. retrospective transition method applied. adopted first quarter fiscal 2019 consolidated financial statements.
 October 2016, FASB recognize income tax effects intercompany sales transfers assets
. effective interim periods
 after December 15 2017 2019. modified retrospective transition method applied. adopted first
 quarter fiscal 2019 impact consolidated financial statements.
 August 2016, FASB diversity cash receipts payments cash flows. effective after December 15 2017. retrospective transition method applied. adopted first quarter fiscal 2019 impact consolidated financial statements.
 January 2016, FASB equity investments measured at fair value changes recognized net income. impacts financial liabilities fair value option presentation disclosure requirements classification measurement financial instruments. effective after December 15, 2017 fiscal 2019.cumulative-effect adjustment balance sheet fiscal year unless equity securities values amendments prospectively. adopted first quarter 2019. amendments investments consolidated financial statements.
 reconciliations net benefit cost consolidated statements 2018 2017
 Twelve Months Ended September 29, 2018: Adjustments
 Cost Sales $34,926
 Selling General Administrative $2,071 $2,064
 Operating Income $3,055 $3,032
 Other (Income Expense $310
 Twelve Months Ended September 30, 2017:
 Cost Sales $33,177 $33,198
 Selling General Administrative $2,152
 Operating Income $2,931 $2,921
 Other (Income) Expense $303 $293


Note 14. Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):

                                                | December 31, |
----------------------------------------------- | ------------ | --------
                                                | 2019         | 2018
Land                                            | $1,949       | $2,185
Buildings and leasehold improvements            | 138,755      | 129,582
Equipment, furniture and fixtures               | 307,559      | 298,537
Capitalized internally developed software costs | 38,466       | 41,883
Transportation equipment                        | 613          | 636
Construction in progress                        | 5,037        | 2,253
                                                | 492,379      | 475,076
Less: Accumulated depreciation                  | 366,389      | 339,658
                                                | $125,990     | $135,418

. Property Equipment
 Land $1,949 $2,185
 Buildings improvements 138,755 129,582
 Equipment furniture fixtures 307,559,537
 software 38,466 41,883
 Transportation
 Construction 5,037 2,253
,379 475,076
 depreciation,389 339,658
 $125,990 $135,418


ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
NOTE 9. ACCOUNTS AND OTHER RECEIVABLE
Accounts and other receivable are recorded at net realizable value. Components of accounts and other receivable, net of reserves, are as follows:
Amounts billed, net consist of amounts that have been invoiced to our customers in accordance with terms and conditions, and are shown net of an allowance for doubtful accounts. These receivables are all short term in nature and do not include any financing components.
Unbilled receivables consist of amounts where we have satisfied our contractual obligations related to inventory stocking contracts with customers. Such amounts are typically invoiced to the customer upon their consumption of the inventory managed under the stocking contracts. We anticipate that substantially all unbilled receivables will be invoiced and collected over the next twelve months. These contracts do not include any financing components.

                       | December 31, 2019 | December 31, 2018
---------------------- | ----------------- | -----------------
Amounts billed, net    | $227,528          | $80,709
Unbilled receivables   | 19,036            | 19,733
Total receivables, net | $246,564          | $100,442

ADVANCED. FINANCIAL STATEMENTS thousands share
 NOTE 9. ACCOUNTS RECEIVABLE
 recorded net realizable value.
 Amounts billed invoiced doubtful accounts. short term financing.
 Unbilled receivables contractual obligations inventory stocking contracts. invoiced consumption inventory. anticipate unbilled receivables invoiced collected next twelve months. financing.
 December 31, 2019 December 31, 2018
 Amounts billed net $227,528 $80,709
 Unbilled receivables 19,036 19,733
 Total receivables net $246,564 $100,442


Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the years endedD ecember 31, 2019 and 2018. A discussion of cash flows for the year ended December 31, 2017 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations,” under the heading “Liquidity and Capital Resources” in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 5, 2019, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
Cash Flows from Operating Activities
Net cash provided by operating activities was $78.3 million for the year ended December 31, 2019. Net cash provided by operating activities consisted of positive cash flow from operations including $101.1 million in non-cash expenses and $16.9 million in changes in operating assets and liabilities, partially offset by net loss of $19.9 million and deferred income taxes and excess tax benefits from stock-based compensation of $19.8 million.
Non-cash items included in net loss for the year ended December 31, 2019 primarily included depreciation and amortization of property, equipment, intangible assets and leased right-of-use assets of $66.4 million and stock-based compensation of $32.1 million.
During the year ended December 31, 2019, we also exited certain leased facilities, which resulted in impairment of leased right-of-use assets of$ 9.2 million and leasehold improvements of $1.4 million, which was partially offset by a gain on extinguishment of related lease liabilities of$ 10.4 million, all of which are non-cash items that did not affect cash flows.
Net cash provided by operating activities was $102.7 million for the year ended December 31, 2018. Net cash provided by operating activities consisted of positive cash flow from operations including $100.3 million in non-cash operating expenses and $28.6 million in changes in operating assets and liabilities, partially offset by net loss of $26.2 million.
Non-cash items included in net loss for the year ended December 31, 2018 primarily included depreciation and amortization of property, equipment and intangible assets of $79.0 million, stock-based compensation of $31.7 million, and impairment of intangible assets of $2.2 million, partially offset by deferred income taxes of $12.1 million and excess tax benefits on stock-based awards of $2.0 million.
Cash Flows from Investing Activities
Net cash used in investing activities was $7.0 million for the year ended December 31, 2019. Net cash used in investing activities primarily consisted of $6.9 million in purchases of property and equipment. Net cash used in investing activities was $7.8 million for the year ended December 31, 2018. Net cash used in investing activities consisted entirely of $7.8 million in purchases of property and equipment.
Cash Flows from Financing Activities
Net cash used in financing activities was $53.4 million for the year ended December 31, 2019. Net cash used in financing activities consisted primarily of cash outflows from aggregate prepayments of principal of $50.0 million and $12.0 million in minimum tax withholding paid on behalf of employees for restricted stock units, partially offset by cash inflows of $8.6 million in net proceeds from issuance of common stock upon exercise of stock options.
Net cash used in financing activities was $93.8 million for the year ended December 31, 2018. Net cash used in financing activities primarily consisted of cash outflows from $93.0 million in aggregate prepayments of principal on outstanding debt and $7.6 million in minimum tax withholding paid on behalf of employees for restricted stock units, partially offset by cash inflows of $6.8 million in net proceeds from issuance of common stock upon exercise of stock options.
We believe that our $92.7 million of cash and cash equivalents at December 31, 2019 will be sufficient to fund our projected operating requirements for at least the next twelve months. We have repaid $213.0 million of debt to date. The credit agreement permits the Company to request incremental loans in an aggregate principal amount not to exceed the sum of $160.0 million (subject to adjustments for any voluntary prepayments), plus an unlimited amount that is subject to pro forma compliance with certain secured leverage ratio and total leverage ratio tests.
Incremental loans are subject to certain additional conditions, including obtaining additional commitments from the lenders then party to the credit agreement or new lenders. The term loan facility has a seven-year term and bears interest at either an Adjusted LIBOR or an Adjusted Base Rate, at our option, plus a fixed applicable margin.
Our cash and cash equivalents in recent years have been favorably affected by our implementation of an equity-based bonus program for our employees, including executives. In connection with that bonus program, in February 2019, we issued 0.3 million freely-tradable shares of our common stock in settlement of bonus awards for the 2018 performance period. We expect to implement a similar equity-based plan for fiscal 2019, but our compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
Notwithstanding the foregoing, we may need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we continue to pursue acquisitions.
Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products and potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to us or at all.
If we are unable to raise additional funds when needed, we may not be able to sustain our operations or execute our strategic plans.

                                                                              | Years Ended December 31, |
----------------------------------------------------------------------------- | ------------------------ | --------
                                                                              | 2019                     | 2018
                                                                              | (in thousands)           |
Net cash provided by operating activities                                     | $78,348                  | $102,689
Net cash used in investing activities                                         | (6,973)                  | (7,825)
Net cash used in financing activities                                         | (53,383)                 | (93,784)
Effect of exchange rate changes on cash, cash equivalents and restricted cash | 934                      | (1,301)
Increase (decrease) in cash, cash equivalents and restricted cash             | $18,926                  | (221)

summary cash flows operating investing financing 2019 2018. 2017 omitted Annual Report Form 10-K.
 Analysis Financial Condition Results Operations Capital Annual Report 2018 SEC February 5 2019 available website.
 Cash Flows Operating Activities
 Net $78. 3 million 2019. positive flow $101. 1 million non-cash expenses $16. 9 million assets liabilities offset net loss $19. 9 million deferred income taxes benefits stock-based compensation $19. 8 million.
 Non-cash items depreciation amortization property equipment intangible assets leased right-use assets $66. 4 million stock-based compensation $32. 1 million.
 exited leased facilities impairment leased-of-use assets$ 9. 2 million leasehold improvements $1. 4 million offset gain extinguishment lease liabilities$ 10. 4 million.
 Net cash $102. 7 million 31, 2018. positive $100. 3 million non-cash expenses $28.assets liabilities offset net loss $26. 2 million.
 Non-cash items depreciation amortization property equipment intangible assets $79. 0 million stock-based compensation $31. 7 million impairment intangible assets $2. 2 million offset deferred income taxes $12. 1 million excess tax benefits stock-based awards $2. million.
 Cash Flows Investing Activities
 $7. 0 million 2019. $6. 9 million purchases property equipment. $7. 8 million. $7. million.
 Cash Flows Financing Activities
 $53. 4 million 2019. prepayments $50. million $12. million minimum tax withholding offset $8. 6 million proceeds issuance common stock.
 financing $93. 8 million 2018. outflows $93. 0 million prepayments $7. 6 million minimum tax withholding offset $6. 8 million proceeds.
 $92. 7 million cash equivalents December 31, 2019 operating requirements twelve months. repaid $213.million debt. credit agreement permits Company request incremental loans not exceed $160. 0 million adjustments voluntary unlimited amount subject compliance secured leverage ratio tests.
 Incremental loans subject conditions commitments from lenders new. term loan facility seven-year term interest Adjusted LIBOR or Adjusted Base Rate fixed margin.
 cash equivalents affected equity bonus program employees. February 2019 issued. 3 million freely-tradable shares common stock bonus 2018. expect similar equity-based plan fiscal 2019 compensation committee payment cash stock.
 may need raise additional capital indebtedness fund strategic initiatives activities acquisitions.
 future capital requirements depend revenue growth expansion engineering sales marketing new products market acceptance potential investments acquisitions complementary businesses. Additional funds may not available.
 unable raise additional funds may sustain operations execute strategic plans.
 Years Ended December 31,
 2019 2018
 thousands
$78,348 $102,689
 investing (6,973) (7,825)
 financing (53,383) (93,784)
 exchange rate changes cash 934 (1,301)
 $18,926 (221)


13. SHARE-BASED EMPLOYEE COMPENSATION
Stock incentive plans — We offer share-based compensation plans to attract, retain, and motivate key officers, employees, and non-employee directors to work toward the financial success of the Company.
Our stock incentive plans are administered by the Compensation Committee of the Board of Directors and have been approved by the stockholders of the Company. The terms and conditions of our share-based awards are determined by the Compensation Committee for each award date and may include provisions for the exercise price, expirations, vesting, restriction on sales, and forfeitures, as applicable. We issue new shares to satisfy stock issuances under our stock incentive plans.
Our Amended and Restated 2004 Stock Incentive Plan authorizes the issuance of up to11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units, or performance units to key employees, directors, and other designated employees. There were 1,677,983 shares of common stock available for future issuance under this plan as of September 29, 2019.
We also maintain a deferred compensation plan for non-management directors under which those who are eligible to receive fees or retainers may choose to defer receipt of their compensation. The deferred amounts are converted to stock equivalents. The plan requires settlement in shares of our common stock based on the number of stock equivalents and dividend equivalents at the time of a participant’s separation from the Board of Directors. This plan provides for the issuance of up to 350,000 shares of common stock in connection with the crediting of stock equivalents. There were143,122 shares of common stock available for future issuance under this plan as of September 29, 2019.
Compensation expense — The components of share-based compensation expense, included within “Selling, general, and administrative expenses” in our consolidated statement of earnings, in each fiscal year are as follows (in thousands):
Nonvested restricted stock units — Nonvested restricted stock units (“RSUs”) are generally issued to executives, non-management directors and certain other members of management and employees. Prior to fiscal 2011, RSUs were granted to certain Executive and Senior Vice Presidents pursuant to our share ownership guidelines. These awards vest upon retirement or termination based on years of service. There were 60,272 of such RSUs outstanding as of September 29, 2019.

                                                | 2019   | 2018   | 2017
----------------------------------------------- | ------ | ------ | -------
Nonvested stock units                           | $5,458 | $5,737 | $5,873
Stock options                                   | 936    | 1,790  | 1,826
Performance share awards                        | 1,417  | 1,236  | 2,580
Nonvested restricted stock awards               | —      | 33     | 88
Non-management directors’ deferred compensation | 263    | 350    | 270
Total share-based compensation expense          | $8,074 | $9,146 | $10,637

. SHARE-BASED EMPLOYEE COMPENSATION
 Stock incentive plans offer share-based compensation plans attract motivate officers employees directors financial success.
 administered by Compensation Committee approved by stockholders. terms conditions awards determined by Committee include exercise price expirations vesting restriction sales forfeitures. issue new shares stock issuances.
 Amended 2004 Stock Incentive Plan authorizes issuance,600,000 common shares stock options appreciation rights purchase rights bonuses units performance units to employees directors. 1,677,983 shares available future issuance September 29, 2019.
 deferred compensation plan for non-management directors. deferred amounts converted to stock equivalents. requires settlement in shares based equivalents dividend equivalents separation. provides issuance 350,000 shares.,122 shares available future issuance September 29, 2019.
 Compensation expense share-based compensation
Nonvested units issued executives non-management directors. Senior Vice Presidents. vest retirement. 60,272 RSUs September 29, 2019.
 Nonvested stock units $5,458 $5,737 $5,873
 Stock options 936 1,790 1,826
 Performance share awards 1,417 1,236 2,580
 Non-management directors’ deferred compensation 263 350
 share-based compensation expense $8,074 $9,146 $10,637


Significant components of Teradyne’s deferred tax assets (liabilities) as of December 31, 2019 and 2018 were as follows:
As of December 31, 2019 and 2018, Teradyne evaluated the likelihood that it would realize deferred income taxes to offset future taxable income and concluded that it is more likely than not that a substantial majority of its deferred tax assets will be realized through consideration of both the positive and negative evidence. At December 31, 2019 and 2018, Teradyne maintained a valuation allowance for certain deferred tax assets of $77.2 million and $69.9 million, respectively, primarily related to state net operating losses and state tax credit carryforwards, due to the uncertainty regarding their realization. Adjustments could be required in the future if Teradyne estimates that the amount of deferred tax assets to be realized is more or less than the net amount recorded.

                                 | 2019           | 2018
-------------------------------- | -------------- | ---------
                                 | (in thousands) |
Deferred tax assets              |                |
Tax credits                      | $79,480        | $69,091
Accruals                         | 25,424         | 23,449
Pension liabilities              | 24,459         | 20,826
Inventory valuations             | 18,572         | 18,514
Deferred revenue                 | 7,622          | 9,130
Equity compensation              | 7,042          | 7,190
Vacation accrual                 | 4,768          | 4,772
Investment impairment            | 3,292          | —
Net operating loss carryforwards | 2,705          | 3,658
Marketable securities            | —              | 962
Other                            | 1,472          | 685
Gross deferred tax assets        | 174,836        | 158,277
Less: valuation allowance        | (77,177)       | (69,852)
Total deferred tax assets        | $97,659        | $88,425
Deferred tax liabilities:        |                |
Depreciation                     | $(18,238)      | $(14,028)
Intangible assets                | (16,705)       | (24,211)
Marketable securities            | (1,601)        | —
Total deferred tax liabilities   | $(36,544)      | $(38,239)
Net deferred assets              | $61,115        | $50,186

Teradyne’s deferred tax assets December 31, 2019 2018
 evaluated deferred taxes majority deferred assets. valuation allowance $77. 2 million $69. 9 million net operating losses tax credit carryforwards uncertainty realization. Adjustments.
 Deferred tax assets
 Tax credits $79,480 $69,091
 Accruals 25,424
 Pension liabilities 24,459
 Inventory valuations 18,572 18,514
 Deferred revenue 7,622
 Equity compensation 7,042
 Vacation accrual 4,768
 Investment impairment 3,292
 Net operating loss carryforwards 2,705
 Marketable securities
 1,472
 Gross deferred tax assets 174,836  158,277
 valuation allowance (77,177
 deferred tax assets $97,659 $88,425
 liabilities
 Depreciation $(18,238) $(14,028)
Intangible (16,705
 deferred tax liabilities,239)
 deferred assets $61,115 $50,186


Contract Liabilities
Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract. The changes in our contract liabilities are as follows (in thousands):
The revenue recognized from amounts included in contract liabilities primarily relates to prepayment contracts with customers as well as payments of activation fees.

Year Ended December 31,                                          |         |
---------------------------------------------------------------- | ------- | -------
                                                                 | 2019    | 2018
Beginning of period balance                                      | $11,176 | $12,678
Revenue deferred and acquired in current period                  | 6,127   | 3,954
Revenue recognized from amounts included in contract liabilities | (6,805) | (5,456)
End of period balance                                            | $10,498 | $11,176

Contract Liabilities
 payments performance realized revenue. changes
 revenue prepayment contracts activation fees.
 Year Ended December 31,
 2019 2018
 Beginning period balance $11,176 $12,678
 Revenue deferred acquired period 6,127 3,954
 Revenue (6,805) (5,456)
 End period balance $10,498 $11,176


Stock-Based Compensation
The following table summarizes the components of total stock-based compensation included in VMware’s consolidated statements of income during the periods presented (table in millions):
As of January 31, 2020, the total unrecognized compensation cost for stock options and restricted stock was $1.8 billion and will be recognized through fiscal 2024 with a weighted-average remaining period of 1.5 years. Stock-based compensation related to VMware equity awards held by VMware employees is recognized on VMware’s consolidated statements of income over the awards’ requisite service periods.

                                           |                  | For the Year Ended |
------------------------------------------ | ---------------- | ------------------ | ----------------
                                           | January 31, 2020 | February 1, 2019   | February 2, 2018
Cost of license revenue                    | $1               | $1                 | $2
Cost of subscription and SaaS revenue      | 13               | 7                  | 5
Cost of services revenue                   | 83               | 58                 | 53
Research and development                   | 459              | 391                | 363
Sales and marketing                        | 293              | 226                | 205
General and administrative                 | 168              | 117                | 84
Stock-based compensation                   | 1,017            | 800                | 712
Income tax benefit                         | (347)            | (253)              | (232)
Total stock-based compensation, net of tax | $670             | $547               | $480

Stock-Based Compensation
 table summarizes compensation statements
 January 31, 2020 unrecognized compensation cost stock options restricted stock $1. 8 billion recognized 2024 1. 5 years. compensation VMware equity awards recognized statements periods.
 January 31, 2020 February 1, 2019 2 2018
 license revenue $1
 subscription SaaS revenue 13
 services 83
 Research development 459
 Sales marketing 293
 General administrative 168
 Stock-based compensation 1,017
 Income tax benefit (347) (253)
 compensation net tax $670 $547 $480


Results of Operations
The following describes the line items set forth in our consolidated statements of operations. A discussion of changes in our results of operations during the year ended December 31, 2018 compared to the year ended December 31, 2017 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 5, 2019, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.
Net Revenue. Net revenue is generated from sales of radio-frequency, analog and mixed-signal integrated circuits for the connected home, wired and wireless infrastructure, and industrial and multi-market applications. A significant portion of our sales are to distributors, which then resell our products.
Cost of Net Revenue. Cost of net revenue includes the cost of finished silicon wafers processed by third-party foundries; costs associated with our outsourced packaging and assembly, test and shipping; costs of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance; amortization of acquired developed technology intangible assets and inventory step-ups to fair value; amortization of certain production mask costs; cost of production load boards and sockets; and an allocated portion of our occupancy costs.
Research and Development. Research and development expense includes personnel-related expenses, including stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs.
Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications. All research and development costs are expensed as incurred.
Selling, General and Administrative. Selling, general and administrative expense includes personnel-related expenses, including stock-based compensation, amortization of certain acquired intangible assets, third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legal fees, depreciation expense and allocated occupancy costs. Impairment Losses. Impairment losses consist of charges resulting from the impairment of acquired intangible assets.
Restructuring Charges. Restructuring charges consist of severance, lease and leasehold impairment charges, and other charges related to restructuring plans. Interest and Other Income (Expense), Net. Interest and other income (expense), net includes interest income, interest expense and other income (expense). Interest income consists of interest earned on our cash, cash equivalents and restricted cash balances. Interest expense consists of interest accrued on debt. Other income (expense) generally consists of income (expense) generated from non-operating transactions.
Income Tax Provision (Benefit). We make certain estimates and judgments in determining income tax expense for financial statement purposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expenses for tax and financial statement purposes and the realizability of assets in future years.
The following table sets forth our consolidated statement of operations data as a percentage of net revenue for the periods indicated:

                                               |      | Years Ended December 31,
---------------------------------------------- | ---- | ------------------------
                                               | 2019 | 2018
Net revenue                                    | 100% | 100%
Cost of net revenue                            | 47   | 46
Gross profit                                   | 53   | 54
Operating expenses:                            |      |
Research and development                       | 31   | 31
Selling, general and administrative            | 28   | 26
Impairment losses                              | -    | 1
Restructuring charges                          | 1    | 1
Total operating expenses                       | 60   | 59
Loss from operations                           | (7)  | (5)
Total interest and other income (expense), net | (3)  | (4)
Loss before income taxes                       | (10) | (9)
Income tax benefit                             | (4)  | (2)
Net loss                                       | (6)% | (7)%

Results Operations
 items consolidated statements operations. discussion changes December 31, 2018 2017 omitted Annual Report Form 10-K found “Item 7.
 Management’s Discussion Analysis Financial Condition Results Annual Report 10-K 2018 filed SEC February 5, 2019 available website.
 Net Revenue. sales radio analog mixed-signal circuits home wired wireless infrastructure industrial multi-market applications. sales distributors resell products.
 Cost Net Revenue. includes finished silicon wafers outsourced packaging assembly test shipping personnel equipment manufacturing support logistics assets inventory production mask costs load boards sockets occupancy costs.
 Research Development. personnel stock-based compensation product engineering mask prototype circuit packaging test computer-aided design software intellectual property design development testing evaluation depreciation occupancy costs.
 development design new products refinement test methodologies. costs expensed incurred.
 Selling Administrative.Selling administrative expense includes personnel expenses stock compensation amortization assets sales commissions engineering support travel professional consulting fees legal fees depreciation occupancy costs. Impairment Losses. assets.
 Restructuring Charges. severance lease leasehold impairment restructuring plans. Interest Income. Interest cash equivalents cash balances. Interest expense accrued debt. Other income non-operating transactions.
 Income Tax Provision (Benefit. estimates judgments income tax expense financial statement. differences timing revenue expenses realizability.
 table consolidated statement operations data net revenue periods
 Ended
 Net revenue 100%
 Cost revenue 47
 Gross profit 53 54
 Operating expenses
 Research development 31
 Selling general administrative 28 26
 Impairment losses
 Restructuring charges
 Total operating expenses 60 59
 Loss operations (7)
 interest other income
taxes (10)
 benefit (4)
 Net loss (6)


Outstanding Equity Awards at Fiscal Year End
The following table summarizes the equity awards made to our named executive officers that were outstanding at December 31, 2019

Name                   | No. of Securities Underlying Unexercised Options (#) Exercisable No. of Securities Underlying Unexercised | No. of Securities Underlying Unexercised Options (#) Unexercisable No. of Securities Underlying Unexercised | Option Exercise Price | Option Expiration Date
---------------------- | --------------------------------------------------------------------------------------------------------- | ----------------------------------------------------------------------------------------------------------- | --------------------- | ----------------------
Garo H. Armen (1)      | 500,000                                                                                | -                                                                                | $1.25                 | April 16, 2026
Garo H. Armen (2)      | 184,028                                                                                | 65,972                                                                                | $1.75                 | October 16, 2027
Alexander K. Arrow (3) | 100,000                                                                                | -                                                                                | $1.25                 | February 12, 2026
Alexander K. Arrow (3) | 140,000                                                                                | -                                                                                | $1.25                 | April 15, 2026
Alexander K. Arrow (4) | 55,208                                                                                | 19,792                                                                                | $1.75                 | October 16, 2027
Alexander K. Arrow (5) | 41,667                                                                                | -                                                                                | $1.00                 | February 1, 2029

Equity Awards Fiscal Year End
 table summarizes equity awards executive officers December 31, 2019
 Name. Options. Option Price Expiration Date
 Garo. Armen $1. 25 April 16 2026
. 184,028 65,972 $1. October 16 2027
 Alexander. (3) 100,000. February 12 2026
 Alexander. 140,000 $1. April 15 2026
. (4) 55,208 19,792. October 16 2027
. (5) 41,667 $1. February 1 2029


12. Information about Segments of Geographic Areas
The Company operates in one segment, the development and marketing of network infrastructure equipment. Revenue is attributed to a geographical area based on the location of the customers. The Company operates in three geographic theaters: Americas, which includes the United States, Canada, Mexico, Central America and South America; EMEA, which includes Europe, Russia, Middle East and Africa; and APAC which includes Asia Pacific, China, South Asia and Japan. The Company’s chief operating decision maker (“CODM”), who is its CEO, reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
See Note 3. Revenues for the Company’s revenues by geographic regions and channel based on the customers’ ship-to location.
The Company’s long-lived assets are attributed to the geographic regions as follows (in thousands):

Long-lived Assets       | June 30,
2019 | June 30,
2018
----------------------- | ------------- | -------------
Americas                | $136,035      | $178,251
EMEA                    | 28,744        | 15,106
APAC                    | 11,529        | 9,896
Total long-lived assets | $176,308      | $203,253

. Areas
 Company operates development marketing network infrastructure equipment. Revenue attributed area location customers. operates three Americas Mexico Central South EMEA Europe Russia Middle East Africa APAC Japan. CEO reviews financial information allocating resources evaluating performance.
 Note 3. Revenues geographic regions location.
 long-lived assets attributed regions
 Assets June
 2019
 2018
 Americas $136,035 $178,251
 EMEA 28,744 15,106
 APAC 11,529 9,896
 Total assets $176,308 $203,253


19 Trade and other payables
Contract liabilities relate to advance payments received from customers which have not yet been recognised as revenue. £8.3m of the contract liabilities at 31st December 2018 was recognised as revenue during 2019 (2018: £3.0m).

                               | 2019  | 2018
------------------------------ | ----- | -----
                               | £m    | £m
Trade payables                 | 57.9  | 57.4
Contract liabilities           | 8.7   | 8.9
Social security                | 5.6   | 5.1
Other payables                 | 37.8  | 37.6
Accruals                       | 64.8  | 58.0
Total trade and other payables | 174.8 | 167.0

Trade payables
 liabilities advance payments revenue. £8. 3m liabilities 31st December 2018 recognised revenue 2019 £3.
 Trade payables 57. 9
 Contract liabilities 8.
 Social security 5.
 payables 37.
 Accruals 64. 58.
 trade payables 174. 167.


9. Audit, audit related and other non-audit services  The following fees were paid or are payable to the company’s auditors, KPMG LLP and other firms in the KPMG network, for the year ended 31 March 2019. Figures in the table below for the years ended 31 March 2017 and 2018 are in respect of fees paid to the company’s previous auditors, PricewaterhouseCoopers LLP.
a Services in relation to the audit of the parent company and the consolidated financial statements, including fees for reports under section 404 of the Sarbanes-Oxley Act. This also includes fees payable for the statutory audits of the financial statements of subsidiary companies. This excludes amounts for the audit of BT Group Employee Share Ownership Trust and Ilford Trustees (Jersey) Limited amounting to £32,000.
b During the year a further £446,000 of fees were payable to PricewaterhouseCoopers LLP in relation to the audit of 2017/18 subsidiary accounts and the audit of our restated IAS 19 accounting valuation of retirement benefit obligations, which have not been included in the 2019 balances in the above table.
c Services in relation to other statutory filings or engagements that are required by law or regulation to be carried out by an appointed auditor. This includes fees for the review of interim results, the accrued fee for the audit of the group’s regulatory financial statements and reporting associated with the group’s US debt shelf registration. d Services relating to tax returns, tax audits, monitoring and enquiries.
e Fees payable for all taxation advisory services not falling within taxation compliance. All other assurance services include fees payable to KPMG LLP for agreed upon procedures performed on the estimated impact of the new IFRS 15 revenue accounting standard, which took effect from 1 April 2018 for the 2017/18 audit. g Fees payable for all non-audit services not covered above, principally comprising other advisory services.
f All other assurance services include fees payable to KPMG LLP for agreed upon procedures performed on the estimated impact of the new IFRS 15 revenue accounting standard, which took effect from 1 April 2018 for the 2017/18 audit.
g Fees payable for all non-audit services not covered above, principally comprising other advisory services.

                                                                          | 2019   | 2018   | 2017
------------------------------------------------------------------------- | ------ | ------ | ------
Year ended 31 March                                                       | £000   | £000   | £000
Fees payable to the company’s auditors and its associates for:            |        |        |
Audit services a,b                                                        |        |        |
The audit of the parent company and the consolidated financial statements | 8,165  | 5,418  | 4,316
The audit of the company’s subsidiaries                                   | 6,061  | 5,877  | 5,675
                                                                          | 14,226 | 11,295 | 9,991
Audit related assurance services c                                        | 2,236  | 1,771  | 1,865
Other non-audit services                                                  |        |        |
Taxation compliance services d                                            | –      | –      | 366
Taxation advisory services e                                              | –      | –      | 111
All other assurance services f                                            | 748    | 211    | 200
All other services g                                                      | 210    | 592    | 2,332
                                                                          | 958    | 803    | 3,009
Total services                                                            | 17,420 | 13,869 | 14,865

. Audit non-audit services fees paid auditors KPMG LLP KPMG network year 31 March 2019. years 2017 2018 fees previous PricewaterhouseCoopers LLP.
 Services audit parent company consolidated financial statements reports 404 Sarbanes-Oxley Act. fees statutory audits financial subsidiary companies. excludes audit BT Group Employee Share Ownership Trust Ilford Trustees (Jersey) Limited £32,000.
 £446,000 fees PricewaterhouseCoopers LLP audit 2017/18 subsidiary accounts IAS 19 accounting valuation retirement benefit obligations not included 2019 balances.
 Services statutory filings auditor. fees review interim results audit regulatory financial statements US debt shelf registration. tax returns audits monitoring enquiries.
 taxation advisory services. KPMG LLP new IFRS 15 revenue accounting standard 1 April 2018 2017/18. non-audit services.
 KPMG LLP new IFRS 15 revenue accounting standard April 2018 2017/18 audit.
Fees non-audit services advisory.
 ended 31 March £000
 Fees auditors associates
 Audit services
 parent company consolidated financial statements 8,165 5,418 4,316
 subsidiaries 6,061 5,877,675
 14,226 11,295
 assurance services 2,236 1,771 1,865
 non-audit services
 Taxation compliance services
 Taxation advisory services 111
 assurance services 748 211
 592 2,332
 3,009
 Total services 17,420 13,869 14,865


30. Financial instruments and financial risk management
The main purpose of the Group’s financial instruments, other than trade and other receivables, trade and other payables, contractual provisions and lease liabilities, is to fund the Group’s liquidity requirements.
All of the Group’s financial assets and liabilities are categorised as financial assets/liabilities stated at amortised cost, except for forward foreign currency exchange contracts, included within current other financial assets, that are designated as financial assets at fair value through profit or loss and corporate owned life insurance, amounting to $3.0 million (2018 $2.4 million), included within non-current trade and other receivables, that is designated as financial assets at fair value through profit or loss. These are shown in the below table:
The Group enters into derivative transactions, forward foreign currency exchange contracts, for the management of the Group’s foreign currency exposures when deemed appropriate.
The key objective of the Group’s treasury department is to manage the financial risks of the business and to ensure that sufficient liquidity is available to the Group. All treasury activity operates within a formal control framework. The Board has approved treasury policies and guidelines and periodically reviews treasury activities. Additionally, it is the Group’s policy that speculative treasury transactions are expressly forbidden.

                                                        |       | 2019      | 2018
------------------------------------------------------- | ----- | --------- | ---------
                                                        | Notes | $ million | $ million
Non-current trade and other receivables                 | 20    | 5.7       | 3.5
Cash and cash equivalents                               | 22    | 183.2     | 121.6
Current trade and other receivables                     | 20    | 133.2     | 126.9
Current other financial assets                          | 20    | 0.1       | –
Financial assets                                        |       | 322.2     | 252.0
Non-current other payables, excluding government grants | 23    | 0.8       | 4.4
Current trade payables, other payables and accruals     | 23    | 75.4      | 57.1
Lease liabilities, current and non-current              | 26    | 33.0      | –
Contractual provisions                                  | 28    | 3.6       | 3.6
Financial liabilities                                   |       | 112.8     | 65.1

. Financial instruments risk management
 main purpose Group’s financial instruments trade receivables contractual provisions lease liabilities fund liquidity requirements.
 financial assets liabilities amortised cost except forward foreign currency exchange contracts fair value profit loss corporate owned life insurance $3. 0 million (2018 $2. 4 non trade. shown table
 Group enters derivative transactions foreign currency exchange contracts currency exposures.
 objective treasury department financial risks ensure liquidity. treasury activity within formal control framework. Board approved treasury policies guidelines reviews activities. speculative treasury transactions forbidden.
 million
 Non-current trade receivables.
 Cash equivalents 183. 121.
 Current trade receivables 133. 126.
 Current other financial assets.
 322. 252.
 Non-current payables excluding government grants. 4.
 Current trade payables accruals 75. 57.
Lease liabilities non-current 26.
 Contractual provisions 28.
 Financial liabilities 112.


The following are the significant assumptions adopted in measuring the Company’s pension and other benefit obligations:
For certain Canadian post-retirement plans the above trend rates are applicable for 2019 to 2024 which will increase linearly to 4.75% in 2029 and grading down to an ultimate rate of 3.57% per annum in 2040 and thereafter.

As at December 31,               | Pension 2019 | Other 2019     | Pension 2018 | Other 2018
-------------------------------- | ------------ | -------------- | ------------ | --------------
Actuarial benefit obligation     |              |                |              |
Discount rate                    | 3.20%        | 2.95% to 3.20% | 3.80%        | 3.80% to 4.00%
Benefit costs for the year ended |              |                |              |
Discount rate                    | 3.90%        | 3.90% to 4.00% | 3.60%        | 3.25% to 3.60%
Future salary growth             | 2.50%        | N/A            | 2.50%        | N/A
Health care cost trend rate      | N/A          | 3.49% to 5.49% | N/A          | 4.50%
Other medical trend rates        | N/A          | 4.00% to 4.56% | N/A          | 4.50%

assumptions pension benefit obligations
 Canadian post-retirement plans trend rates 2019 to 2024. 75% 2029 3. 57% 2040.
 Actuarial benefit obligation
 Discount 3. 20% 2. 95% 3. 80%. 80% 4.
 Benefit costs year
 3. 90%. 90% 4. 60%. 25% 3. 60%
 Future salary growth 2. 50%.
 Health care cost trend 3. 49% to 5. 49%. 50%
 medical trend rates 4. 4. 56%. 50%


The following table summarizes stock-based compensation expense in the Company’s consolidated statements of operations:
For the year ended September 30, 2019, the Company granted 33,000 nonvested shares to certain key employees, 55,000 nonvested shares to certain officers including 35,000 shares granted to the Chief Executive Officer, and 20,000 nonvested shares
to its non-employee directors. For the year ended September 30, 2018, the Company granted 12,000 nonvested shares to certain key employees, 40,000 nonvested shares to certain officers including 30,000 to its Chief Executive Officer and 20,000 nonvested
shares to its non-employee directors.
The Company measures the fair value of nonvested stock awards based upon the market price of its common stock as of the date of grant. The Company used the Black-Scholes option-pricing model to value stock options. The Black-Scholes model requires the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate and the weighted average expected life of the options, at the time of grant. The expected dividend yield is equal to the divided per share declared, divided by the closing share price on the date the options were granted. All equity compensation awards granted for the years ended September 30, 2019 and September 30, 2018 were nonvested stock awards.

                                    | Years Ended            |
----------------------------------- | ---------------------- | ------------------
                                    | September 30, 2019     | September 30, 2018
                                    | (Amounts in thousands) |
Cost of sales                       | $7                     | $5
Engineering and development         | 49                     | 32
Selling, general and administrative | 736                    | 654
Total                               | $792                   | $691

table summarizes stock-based compensation expense statements
 year September 30 2019 granted 33,000 shares employees 55,000 officers Chief Executive Officer
 non-employee directors. year September 30 2018 granted 12,000 employees officers 30,000 Chief Executive Officer
 non-employee directors.
 measures value nonvested stock awards market price common stock. Black-Scholes option-pricing model options. assumptions volatility stock price risk-free interest rate expected life options. expected dividend yield equal divided per share closing share price. equity compensation awards 2019 2018 nonvested.
 Years Ended
 2019 2018
 thousands
 Cost sales $7 $5
 Engineering development 49
 Selling general administrative 736 654
 Total $792 $691