| _id | d1b3969e8 |
| title |  |
| text | Seasonality and Backlog
We experience a slight seasonal pattern to our business. Overall, the third and fourth fiscal quarters are typically the strongest quarters of our fiscal year, whereas the first fiscal quarter is negatively affected by holidays and the second fiscal quarter may be affected by adverse winter weather conditions in some of our markets.

Certain of our end markets experience some seasonality. Our sales in the automotive market are dependent upon global automotive production, and seasonal declines in European production may negatively impact net sales in the fourth fiscal quarter. Also, our sales in the energy market typically increase in the third and fourth fiscal quarters as customer activity increases.

Customer orders typically fluctuate from quarter to quarter based upon business and market conditions. Backlog is not necessarily indicative of future net sales as unfilled orders may be cancelled prior to shipment of goods. Backlog by reportable segment was as follows:
We expect that the majority of our backlog at fiscal year end 2019 will be filled during fiscal 2020.

 |
| table | |         | Fiscal Year End
------------------------ | ------- | ---------------
                         | 2019    | 2018
                         |         | (in millions)
Transportation Solutions | $ 1,639 | $ 1,779
Industrial Solutions     | 1,315   | 1,245
Communications Solutions | 361     | 441
Total                    | $ 3,315 | $ 3,465 |


| _id | d1a723c42 |
| title |  |
| text | 15. Income Taxes
Income before income taxes is as follows (in thousands):

 |
| table | | Year Ended    |               |
--------- | ------------- | ------------- | -------------
          | June 30, 2019 | June 30, 2018 | June 30, 2017
Domestic  | $22,330       | $(55,197)     | $(7,228)
Foreign   | (48,204)      | 8,550         | 9,824
Total     | $(25,874)     | $(46,647)     | $2,596 |


| _id | d1b3135ca |
| title |  |
| text | Note 5. Inventory, Net
The components of inventory, net are as follows (in thousands):

 |
| table | | December 31, |
-------------------- | ------------ | -------
                     | 2019         | 2018
Raw materials        | $8,921       | $6,396
Finished goods       | 25,247       | 16,594
Total inventory, net | $34,168      | $22,990 |


| _id | d1b34622c |
| title |  |
| text | Note 13. Basic and Diluted Net Loss Per Share

Basic net loss per share is computed by dividing the net loss by the weighted-average number of shares of common stock outstanding during the period, less the weighted-average unvested common stock subject to repurchase or forfeiture as they are not deemed to be issued for accounting purposes. Diluted net loss per share is computed by giving effect to all potential shares of common stock, stock options, restricted stock units, ESPP, and convertible senior notes, to the extent dilutive. For the periods

notes, to the extent dilutive. For the periods presented, all such common stock equivalents have been excluded from diluted net loss per share as the effect to net loss per share would be anti-dilutive.

The following table sets forth the computation of the Company’s basic and diluted net loss per share during the years ended December 31, 2019, 2018 and 2017 (in thousands, except per share data)

 |
| table | |           | Year Ended December 31, |
----------------------------------------------------------------------- | --------- | ----------------------- | --------
                                                                        | 2019      | 2018                    | 2017
Numerator                                                               |           |                         |
Net loss                                                                | $(53,607) | $(26,203)               | $(4,204)
Denominator                                                             |           |                         |
Weighted-average common shares for basic and diluted net loss per share | 83,130    | 79,500                  | 76,281
Basic and diluted net loss per share                                    | $(0.64)   | $(0.33)                 | $(0.06) |


| _id | d1b320acc |
| title |  |
| text | Note 10. EQUITY INVESTMENTS
Our equity investments consist of equity investments with readily determinable fair value, investments without readily determinable fair value, equity investments accounted for using the fair value option, and equity method investments.

Our share of earnings (losses) from equity investments accounted for under the equity method is reflected as ‘‘Equity in earnings (losses) of unconsolidated investees’’ in our consolidated statements of operations. Mark-to-market gains and losses on equity investments with readily determinable fair value are reflected as ‘‘other, net’’ under other income (expense), net in our consolidated statements of operations. The carrying value of our equity investments, classified as ‘‘other long-term assets’’ on our

classified as ‘‘other long-term assets’’ on our consolidated balance sheets, are as follows:

 |
| table | | As of             |
---------------------------------------------------------------- | ----------------- | -----------------
(In thousands)                                                   | December 29, 2019 | December 30, 2018
Equity investments with readily determinable fair value:         |                   |
Enphase Energy, Inc                                              | $173,908          | $36,225
Total equity investments with readily determinable fair value    | 173,908           | 36,225
Equity investments without readily determinable fair value:      |                   |
Project entities                                                 | 2,677             | 2,951
Other equity investments without readily determinable fair value | 5,859             | 5,859
Total equity investments without readily determinable fair value | 8,536             | 8,810
Equity investments with fair value option:                       |                   |
SunStrong Capital Holdings, LLC                                  | 8,000             | 8,831
SunStrong Partners, LLC                                          | 9,500             | —
8point3 Solar Investco 3 Holdings, LLC                           | —                 | —
Total equity investment with fair value option                   | 17,500            | 8,831
Equity method investments                                        |                   |
Huansheng Corporation                                            | 26,533            | 32,784
Project entities                                                 | 125               | 2,044
Total equity method investments                                  | 26,658            | 34,828
Total equity investments                                         | $226,602          | $88,694 |


| _id | d1b3345c2 |
| title |  |
| text | Other non-operating results
The following details our other consolidated results for the years ended December 31, 2018 and 2017:
Interest income: Interest income increased by $4.2 million to $10.1 million for the year ended December 31, 2018, compared to $5.9 million for the same period in 2017 due to returns on our fixed deposits that had been made in 2018, and income derived from the lending capital of our lessor VIEs, that we are required to consolidate under U.S. GAAP.

Interest expense: Interest expense increased by $42.6 million to $101.9 million for the year ended December 31, 2018 compared to $59.3 million for the same period in 2017. In addition to higher LIBOR rates, this was primarily due to:

• $22.7 million increase in interest expense arising on the loan facilities of our consolidated lessor VIEs (refer to note 5 "Variable Interest Entities ("VIE")" of our consolidated financial statements included herein), in particular on the Hilli post-delivery sale and leaseback arrangement entered into during June 2018;
• $21.7 million lower capitalized interest on borrowing costs in relation to our investment in the Hilli FLNG conversion prior to acceptance of the vessel;

• $7.0 million increase in amortization of deferred financing costs in relation to the Hilli facility; and
• $1.4 million increase in interest expense in relation to the $402.5 million convertible bond issued in February 2017, resulting in a full year of interest incurred in 2018.
This was partially offset by a decrease of:
• $5.9 million in interest expense relating to the Hilli disposal; and
• $5.0 million higher capitalized interest on borrowing costs in relation to our investment in Golar Power.

(Losses)/gains on derivative instruments: Losses on derivative instruments increased by $51.2 million to a loss of $30.5 million for the year ended December 31, 2018 compared to a gain of $20.7 million for the same period in 2017. The movement was primarily due to:

Net unrealized and realized gains on interest rate swap agreements: As of December 31, 2018, we have an interest rate swap portfolio with a notional amount of $950 million, none of which are designated as hedges for accounting purposes. Net unrealized gains on the interest rate swaps decreased to a gain of $0.6 million for the year ended December 31, 2018 compared to a gain of $6.6 million for the same period in 2017, due to an improvement in the long-term swap rates, offset by the decreased notional value

rates, offset by the decreased notional value of the swap portfolio over the period. Realized gains on our interest rate swaps increased to a gain of $8.1 million for the year ended December 31, 2018, compared to a loss of $3.8 million for the same period in 2017. The increase was primarily due to higher LIBOR rates for the year ended December 31, 2018.

Unrealized (losses) gains on Total Return Swap (or equity swap): In December 2014, we established a three month facility for a Stock Indexed Total Return Swap Programme or Equity Swap Line with DNB Bank ASA in connection with a share buyback scheme. The facility has been extended to June 2019. The equity swap derivatives mark-to-market adjustment resulted in a net loss of $30.7 million recognized in the year ended December 31, 2018 compared to a gain of $16.6 million for the same period in 2017. The loss

million for the same period in 2017. The loss in 2018 is due to the fall in our share price during 2018.

Unrealized mark-to-market losses on Earn-Out Units: This relates to the mark-to-market movement on the Earn-Out Units issuable in connection with the IDR reset transaction in October 2016, which we recognize as a derivative asset in our consolidated financial statements. The decrease in Golar Partners' quarterly distribution to $0.4042 per common unit on October 24, 2018 resulted in the contingent Earn-Out Units arising out of the IDR reset transaction in October 2016 not crystallizing and, accordingly, we

2016 not crystallizing and, accordingly, we recognized a mark-to-market loss of $7.4 million for the year ended December 31, 2018, effectively reducing the derivative asset to $nil at December 31, 2018, compared to a gain of $0.4 million for the same period in 2017.

Net income attributable to non-controlling interests: The net income attributable to non-controlling interests comprises of (i) $19.7 million and $1.5 million in relation to the non-controlling shareholders who hold interests in Hilli LLC and Hilli Corp (prior to the incorporation of Hilli LLC) for the year ended December 31, 2018 and 2017, respectively, and (ii) $43.5 million and $32.9 million in relation to the equity interests in our lessor VIEs for the year ended December 31, 2018 and 2017,

for the year ended December 31, 2018 and 2017, respectively.

 |
| table | |           | December 31, |          |
---------------------------------------------------- | --------- | ------------ | -------- | --------
(in thousands of $)                                  | 2018      | 2017         | Change   | % Change
Total other non-operating expense                    | —         | (81)         | 81       | (100)%
Interest income                                      | 10,133    | 5,890        | 4,243    | 72%
Interest expense                                     | (101,908) | (59,305)     | (42,603) | 72%
(Losses)/gains on derivative instruments             | (30,541)  | 20,696       | (51,237) | (248)%
Other financial items, net                           | (1,481)   | (69)         | (1,412)  | 2,046%
Income taxes                                         | (1,267)   | (1,505)      | 238      | (16)%
Net income attributable to non-controlling interests | (63,214)  | (34,424)     | (28,790) | 84% |


| _id | d1b347f1e |
| title |  |
| text | Stock-Based Compensation
The Company accounts for options granted to employees by measuring the cost of services received in exchange for the award of equity instruments based upon the fair value of the award on the date of grant. The fair value of that award is then ratably recognized as an expense over the period during which the recipient is required to provide services in exchange for that award.

Options and warrants granted to consultants and other non-employees are recorded at fair value as of the grant date and subsequently adjusted to fair value at the end of each reporting period until such options and warrants vest, and the fair value of such instruments, as adjusted, is expensed over the related vesting period.

The Company measures the cost of services received in exchange for an award of equity instruments based on the fair value of the award. The fair value of the award is measured on the grant date and recognized over the period services are required to be provided in exchange for the award, usually the vesting period. Forfeitures of unvested stock options are recorded when they occur.

The Company incurred stock-based compensation charges of $3.5 million and $1.5 million for each of the years ended December 31, 2019 and 2018, respectively, which are included in general and administrative expenses. The following table summarizes the nature of such charges for the periods then ended (in thousands):

 |
| table | | For the Years Ended December 31, |
--------------------------------- | -------------------------------- | ------
                                  | 2019                             | 2018
Compensation and related benefits | $3,247                           | $949
Professional and legal fees       | 242                              | 545
Totals                            | 3,489                            | $1,494 |


| _id | d1b2f5a7a |
| title |  |
| text | Selected Financial Data
• Significant events affecting our historical earnings trends in 2018 through 2019 are described in “Special Items” in the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section.

• 2017 data includes severance, pension and benefit charges, gain on spectrum license transactions, acquisition and integration related charges, product realignment charges, net gain on sale of divested businesses and early debt redemption costs. 2016 data includes severance, pension and benefit charges, gain on spectrum license transactions, net gain on sale of divested businesses and early debt redemption costs. 2015 data includes severance, pension and benefit credits and gain on spectrum license

and benefit credits and gain on spectrum license transactions.

• On January 1, 2019, we adopted several Accounting Standards Updates (ASUs) that were issued by the Financial Accounting Standards Board (FASB) using the modified retrospective basis. On January 1, 2018, we adopted several ASUs that were issued by the FASB. These standards were adopted on different bases, including: (1) prospective; (2) full retrospective; and (3) modified retrospective.

Based on the method of adoption, certain figures are not comparable, with full retrospective reflected in all periods. See Note 1 to the consolidated financial statements for additional information.

 |
| table | |           |           |           | (dollars in millions, except per share amounts) |
--------------------------------------------------- | --------- | --------- | --------- | ----------------------------------------------- | ---------
                                                    | 2019      | 2018      | 2017      | 2016                                            | 2015
Results of Operations                               |           |           |           |                                                 |
Operating revenues                                  | $131,868  | $130,863  | $ 126,034 | $ 125,980                                       | $ 131,620
Operating income                                    | 30,378    | 22,278    | 27,425    | 29,249                                          | 30,615
Net income attributable to Verizon                  | 19,265    | 15,528    | 30,101    | 13,127                                          | 17,879
Per common share – basic                            | 4.66      | 3.76      | 7.37      | 3.22                                            | 4.38
Per common share – diluted                          | 4.65      | 3.76      | 7.36      | 3.21                                            | 4.37
Cash dividends declared per common share            | 2.435     | 2.385     | 2.335     | 2.285                                           | 2.230
Net income attributable to noncontrolling interests | 523       | 511       | 449       | 481                                             | 496
Financial Position                                  |           |           |           |                                                 |
Total assets                                        | $ 291,727 | $ 264,829 | $ 257,143 | $ 244,180                                       | $ 244,175
Debt maturing within one year                       | 10,777    | 7,190     | 3,453     | 2,645                                           | 6,489
Long-term debt                                      | 100,712   | 105,873   | 113,642   | 105,433                                         | 103,240
Employee benefit obligations                        | 17,952    | 18,599    | 22,112    | 26,166                                          | 29,957
Noncontrolling interests                            | 1,440     | 1,565     | 1,591     | 1,508                                           | 1,414
Equity attributable to Verizon                      | 61,395    | 53,145    | 43,096    | 22,524                                          | 16,428 |


| _id | d1b321094 |
| title |  |
| text | Revenues
The following table sets forth the breakdown of revenues (in thousands) by category and segment. Travel revenue includes travel publications (Top 20, Website, Newsflash, Travelzoo Network), Getaways vouchers, and hotel platform and vacation packages. Local revenue includes Local Deals vouchers and entertainment offers (vouchers and direct bookings).
Asia Pacific

Asia Pacific
Asia Pacific revenues decreased $1.4 million or 17% in 2019 compared to 2018. This decrease was primarily due to the decrease in Travel revenues, the decrease in Local revenues and a $206,000 negative impact from foreign currency movements relative to the U.S. dollar. The decrease in Travel revenues of $887,000 was primarily due to a decrease of number of emails sent. The decrease in Local revenues of $276,000 was primarily due to the decreased number of Local Deals vouchers sold.
Europe

Europe
Europe revenues increased $749,000 or 2% in 2019 compared to 2018. This increase was primarily due to the increase in Travel revenues, the decrease in Local revenues and a $1.8 million negative impact from foreign currency movements relative to the U.S. dollar. The increase in Travel revenue of $2.9 million was primarily due to the increased number of emails sent. The decrease in Local revenues of $292,000 was primarily due to the decreased number of Local Deals vouchers sold.
North America

North America
North America revenues increased $710,000 or 1% in 2019 compared to 2018. This increase was primarily due to the increase in Travel revenues offset by the decrease in Local revenue. The increase in Travel revenue of $1.7 million was primarily due to the increased number of emails sent. The decrease in Local revenues of $1.0 was primarily due to the decreased number of Local Deals vouchers sold.
For 2019 and 2018 , none of our customers accounted for 10% or more of our revenue.

 |
| table | | Year Ended December 31, |
---------------------------- | ----------------------- | --------
                             | 2019                    | 2018
Asia Pacific                 |                         |
Travel                       | $6,274                  | $7,351
Local                        | 216                     | 508
Total Asia Pacific revenues  | 6,490                   | 7,859
Europe                       |                         |
Travel                       | 32,081                  | 30,856
Local                        | 4,817                   | 5,293
Total Europe revenues        | 36,898                  | 36,149
North America                |                         |
Travel                       | 57,863                  | 56,145
Local                        | 10,161                  | 11,169
Total North America revenues | 68,024                  | 67,314
Consolidated                 |                         |
Travel                       | 96,218                  | 94,352
Local                        | 15,194                  | 16,970
Total revenues               | $111,412                | $111,322 |


| _id | d1b35a862 |
| title |  |
| text | ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (United States Dollars in thousands, except per share data and unless otherwise indicated)
Adjusted EBITDA has limitations as an analytical tool and should not be considered in isolation from, or as a substitute for, the analysis of other GAAP financial measures, such as net income. Some of the limitations of Adjusted EBITDA include:

• It does not reflect our current contractual commitments that will have an impact on future cash flows; • It does not reflect the impact of working capital requirements or capital expenditures; and • It is not a universally consistent calculation, which limits its usefulness as a comparative measure.

Management compensates for the inherent limitations associated with using the measure of Adjusted EBITDA through disclosure of such limitations, presentation of our financial statements in accordance with GAAP and reconciliation of Adjusted EBITDA to the most directly comparable GAAP measure, net income, as presented below.
(1) Includes equity-based compensation to employees and directors, as well as equity-based payments to non-employees.

(2) Includes losses recorded in the fourth quarter of 2019 associated with the financial guarantee arrangement for a Bank Partner that did not renew its loan origination agreement when it expired in November 2019. See Note 14 to the Notes to Consolidated Financial Statements included in Item 8 for additional discussion of our financial guarantee arrangements.

(3) For the year ended December 31, 2019, includes loss on remeasurement of our tax receivable agreement liability of $9.8 million and professional fees associated with our strategic alternatives review process of $1.5 million. For the year ended December 31, 2018, includes certain costs associated with our IPO, which were not deferrable against the proceeds of the IPO. Further, includes certain costs, such as legal and debt arrangement costs, related to our March 2018 term loan upsizing. For the year

our March 2018 term loan upsizing. For the year ended December 31, 2017, includes one-time fees paid to an affiliate of one of the members of the board of managers in conjunction with the August 2017 term loan transaction.

(4) For the year ended December 31, 2019, includes (i) legal fees associated with IPO related litigation of $2.0 million, (ii) one-time tax compliance fees related to filing the final tax return for the Former Corporate Investors associated with the Reorganization Transactions of $0.2 million, and (iii) lien filing expenses related to certain Bank Partner solar loans of $0.6 million.

 |
| table | |          | Year Ended December 31, |
------------------------------------------ | -------- | ----------------------- | --------
                                           | 2019     | 2018                    | 2017
Net income                                 | $95,973  | $127,980                | $138,668
Interest expense                           | 23,860   | 23,584                  | 7,536
Tax expense (benefit)                      | (7,125)  | 5,534                   | —
Depreciation and amortization              | 7,304    | 4,478                   | 3,983
Equity-based compensation expense(1)       | 13,769   | 6,054                   | 4,253
Change in financial guarantee liability(2) | 16,215   | —                       | —
Transaction expenses(3)                    | 11,345   | 2,393                   | 2,612
Non-recurring expenses(4)                  | 2,804    | —                       | —
Adjusted EBITDA                            | $164,145 | $170,023                | $157,052 |


| _id | d1b2ef3dc |
| title |  |
| text | Comparison of Years Ended December 31, 2019 to December 31, 2018

The following tables in this section set forth our selected consolidated statements of operations (in thousands), data for the percentage change and data as a percentage of revenue for the years ended December 31, 2019 and 2018. Certain previously reported amounts in the consolidated statements of operations for the year ended December 31, 2018 have been reclassified to conform to our current presentation to reflect interest income as a separate line item, which was previously included in other income,

which was previously included in other income, net.

Cost of Revenue
(1) Excludes amortization and depreciation shown in operating expenses.

The $37.9 million increase in cost of revenue in 2019 as compared to 2018 was the result of a $32.8 million, or 32%, increase in cost of hardware and other revenue and a $5.1 million, or 11%, increase in cost of SaaS and license revenue. Our cost of software license revenue included within cost of SaaS and license revenue decreased $0.4 million to $1.3 million during 2019 as compared to $1.7 million during 2018. The increase in cost of Alarm.com segment hardware and other revenue related primarily to an

and other revenue related primarily to an increase in the number of hardware units shipped in 2019 as compared to 2018. The increase in cost of  corresponding increase in amounts paid to wireless network providers.

Cost of hardware and other revenue as a percentage of hardware and other revenue was 81% and 78% for the years ended December 31, 2019 and 2018, respectively. Cost of SaaS and license revenue as a percentage of SaaS and license revenue was 15% for each of the years ended December 31, 2019 and 2018. Cost of software license revenue as a percentage of software license revenue was 3% and 4% for the years ended December 31, 2019 and 2018, respectively. The increase in cost of hardware and other revenue as a

in cost of hardware and other revenue as a percentage of hardware and other revenue in 2019 as compared to 2018 is a reflection of the mix of product sales during the periods.

 |
| table | |          | Year Ended December 31, | % Change
---------------------------------- | -------- | ----------------------- | -------------
2019 vs. 2018                      | 2019     | 2018                    | 2019 vs. 2018
Cost of revenue(1):                |          |                         |
Cost of SaaS and license revenue   | $50,066  | $44,933                 | 11%
Cost of hardware and other revenue | 133,533  | 100,782                 | 32%
Total cost of revenue              | $183,599 | $145,715                | 26%
% of total revenue                 | 37%      | 35%                     | |


| _id | d1b304a2a |
| title |  |
| text | 2. Fixed assets
Accounting policies
Shares in Group undertakings are stated at cost less any provision for impairment and capital related to share-based payments. Contributions in respect of share-based payments are recognised in line with the policy set out in note 7 “Share-based payments”.

The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists, the Company makes an estimate of the recoverable amount. If the recoverable amount of the cash-generating unit is less than the value of the investment, the investment is considered to be impaired and is written down to its recoverable amount. An impairment loss is recognised immediately in the

impairment loss is recognised immediately in the income statement.

Shares in Group undertakings

 |
| table | | 2019   | 2018
---------------------------------------------------------- | ------ | ------
                                                           | €m     | €m
Cost:                                                      |        |
1 April                                                    | 91,905 | 91,902
Capital contributions arising from share-based payments    | 137    | 130
Contributions received in relation to share-based payments | (92)   | (127)
31 March                                                   | 91,950 | 91,905
Amounts provided for:                                      |        |
1 April                                                    | 8,177  | 7,911
Impairment losses                                          | –      | 266
31 March                                                   | 8,177  | 8,177
Net book value:                                            |        |
31 March                                                   | 83,773 | 83,728 |


| _id | d1b35da30 |
| title |  |
| text | Item 10. Directors, Executive Officers and Corporate Governance
Information About Our Board of Directors
Set forth below are the name, age and position of each member of our board of directors.
The following are biographical summaries of our board members.

Darcy Antonellis has served on the Board since December 2018. Since January 2014, Ms. Antonellis has been the Chief Executive Officer of Vubiquity, Inc., a wholly owned subsidiary of Amdocs Limited since February 22, 2018, the largest global provider of premium content services and technical solutions serving clients in 120 countries and in 80 languages. From June 1998 until December 2013, Ms. Antonellis held numerous positions at Warner Bros. Entertainment Inc., a Time Warner company, including President,

Inc., a Time Warner company, including President, Technical Operations and Chief Technology Officer. Ms. Antonellis has also served as a member of the Board of Directors of Cinemark Holdings, Inc. since July 7, 2015. Ms, Antonellis received a B.S. in electrical engineering from Temple University and an M.B.A. from Fordham University. The Board believes Ms. Antonellis brings her extensive expertise in executive management, operations and engineering and her in-depth understanding of content services, media

in-depth understanding of content services, media and entertainment industry to her role as a member of the Board.

David C. Habiger has served on the Board since December 2016. Mr. Habiger currently serves as the Chief Executive Officer of JD Power, a privately held company. Mr. Habiger served as a director of DTS from March 2014 until its acquisition by the Company in December 2016. Mr. Habiger serves as a director of the Chicago Federal Reserve Board. He is on the SABOR (Systems Activities, Bank Operations and Risk) Committee and the Governance & HR Committee for the

Federal Reserve. Mr. Habiger served as the CEO at Textura Corporation, a soft

David C. Habiger has served on the Board since December 2016. Mr. Habiger currently serves as the Chief Executive Officer of JD Power, a privately held company. Mr. Habiger served as a director of DTS from March 2014 until its acquisition by the Company in December 2016. Mr. Habiger serves as a director of the Chicago Federal Reserve Board. He is on the SABOR (Systems Activities, Bank Operations and Risk) Committee and the Governance & HR Committee for the Federal Reserve. Mr. Habiger served as the CEO at

Federal Reserve. Mr. Habiger served as the CEO at Textura Corporation, a soft David C. Habiger has served on the Board since December 2016. Mr. Habiger currently serves as the Chief Executive Officer of JD Power, a privately held company. Mr. Habiger served as a director of DTS from March 2014 until its acquisition by the Company in December 2016. Mr. Habiger serves as a director of the Chicago Federal Reserve Board. He is on the SABOR (Systems Activities, Bank Operations and Risk) Committee and the

Bank Operations and Risk) Committee and the Governance & HR Committee for the Federal Reserve. Mr. Habiger served as the CEO at Textura Corporation, a software company focused on construction management, from May 2015 until its sale to Oracle in June 2016. From May 2011 to August 2012, he served as the Chief Executive Officer of NDS Group Ltd., a provider of video software and content security solutions. Mr. Habiger worked with the founding members of Sonic Solutions (“Sonic”), a computer software company,

Solutions (“Sonic”), a computer software company, from 1992 to 2011 and served as President and Chief Executive Officer of Sonic from 2005 to 2011. He serves as a director for Echo Global Logistics, Inc., GrubHub Inc., and Stamps.com Inc., and previously served as a director for Control4 Corporation, Enova International, Inc., Immersion Corporation, RealD Inc., Textura Corporation, DTS, and Sonic Solutions. He is a member of the National Association of Corporate Directors and is on the Advisory Board of

Directors and is on the Advisory Board of the University of Chicago Center for Entrepreneurship. Mr. Habiger received a bachelor’s degree in business administration from St. Norbert College and an M.B.A. from the University of Chicago. The Board believes that Mr. Habiger brings extensive experience in the digital media and entertainment industries and his in-depth knowledge and understanding of the consumer electronics industry to his role as a member of the Board.

Richard S. Hill has served as a member of the Board since August 2012 and as Chairman of the Board since March 2013. Mr. Hill also served as the Company’s Interim Chief Executive Officer from April 15, 2013 until May 29, 2013. Mr. Hill previously served as the Chief Executive Officer and member of the board of directors of Novellus Systems Inc., until its acquisition by Lam Research Corporation in June 2012. During his nearly 20 years leading Novellus Systems, a designer, manufacturer, and marketer of

a designer, manufacturer, and marketer of semiconductor equipment used in fabricating integrated circuits, Mr. Hill grew annual revenues from approximately $100 million to over $1 billion. Presently, Mr. Hill is Chairman of Marvell Technology Group Ltd. (“Marvell”), a producer of storage, communications and consumer semiconductor products, and a member of its board of directors. Mr. Hill served as Interim Chief Executive Officer of Marvell from May 2016 until July 2016. Mr. Hill is a member of the boards

July 2016. Mr. Hill is a member of the boards of directors of Arrow Electronics, Inc., a global provider of products and services to industrial and commercial users of electronic components and enterprise computing, and Cabot Microelectronics Corporation, the leading global supplier of chemical mechanical planarization (CMP) slurries and a growing CMP pad supplier to the semiconductor industry. Mr. Hill previously served on the board of directors of Symantec Corporation, LSI Corporation, Planar Systems,

Corporation, LSI Corporation, Planar Systems, Autodesk, Inc. and Yahoo Inc. Mr. Hill received a B.S. in Bioengineering from the University of Illinois in Chicago and an M.B.A. from Syracuse University. The Board believes that Mr. Hill brings extensive expertise in executive management and engineering for technology and defenserelated companies to his role as Chairman of the Board.

Jon E. Kirchner has served on the Board and as Chief Executive Officer since June 2017. Previously he was president of Xperi following the completion of the acquisition of DTS in December 2016. He served as DTS’s Chairman of the board of directors and Chief Executive Officer from 2010 to December 2016 and had been a member of DTS’s board of directors from 2002 to December 2016. From 2001 to 2010, he served as DTS’s Chief Executive Officer. Prior to his tenure as

Chief Executive Officer, Mr. Kirchner served at DTS from 1993 to 2001 in a number of senior leadership roles including President, Chief Operating Officer and Chief Financial Officer. Prior to joining DTS, Mr. Kirchner worked for the consulting and audit groups at Price Waterhouse LLP (now PricewaterhouseCoopers LLP), an international accounting firm. In 2012, Mr. Kirchner received the Ernst & Young Technology Entrepreneur of the Year Award for Greater Los Angeles.

In 2011, Mr. Kirchner was honored by the Producers Guild of America, receiving the “Digital 25: Leaders in Emerging Entertainment” award for being among the visionaries that have made significant contributions to the advancement of digital entertainment and storytelling. Mr. Kirchner currently serves on the board of directors of Free Stream Media Corporation (Samba TV), a leader in developing cross platform TV experiences for consumers and advertisers. Mr. Kirchner is a

Certified Public Accountant and received a B.A. in Economics, cum laude, from Claremont McKenna College. The Board believes that Mr. Kirchner brings his experience in the senior management of public companies, including service as chairman, president, Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, his extensive experience in the digital media and entertainment industries, as well as his knowledge of the Company as its Chief Executive Officer, to his role as a member

Officer, to his role as a member of the Board.

V. Sue Molina has served on the Board since February 2018. Most recently she served on the Board of Directors of DTS from January 2008 until December 2016, and served as Chair of the Audit Committee and Nominating and Corporate Governance Committee. From November 1997 until her retirement in May 2004, Ms. Molina was a tax partner at Deloitte & Touche LLP, an international accounting firm, serving from 2000 until May 2004 as the national partner in charge of Deloitte’s Initiative for the Retention and

of Deloitte’s Initiative for the Retention and Advancement of Women. Prior to that, she spent twenty years with Ernst & Young LLP, an international accounting firm, the last ten years as a partner. Ms. Molina has prior board experience serving on the Board of Directors, chair of the Compensation Committee and member of the Audit Committee of Sucampo Pharmaceuticals, Inc., and on the Board of Directors, chair of the Audit Committee and a member of the Compensation Committee of Royal Neighbors of America.

Committee of Royal Neighbors of America. She received a B.S.B.A. and a Masters of Accounting degree from the University of Arizona. The Board believes that Ms. Molina brings her extensive accounting and financial expertise, her experience in advising boards and her past service on boards of public companies, to her role as a member of the Board.

George A. Riedel has served on the Board since May 2013. He also has served on the board of Cerner Corporation, a leading supplier of health care information technology solutions and tech-enabled services, since May 2019. Since January 2018, Mr. Riedel has been a Senior Lecturer at Harvard Business School. Prior to that, he was the Chairman of the Board of Montreal-based Accedian Networks, where he had served as a director since 2010. Until January 2017, Mr. Riedel also

served as Chairman and CEO of Cloudmark, Inc., a private network security company. Mr. Riedel joined the board at Cloudmark in June 2013, became Chairman in January 2014 and CEO in December 2014. Mr. Riedel also served on the board of directors of PeerApp from 2011 until 2014 and on the board of directors of Blade Network Technologies from 2009 until its sale to IBM in 2010. In March 2006, Mr. Riedel joined Nortel Networks Corporation, a publicly-traded,

multinational, telecommunications equipment manufacturer (“Nortel”), as part of the turnaround team as the Chief Strategy Officer. His role changed after Nortel initiated creditor protection under the respective restructuring regimes of Canada under the Companies’ Creditors Arrangement Act, in the U.S. under the Bankruptcy Code, the United Kingdom under the Insolvency Act 1986, on January 14, 2009, and subsequently, Israel, to lead the sale/restructuring of various

carrier and enterprise business units through a series of transactions to leading industry players such as Ericsson, Avaya and Ciena. Mr. Riedel led the efforts to create stand-alone business units, carve out the relevant P&L and balance sheet elements and assign patents to enable sales of the assets. In 2010, Mr. Riedel’s role changed to President of Business Units and CSO as he took leadership of the effort to monetize the remaining 6,500 patents and applications patents as well as

manage the P&L for several business units that were held for sale. The 2011 patent sale led to an unprecedented transaction of $4.5 billion to a consortium of Apple, Ericsson, RIM, Microsoft and EMC. Prior to Nortel, Mr. Riedel was the Vice President of Strategy and Corporate Development of Juniper Networks, Inc., a publicly-traded designer, developer and manufacturer of networking products, from 2003 until 2006. Previously, Mr. Riedel was also a Director at McKinsey &

Company, a global management consulting firm, where he spent 15 years serving clients in the telecom and technology sectors in Asia and North America on a range of strategy and growth issues. Mr. Riedel received a B.S. with Distinction in Mechanical Engineering from the University of Virginia and his M.B.A. from Harvard Business School. Mr. Riedel holds a Stanford Directors’ College certification based on completion of its corporate directors training. The Board believes

that Mr. Riedel brings his experience from his direct involvement in the restructuring of Nortel, including the sale of Nortel’s patent portfolio for $4.5 billion, as well as his knowledge of the technology industry and leadership experience, to his role as a member of the Board.

Christopher A. Seams has served on the Board since March 2013. Mr. Seams served as the Chief Executive Officer and a director of Deca Technologies Inc., a subsidiary of Cypress Semiconductor Corporation, a global semiconductor company, from May 2013 until August 2016. Mr. Seams previously was an Executive Vice President of Sales & Marketing at Cypress Semiconductor Corporation, from July 2005 until June 2013. He previously served as an Executive Vice President of Worldwide Manufacturing & Research and

of Worldwide Manufacturing & Research and Development of Cypress Semiconductor Corporation. Mr. Seams joined Cypress in 1990 and held a variety of positions in process and assembly technology research and development and manufacturing operations. Prior to joining Cypress in 1990, he worked as a process development Engineer or Manager for Advanced Micro Devices and Philips Research Laboratories. Mr. Seams currently serves as the Chairman of the Board of Directors of Onto Innovation Inc. (formerly

of Directors of Onto Innovation Inc. (formerly Nanometrics Inc.). Mr. Seams is a senior member of IEEE, a member of NACD and ACCD, served on the Engineering Advisory Council for Texas A&M University and was a board member of Joint Venture Silicon Valley. Mr. Seams received a B.S. in Electrical Engineering from Texas A&M University and a M.S. in Electrical and Computer Engineering from the University of Texas at Austin. Mr. Seams has a Professional Certificate in Advanced Computer Security from Stanford

in Advanced Computer Security from Stanford University. Mr. Seams also holds a National Association of Corporate Directors certification which was awarded to him based on NACD training and examination standards. The Board believes that Mr. Seams brings extensive management, sales and marketing, and engineering experience in the semiconductor industry to his role as a member of the Board.

 |
| table | Name                 | Age | Position(s)
-------------------- | --- | ------------------------------------
Darcy Antonellis     | 57  | Director
David C. Habiger     | 51  | Director
Richard S. Hill      | 68  | Chairman of the Board of Directors
Jon E. Kirchner      | 52  | Chief Executive Officer and Director
V. Sue Molina        | 71  | Director
George A. Riedel     | 62  | Director
Christopher A. Seams | 57  | Director |


| _id | d1a72cac2 |
| title |  |
| text | Cash flow
Net cash flow from operating activities decreased by $4.8 million to $142.9 million from $147.7 million in the prior period. The small overall decrease was due to a $9.9 million reduction in the cashflow outflow on exceptional items, a $7.0 million improved use of working capital within the business, both being offset by an increase in overheads, primarily in relation to Sales and Marketing expenses.

Unlevered free cashflow decreased by $15.8 million to $123.8 million from $139.6 million in the prior-period representing the reduction in net cash flow from operating activities adjusted for the cashflow impact of exceptional items.
1 Restated for the adoption of IFRS 15 and change in accounting policy in respect of research and development expenditure tax credit scheme (“RDEC”) and provision for interest on uncertain tax positions, as explained in note 2 of the Financial Statements

2 Unlevered free cash flow is also represented by the sum of the marked rows and has been presented to enhance understanding of the Group’s cash generation capability
3 Excludes non-cash movements on exceptional items

 |
| table | | FY19   | FY181
--------------------------------------- | ------ | -------
                                        | $M     | $M
Cash EBITDA2                            | 167.9  | 199.2
Net deferral of revenue                 | (49.7) | (129.6)
Net deferral of expenses                | 0.9    | 8.4
Foreign exchange                        | 1.5    | (8.1)
Depreciation                            | (11.6) | (11.6)
Adjusted operating profit               | 109.0  | 58.3
Net deferral of revenue                 | 49.7   | 129.6
Net deferral of expenses                | (0.9)  | (8.4)
Exceptional items 3                     | (3.1)  | (13.0)
Depreciation                            | 11.6   | 11.6
Foreign exchange                        | (1.5)  | 8.1
Change in working capital 2             | (5.2)  | (12.2)
Corporation tax paid 2                  | (16.7) | (26.3)
Net cash flow from operating activities | 142.9  | 147.7
Exceptional items 3                     | 3.1    | 13.0
Net capital expenditure 2               | (22.2) | (21.1)
Unlevered free cash flow                | 123.8  | 139.6 |


| _id | d1b39aaca |
| title |  |
| text | For the full year 2019, our ADG revenues increased 1.4% compared to the previous period. The increase was primarily due to improved average selling prices of approximately 9%, which was entirely due to a better product mix, and partially offset by a decrease in volumes by approximately 8%.

AMS revenues grew 4.6%, mainly due to the double-digits growth in Imaging. The increase was due to higher average selling prices of approximately 12%, as a result of a better product mix, and was partially offset by lower volumes of approximately 7%.
MDG revenues were down by 10.3%, mainly due to Microcontrollers. The decrease was due to lower volumes of approximately 10% while average selling prices remained substantially flat.

In 2018, all product groups registered double-digit revenue increase. Our ADG revenues increased 16.2% for the full year 2018 compared to the full year 2017 on growth in both Power Discrete and Automotive. The increase was primarily due to improved average selling prices of approximately 21% and volumes decreased by approximately 5%. The increase in average selling prices was entirely due to improved product mix, while selling prices remained substantially flat.

AMS revenues grew 19.9%, mainly on the strong increase in Imaging. The increase was due to higher volumes of approximately 12% and higher average selling prices of approximately 8%, which was entirely due to improved product mix of approximately 13%, while selling prices decreased by approximately 5%.

MDG revenues were up by 11.1%, with Digital and Microcontrollers & Memories equally contributing. The increase was primarily due to higher average selling prices of approximately 11%, while volumes remained substantially flat. The increase in average selling prices was due to a better product mix of approximately 13%, while the selling prices effect was negative of approximately 2%.

 |
| table | | Year Ended    | Year Ended    | Year Ended    | % Variation  | % Variation
-------------------------------------------- | ------------- | ------------- | ------------- | ------------ | ------------
2019 vs 2018 2018 vs 2017                    | 2019          | 2018          | 2017          | 2019 vs 2018 | 2018 vs 2017
                                             | (In millions) | (In millions) | (In millions) |              |
Automotive and Discrete Group (ADG)          | $3,606        | $3,556        | $3,059        | 1.4%         | 16.2%
Analog MEMS and Sensors Group (AMS)          | 3,299         | 3,154         | 2,630         | 4.6          | 19.9
Microcontrollers and Digital ICs Group (MDG) | 2,638         | 2,940         | 2,646         | (10.3)       | 11.1
Others                                       | 13            | 14            | 12            | —            | —
Total consolidated net revenues              | $9,556        | $9,664        | $8,347        | (1.1)%       | 15.8% |


| _id | d1b345d9a |
| title |  |
| text | Research and Development Our principal research and development (R&D) activities during 2019, 2018 and 2017 focused on the expansion and integration of new products and releases, while expanding the product footprint of our software solution suites in Supply Chain, Inventory Optimization and Omnichannel including cloud-based solutions, point-of-sale and tablet retailing. For 2019, 2018 and 2017, we did not capitalize any R&D costs because the costs incurred following the attainment of technological

following the attainment of technological feasibility for the related software product through the date of general release were insignificant. Our principal research and development (R&D) activities during 2019, 2018 and 2017 focused on the expansion and integration of new products and releases, while expanding the product footprint of our software solution suites in Supply Chain, Inventory Optimization and Omnichannel including cloud-based solutions, point-of-sale and tablet retailing. For 2019, 2018 and

and tablet retailing. For 2019, 2018 and 2017, we did not capitalize any R&D costs because the costs incurred following the attainment of technological feasibility for the related software product through the date of general release were insignificant. Our principal research and development (R&D) activities during 2019, 2018 and 2017 focused on the expansion and integration of new products and releases, while expanding the product footprint of our software solution suites in Supply Chain, Inventory

solution suites in Supply Chain, Inventory Optimization and Omnichannel including cloud-based solutions, point-of-sale and tablet retailing. For 2019, 2018 and 2017, we did not capitalize any R&D costs because the costs incurred following the attainment of technological feasibility for the related software product through the date of general release were insignificant.

Our principal research and development (R&D) activities during 2019, 2018 and 2017 focused on the expansion and integration of new products and releases, while expanding the product footprint of our software solution suites in Supply Chain, Inventory Optimization and Omnichannel including cloud-based solutions, point-of-sale and tablet retailing.
For 2019, 2018 and 2017, we did not capitalize any R&D costs because the costs incurred following the attainment of technological

feasibility for the related software product through the date of general release were insignificant.

Year 2019 compared with year 2018 R&D expenses primarily consist of salaries and other personnel-related costs for personnel involved in our research and development activities. Research and development expenses in 2019 increased by $15.7 million, or 22%, compared to 2018. This increase is primarily due to a $10.6 million increase in compensation and other personnel-related expenses, $3.0 million increase in performance-based compensation expense, and $1.7 million increase in computer infrastructure costs,

increase in computer infrastructure costs, resulting from increased headcount to support R&D activities.

Year 2018 compared with year 2017
Research and development expenses in 2018 increased by $14.2 million compared to 2017. The increase is primarily attributable to
an $8.9 million increase in compensation and other personnel-related expenses, resulting from increased headcount to support R&D
activities, a $4.0 million increase in performance-based compensation and a $0.7 million increase in computer infrastructure costs.

Sales and Marketing Year 2019 compared with year 2018 Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing and alliance programs and related activities. Sales and marketing expenses increased by $5.6 million, or 11%, in 2019 compared to 2018, primarily due to a $4.9 million increase in performance-based compensation expense and a $2.5 million increase in compensation and other personnel-related expenses, offset by a $1.9 million

expenses, offset by a $1.9 million decrease in marketing related expenses. Year 2019 compared with year 2018 Sales and marketing expenses include salaries, commissions, travel and other personnel-related costs and the costs of our marketing and alliance programs and related activities. Sales and marketing expenses increased by $5.6 million, or 11%, in 2019 compared to 2018, primarily due to a $4.9 million increase in performance-based compensation expense and a $2.5 million increase in compensation and

and a $2.5 million increase in compensation and other personnel-related expenses, offset by a $1.9 million decrease in marketing related expenses.

Year 2018 compared with year 2017 Sales and marketing expenses increased $3.8 million in 2018 compared to 2017, due primarily to an increase of $2.9 million in marketing and campaign programs, a $1.1 million increase in performance-based compensation and a $0.7 million increase in compensation and other personnel-related expenses, partially offset by a $2.0 million decrease in commissions expense as we must defer a portion of our sales commission expense and amortize it over time as the corresponding

and amortize it over time as the corresponding services are transferred to the customer under ASC 606. Sales and marketing expenses increased $3.8 million in 2018 compared to 2017, due primarily to an increase of $2.9 million in marketing and campaign programs, a $1.1 million increase in performance-based compensation and a $0.7 million increase in compensation and other personnel-related expenses, partially offset by a $2.0 million decrease in commissions expense as we must defer a portion of our sales

expense as we must defer a portion of our sales commission expense and amortize it over time as the corresponding services are transferred to the customer under ASC 606. Sales and marketing expenses increased $3.8 million in 2018 compared to 2017, due primarily to an increase of $2.9 million in marketing and campaign programs, a $1.1 million increase in performance-based compensation and a $0.7 million increase in compensation and other personnel-related expenses, partially offset by a $2.0 million

expenses, partially offset by a $2.0 million decrease in commissions expense as we must defer a portion of our sales commission expense and amortize it over time as the corresponding services are transferred to the customer under ASC 606.

Sales and marketing expenses increased $3.8 million in 2018 compared to 2017, due primarily to an increase of $2.9 million in marketing and campaign programs, a $1.1 million increase in performance-based compensation and a $0.7 million increase in compensation and other personnel-related expenses, partially offset by a $2.0 million decrease in commissions expense as we must defer a portion of our sales commission expense and amortize it over time as the corresponding services are transferred to the

the corresponding services are transferred to the customer under ASC 606.

General and Administrative Year 2019 compared with year 2018 General and administrative expenses consist primarily of salaries and other personnel-related costs of executive, financial, human resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other
Year 2019 compared with year 2018

Year 2019 compared with year 2018
General and administrative expenses consist primarily of salaries and other personnel-related costs of executive, financial, human resources, information technology, and administrative personnel, as well as facilities, legal, insurance, accounting, and other administrative expenses. General and administrative expenses increased $12.0 million, or 23%, in 2019 primarily attributable to a $8.9

million increase in compensation and other personnel-related expenses resulting from increased headcount, a $1.9 million increase in performance-based compensation expense, and a $1.1 million increase in computer infrastructure costs.
Year 2018 compared with year 2017 General and administrative expenses increased $6.6 million in 2018 due primarily to a $3.6 million increase in compensation and other personnel-related expenses and a $2.4 million increase in performance-based compensation.

Depreciation and Amortization Depreciation and amortization of intangibles and software expense amounted to $8.0 million, $8.6 million, and $9.1 million in 2019, 2018 and 2017, respectively. Amortization of intangibles was immaterial in 2019, 2018 and 2017. We have recorded goodwill and other acquisition-related intangible assets as part of the purchase accounting associated with various acquisitions.

Depreciation and amortization of intangibles and software expense amounted to $8.0 million, $8.6 million, and $9.1 million in 2019, 2018 and 2017, respectively. Amortization of intangibles was immaterial in 2019, 2018 and 2017. We have recorded goodwill and other acquisition-related intangible assets as part of the purchase accounting associated with various acquisitions.

Restructuring Charge In May 2017, we eliminated about 100 positions due primarily to U.S. retail sector headwinds, aligning services capacity with demand. We recorded a restructuring charge of approximately $2.9 million pretax ($1.8 million after-tax or $0.03 per fully diluted share). The charge primarily consisted of employee severance, employee transition costs and outplacement services. The charge is classified in “Restructuring charge” in our Consolidated Statements of Income.

In May 2017, we eliminated about 100 positions due primarily to U.S. retail sector headwinds, aligning services capacity with demand. We recorded a restructuring charge of approximately $2.9 million pretax ($1.8 million after-tax or $0.03 per fully diluted share). The charge primarily consisted of employee severance, employee transition costs and outplacement services. The charge is classified in “Restructuring charge” in our Consolidated Statements of Income.
Operating Income

Operating Income
Operating income in 2019 decreased $18.0 million to $115.9 million, compared to $133.9 million for 2018. Operating margins
were 18.8% for 2019 versus 23.9% for 2018. Operating income and margin decreased primarily due to our commitment to
strategically invest in a business transition to a cloud first company focused on delivering long-term sustainable growth and earnings

leverage. As a result, we are investing significantly in R&D to deliver new innovation, cloud operations headcount, infrastructure and

technology to support our ability to scale our cloud business to achieve our growth objectives. In addition, our innovation releases have fueled strong demand for our global consulting services and we are actively hiring to fulfill customer demand, which pressures operating income and margins until new resources ramp to full utilization. Finally, our performance-based compensation expense has increased over the prior year based on strong execution against target objectives. In 2019, operating income in the

objectives. In 2019, operating income in the Americas segment decreased by $18.9 million and remained relatively flat in the EMEA and APAC segments.

Operating income in 2018 decreased $51.7 million to $133.9 million, compared to $185.6 million for 2017. Operating margins were 23.9% for 2018 versus 31.2% for 2017. Operating income and margin decreased primarily as a result of our investment in cloud transition combined with lower license revenue. The operating income decrease in the Americas, EMEA and APAC segments was
$39.1 million, $9.4 million and $3.2 million, respectively.

 |
| table | Year Ended December 31,       |           |           |           |                    |
----------------------------- | --------- | --------- | --------- | ------------------ | -----
                              |           |           |           | % Change vs. Prior |
Year                          | 2019      | 2018      | 2017      | 2019               | 2018
(in thousands)                |           |           |           |                    |
Research and development      | $ 87,608  | $ 71,896  | $ 57,704  | 22%                | 25%
Sales and marketing           | 56,860    | 51,262    | 47,482    | 11%                | 8%
General and administrative    | 64,603    | 52,618    | 46,054    | 23%                | 14%
Depreciation and amortization | 7,987     | 8,613     | 9,060     | -7%                | -5%
Restructuring charge          | -         | -         | 2,921     | NA                 | -100%
Operating expenses            | $ 217,058 | $ 184,389 | $ 163,221 | 18%                | 13% |


| _id | d1b3403d6 |
| title |  |
| text | Product Warranties
The following table summarizes accrued warranty activities for fiscal 2019, 2018 and 2017:

In some cases, we may offer customers the option to purchase extended warranties to ensure protection beyond the standard warranty period. In those circumstances, the warranty is considered a distinct service and we account for the extended warranty as a performance obligation and allocate a portion of the transaction price to that performance obligation. More frequently, customers do not purchase a warranty separately. In those situations, we account for the warranty as an assurance-type warranty, which

the warranty as an assurance-type warranty, which provides customers with assurance that the product complies with agreed-upon specifications, and this does not represent a separate performance obligation. Such warranties are recorded separately as liabilities and presented within ‘‘accrued liabilities’’ and ‘‘other long-term liabilities’’ on our consolidated balance sheets (see Note 5. Balance Sheet Components).

 |
| table | |                   | Fiscal Year Ended |
------------------------------------------------ | ----------------- | ----------------- | -----------------
(In thousands)                                   | December 29, 2019 | December 30, 2018 | December 31, 2017
Balance at the beginning of the period           | $172,266          | $181,303          | $161,209
Accruals for warranties issued during the period | 27,717            | 31,628            | 29,689
Settlements and adjustments during the period    | (61,538)          | (40,665)          | (9,595)
Balance at the end of the period                 | $138,445          | $172,266          | $181,303 |


| _id | d1b33b75a |
| title |  |
| text | PREPAYMENTS, DEPOSITS AND OTHER ASSETS
Note: (a) As at 31 December 2019, the balances of loans to investees and investees’ shareholders are mainly repayable within a period of one to five years (included in non-current assets), or within one year (included in current assets), and are interest-bearing at rates of not higher than 12.0% per annum (31 December 2018: not higher than 12.0% per annum).

(b) Running royalty fees for online games comprised prepaid royalty fees, unamortised running royalty fees and deferred Online Service Fees.
As at 31 December 2019, the carrying amounts of deposits and other assets (excludes prepayments and refundable value-added tax) approximated their fair values. Deposits and other assets were neither past due nor impaired.

 |
| table | | As at 31 December |
--------------------------------------------------------- | ----------------- | -----------
                                                          | 2019              | 2018
                                                          | RMB’Million       | RMB’Million
Included in non-current assets:                           |                   |
Prepayments for media contents                            | 15,731            | 13,652
Loans to investees and investees’ shareholders (Note (a)) | 937               | 3,864
Prepayments for capital investments in investees          | 587               | 619
Running royalty fees for online games (Note (b))          | 564               | 99
Others                                                    | 5,623             | 3,297
                                                          | 23,442            | 21,531
Included in current assets:                               |                   |
Running royalty fees for online games (Note (b))          | 10,888            | 5,230
Prepayments and prepaid expenses                          | 8,353             | 7,532
Interest receivables                                      | 2,774             | 1,697
Lease deposits and other deposits                         | 1,107             | 693
Dividend and other investment-related receivables         | 1,034             | 338
Refundable value-added tax                                | 629               | 915
Loans to investees and investees’ shareholders (Note (a)) | 447               | 225
Others                                                    | 2,608             | 1,863
                                                          | 27,840            | 18,493
                                                          | 51,282            | 40,024 |


| _id | d1b351bc2 |
| title |  |
| text | Equity Incentive Plan

On May 17, 2019, the Company’s stockholders approved the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”). Concurrently, the 2011 Omnibus Equity Incentive Plan (the “2011 Plan”) was terminated and any shares remaining available for new grants under the 2011 Plan share reserve were extinguished. The purpose of the 2019 Plan is to promote the interests of the Company and its stockholders by (i) attracting and retaining key officers, employees and directors of, and consultants to, the Company and its

of, and consultants to, the Company and its Subsidiaries and Affiliates; (ii) motivating such individuals by means of performance-related incentives to achieve long-range performance goals; (iii) enabling such individuals to participate in the long-term growth and financial success of the Company; (iv) encouraging ownership of stock in the Company by such individuals; and (v) linking their compensation to the long-term interests of the Company and its stockholders.

The 2019 Plan is administered by the Compensation and Human Capital Committee (the “Committee”) of the Board of Directors and allows for the issuance of stock options, stock appreciation rights (“SARs”), RSAs, restricted share units, performance awards, or other stock-based awards. Stock option exercise prices are fixed by the Committee but shall not be less than the fair market value of a common share on the date of the grant of the option, except in the case of substitute awards. Similarly, the grant

case of substitute awards. Similarly, the grant price of an SAR may not be less than the fair market value of a common share on the date of the grant. The Committee will determine the expiration date of each stock option and SAR, but in no case shall the stock option or SAR be exercisable after the expiration of 10 years from the date of the grant. The 2019 Plan provides for 2,600,000 shares available for grant. As of December 27, 2019, there were 2,222,088 shares available for grant.

Stock compensation expense was $4,399, $4,094 and $3,018 for the fiscal years ended December 27, 2019, December 28, 2018 and December 29, 2017, respectively. The related tax benefit for stock-based compensation was $883, $864 and $1,283 for the fiscal years ended December 27, 2019, December 28, 2018 and December 29, 2017, respectively.
The following table reflects the activity of RSAs during the fiscal years ended December 27, 2019 and December 28, 2018:

The fair value of RSAs vested during the fiscal years ended December 27, 2019, December 28, 2018 and December 29, 2017, was $3,742, $2,936 and $1,703, respectively.

These awards are a mix of time-, market- and performance-based grants awarded to key employees and non-employee directors which vest over a range of periods of up to five-years. The market- and performance-based RSAs cliff vest, if at all, after the conclusion of a three-year performance period and vesting is subject to the award recipient’s continued service to the Company as of the vesting date. The number of performance-based RSAs that ultimately vest is based on the Company’s attainment of certain

is based on the Company’s attainment of certain profitability and return on invested capital targets.

During fiscal 2019, the Company awarded market-based RSAs that vest based on the Company’s attainment of an average closing trade price of the Company’s common stock of $39.86 per share, based on an average of 20 consecutive trading days. The grant date fair value of these market-based performance awards was determined using a Monte Carlo simulation in order to simulate a range of possible future stock prices. Key assumptions used included a risk-free interest rate of 2.2% and expected volatility of 44.6%.

 |
| table | | Shares    | Weighted Average Grant Date Fair Value
------------------------------ | --------- | --------------------------------------
Unvested at December 29, 2017  | 329,761   | $16.69
Granted                        | 311,957   | 23.62
Vested                         | (113,482) | 17.60
Forfeited                      | (1,506)   | 17.13
Unvested at December 28, 2018  | 526,730   | $20.60
Granted                        | 384,531   | 34.44
Vested                         | (115,459) | 21.32
Forfeited                      | (55,193)  | 20.46
Unvested at December 27, 2019  | 740,609   | $27.68 |


| _id | d1b30ad1c |
| title |  |
| text | Information About Our Executive Officers and Directors
Our executive officers are appointed by, and serve at the discretion of, our Board of Directors. There are no family relationships among our directors and officers.
The following table sets forth certain information concerning our current executive officers and directors as of March 13, 2020:

Brian C. Faith joined QuickLogic in June 1996. Mr. Faith has served as our President and Chief Executive Officer since June 2016 after having served as Vice President of Worldwide Marketing and Vice President of Worldwide Sales & Marketing between 2008 and 2016. Mr. Faith during the last 21 years has held a variety of managerial and executive leadership positions in engineering, product line management, marketing and sales. Mr. Faith has also served as the board member of the Global Semiconductor Alliance

board member of the Global Semiconductor Alliance (GSA), the Chairman of the Marketing Committee for the CE-ATA Organization. He holds a B.S. degree in Computer Engineering from Santa Clara University and was an Adjunct Lecturer at Santa Clara University for Programmable Logic courses.

Suping (Sue) Cheung (Ph.D.) joined QuickLogic in May 2007. Dr. Cheung has served as our Chief Financial Officer, Vice President of Finance, Chief Accounting Officer, and Principal Accounting Officer since May 2015, Corporate Controller from 2007 to 2018. Prior to joining QuickLogic, Dr. Cheung was a Senior Manager of SEC Reporting, Technical Accounting and International Consolidation at Dell SonicWALL from 2006 to 2007 and was the Senior Accounting Manager at VeriFone System, Inc. from 2005 to 2006. Prior

at VeriFone System, Inc. from 2005 to 2006. Prior to 2005, Dr. Cheung held various senior accounting and financial management roles in both publicly traded and privately held companies. Dr. Cheung began her career with PricewaterhouseCoopers (PWC) where she served as an auditor and as a tax consultant. Dr. Cheung holds a Ph.D. in Business Administration and a Masters in Accounting from the Florida International University in Miami. She is a Certified Public Accountant.

Rajiv Jain joined QuickLogic in August 1992. Mr. Jain has served as our Vice President of Worldwide Operations since April 2014. Prior to this role, Mr. Jain served as QuickLogic’s Senior Director of Operations and Development Engineering from 2011 to 2014, Senior Director of System Solutions and Process Technology from 2009 to 2011, Director of Process Technology from 1997 to 2009, and Senior Process Technologist from 1992 to 1997. Prior to joining QuickLogic, Mr. Jain was a Senior Yield Engineer at

Mr. Jain was a Senior Yield Engineer at National Semiconductor from 1991 to 1992, where he focused on BiCMOS product yield improvements, and at Monolithic Memories from 1985 to 1988, where he focused on BiPolar product yield and engineering wafer sort improvements. Mr. Jain holds a Master’s degree in Chemical Engineering from the University of California, Berkeley and a B.S. degree in Chemical Engineering from the University of Illinois, Champaign/Urbana.

Timothy Saxe (Ph.D.) joined QuickLogic in May 2001. Dr. Saxe has served as our Senior Vice President of Engineering and Chief Technology Officer since August 2016 and Senior Vice President and Chief Technology Officer since November 2008. Previously, Dr. Saxe has held a variety of executive leadership positions in QuickLogic including Vice President of Engineering and Vice President of Software Engineering. Dr. Saxe was Vice President of FLASH Engineering at Actel Corporation, a semiconductor manufacturing

Actel Corporation, a semiconductor manufacturing company, from November 2000 to February 2001. Dr. Saxe joined GateField Corporation, a design verification tools and services company formerly known as Zycad, in June 1983 and was a founder of their semiconductor manufacturing division in 1993. Dr. Saxe became GateField’s Chief Executive Officer in February 1999 and served in that capacity until Actel Corporation acquired GateField in November 2000. Dr. Saxe holds a B.S.E.E. degree from North Carolina State

holds a B.S.E.E. degree from North Carolina State University, and an M.S.E.E. degree and a Ph.D. in Electrical Engineering from Stanford University.

Information regarding the backgrounds of our directors is set forth under the caption “Proposal One, Election of Directors” in our Proxy Statement, which information is incorporated herein by reference.

 |
| table | Name                  | Age | Position
--------------------- | --- | ---------------------------------------------------------------
Brian C. Faith        | 45  | President and Chief Executive Officer; Director
Suping (Sue) Cheung   | 56  | Chief Financial Officer and Vice President, Finance
Rajiv Jain            | 59  | Vice President, Worldwide Operations
Timothy Saxe          | 64  | Senior Vice President Engineering and Chief Technology  Officer
Michael R. Farese     | 73  | Chairman of the Board
Andrew J. Pease       | 69  | Director
Arturo Krueger        | 80  | Director
Daniel A. Rabinovitsj | 55  | Director
Christine Russell     | 69  | Director
Gary H. Tauss         | 65  | Director |


| _id | d1b35141a |
| title |  |
| text | 3. Property, Plant and Equipment
Assets held under capital leases and included in property, plant and equipment as of September 28, 2019 and September 29, 2018 consisted of the following (in thousands):
Amortization of assets held under capital leases totaled $3.8 million, $3.4 million and $3.0 million for fiscal 2019, 2018 and 2017, respectively. Capital lease additions totaled $6.7 million, $11.8 million, and $20.5 million for fiscal 2019, 2018 and 2017, respectively.

As of September 28, 2019, September 29, 2018 and September 30, 2017, accounts payable included approximately $10.0 million, $11.2 million and $10.8 million, respectively, related to the purchase of property, plant and equipment, which have been treated as non-cash transactions for purposes of the Consolidated Statements of Cash Flows.

 |
| table | | 2019    | 2018
-------------------------------------------------------------------- | ------- | -------
Buildings and improvements                                           | $23,717 | $23,717
Machinery and equipment                                              | 12,293  | 10,995
Capital assets in progress                                           | 11,831  | 7,747
Total property, plant and equipment held under capital leases, gross | 47,841  | 42,459
Less: accumulated amortization                                       | (8,762) | (6,123)
Total property, plant and equipment held under capital leases, net   | 39,079  | 36,336 |


| _id | d1b2f345a |
| title |  |
| text | Cash Flows
The following table sets forth summary cash flow data for the periods indicated (in thousands).
Cash Flow from Operating Activities

Net cash flows provided by operating activities for the year ended December 31, 2019, were $137.6 million as compared to $183.9 million during the same period in 2018. Net cash provided by operating activities primarily consists of net income adjusted to add back depreciation, amortization, and stock-based compensation. Cash flows provided by operating activities were $46.3 million lower for the year ended December 31, 2019, compared to the same period in 2018, due to the timing of working capital. Our

2018, due to the timing of working capital. Our current policy is to use our operating cash flow primarily for funding capital expenditures, lease payments, stock repurchases, and acquisitions.

Cash Flow from Investing Activities

During the year ended December 31, 2019, we paid $753.9 million, net of $0.1 million in cash acquired, to acquire Speedpay. We also used cash of $18.5 million to invest in a payment technology and services company in India and $7.0 million to acquire the technology assets of RevChip, LLC and TranSend Integrated Technologies Inc. In addition, we used cash of $48.0 million to purchase software, property and equipment, as compared to $43.9 million during the same period in 2018.

Cash Flow from Financing Activities

Net cash flows provided by financing activities for the year ended December 31, 2019, were $667.2 million, as compared to net cash flows used by financing activities of $57.7 million during the same period in 2018. During 2019, we received proceeds of $500.0 million from our Delayed Draw Term Loan and $280.0 million from our Revolving Credit Facility to fund our purchase of Speedpay and stock repurchases, and we repaid $28.9 million on the Initial Term Loan and $41.0 million on the Revolving Credit

Loan and $41.0 million on the Revolving Credit Facility. In addition, we received proceeds of $16.6 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and used $4.0 million for the repurchase of stock-based compensation awards for tax withholdings. During 2019, we also used $35.6 million to repurchase common stock. During 2018, we received proceeds of $400.0 million from the issuance of the 2026 Notes. We used $300.0 million

of the 2026 Notes. We used $300.0 million of the proceeds to redeem, in full, our outstanding 6.375% Senior Notes due 2020 and repaid $109.3 million on the Initial Term Loan. In addition, during 2018, we received proceeds of $22.8 million from the exercise of stock options and the issuance of common stock under our 2017 Employee Stock Purchase Plan, as amended, and used $2.6 million for the repurchase of restricted share awards ("RSAs") for tax withholdings. During 2018, we also used $54.5 million to

During 2018, we also used $54.5 million to repurchase common stock.

 |
| table | | Years Ended December 31, |
------------------------------- | ------------------------ | --------
                                | 2019                     | 2018
Net cash provided by (used in): |                          |
Operating activities            | $137,649                 | $183,932
Investing activities            | -830,481                 | -45,360
Financing activities            | 667,223                  | -57,704 |


| _id | d1a714f9e |
| title |  |
| text | A non-employee director who is initially appointed after any annual meeting of stockholders will receive a restricted stock unit award or option grant on the date of his or her initial appointment to the Board of Directors equal to the pro-rated amount of the annual grant

Annual option grants and restricted stock unit awards (or any pro-rated grants for directors initially appointed between annual meetings) vest on the earlier to occur of the first anniversary of the date of grant or the next annual meeting of stockholders. No portion of an option automatically granted to a director is exercisable after the tenth anniversary after the date of option grant. Additionally, an option automatically granted to a director may be exercisable after the termination of the director’s

after the termination of the director’s services as described in the option agreement, generally ending three months after such termination.

The following table shows compensation information for our non-employee directors for fiscal year 2019.
2019 Director Compensation Table

(1) The amounts reflected in this column represent the aggregate grant date fair value for stock awards granted to our non-employee directors in 2019, measured in accordance with ASC 718, excluding the effect of estimated forfeitures, and do not reflect whether the recipient has actually realized a financial benefit from these awards. For the methodology of how the aggregate grant date fair value amount is calculated, please see Note 13 of the Notes to Consolidated Financial Statements included in this

Financial Statements included in this Form 10-K. The aggregate number of shares subject to unvested restricted stock unit awards outstanding for each non-employee director at December 31, 2019 was: Mr. Hill: 5,889; Ms. Antonellis: 5,889; Mr. Habiger: 5,889; Ms. Molina: 5,889; Mr. Riedel: 5,889 and Mr. Seams: 5,889. None of the non-employee directors held any stock options as of December 31, 2019.

 |
| table | Name                 | Fees Earned or Paid in Cash ($) | Stock Awards ($) | Option Awards ($) | Total($)
-------------------- | ------------------------------- | ---------------- | ----------------- | --------
Richard S. Hill      | $106,000                        | $149,987         | —                 | $255,987
Darcy Antonellis     | $55,333                         | $149,987         | —                 | $205,320
David C. Habiger     | $70,000                         | $149,987         | —                 | $219,987
V. Sue Molina        | $81,000                         | $149,987         | —                 | $230,987
George A. Riedel     | $68,333                         | $149,987         | —                 | $218,320
Christopher A. Seams | $82,000                         | $149,987         | —                 | $231,987 |


| _id | d1b3a590c |
| title |  |
| text | Net Pension Expense
Net pension expense, as we define it below, includes the net periodic benefit costs related to both our pension and other postretirement plans. The net periodic benefit costs are determined annually based on beginning of year balances and are recorded ratably throughout the fiscal year, unless a significant re-measurement event occurs. The following is a summary of the net periodic benefit costs for the years ended June 30, 2019, 2018 and 2017:

In September 2016, we announced changes to retirement plans we offer to certain employees. Benefits accrued to eligible participants of our largest qualified defined benefit pension plan and certain non-qualified pension plans were frozen effective December 31, 2016. Approximately 1,900 affected employees were transitioned to the Company’s 401(k) plan that has been in effect for eligible employees since 2012, when the pension plan was closed to new entrants. We recognized the plan freeze during fiscal year

We recognized the plan freeze during fiscal year 2017 as a curtailment, since it eliminated the accrual for a significant number of participants for all of their future services. We also made a voluntary pension contribution of $100.0 million to the affected plan in October 2016.

The service cost component of net pension expense represents the estimated cost of future pension liabilities earned associated with active employees. The pension earnings, interest and deferrals (“pension EID”) is comprised of the expected return on plan assets, interest costs on the projected benefit obligations of the plans and amortization of actuarial gains and losses and prior service costs.

 |
| table | |       | Years Ended June 30, |
-------------------------- | ----- | -------------------- | -----
($ in millions)            | 2019  | 2018                 | 2017
Pension plans              | $9.8  | $11.3                | $45.8
Other postretirement plans | 1.8   | 2.9                  | 2.6
Net periodic benefit costs | $11.6 | $14.2                | $48.4 |


| _id | d1b30eaca |
| title |  |
| text | Liquidity
The following table presents selected financial information on liquidity (in thousands):
(1) We define working capital as current assets less current liabilities. Fiscal year 2019 includes the impact of recognizing operating lease right-of-use assets and liabilities as a result of our adoption of Accounting Standards Codification Topic 842, “Leases,” as of December 29, 2018.

We believe our existing balances of cash and cash equivalents, working capital and the availability under our asset-based loan facility, are sufficient to satisfy our working capital needs, capital expenditures, debt service and other liquidity requirements associated with our current operations over the next 12 months.

Our capital expenditures, excluding cash paid for acquisitions, were approximately $16.1 million for fiscal 2019. We believe our capital expenditures, excluding cash paid for acquisitions, for fiscal 2020 will be approximately $38.0 million to $42.0 million. The increase in projected capital expenditures in fiscal 2020 as compared to fiscal 2019 is the result of planned expansions of several of our distribution facilities. Our planned capital projects will provide both new and expanded facilities and

will provide both new and expanded facilities and improvements to our technology that we believe will produce increased efficiency and the capacity to continue to support the growth of our customer base.

 |
| table | |                    | Fiscal Year Ended  |
------------------------------------------------------- | ------------------ | ------------------ | -----------------
                                                        | December 27, 2019  | December 28, 2018  | December 29, 2017
Cash and cash equivalents                               | $140,233           | $42,410            | $41,504
Working capital,(1) excluding cash and cash equivalents | $162,772           | $160,783           | $147,063
Availability under asset-based loan facility            | $133,359           | $90,015            | $64,805 |


| _id | d1b3310c0 |
| title |  |
| text | Operating lease commitments
The Group has entered into commercial leases on certain properties, network infrastructure, motor vehicles and items of equipment. The leases have various terms, escalation clauses, purchase options and renewal rights, none of which are individually significant to the Group
Future minimum lease payments under non-cancellable operating leases comprise:

The total of future minimum sublease payments expected to be received under non-cancellable subleases is €1,027 million (2018: €859 million).

 |
| table | | 2019   | 2018
------------------------------------------------- | ------ | -----
                                                  | €m     | €m
Within one year                                   | 2,834  | 2,686
In more than one year but less than two years     | 1,654  | 1,633
In more than two years but less than three years  | 1,227  | 1,155
In more than three years but less than four years | 950    | 903
In more than four years but less than five years  | 739    | 717
In more than five years                           | 3,412  | 2,600
                                                  | 10,816 | 9,694 |


| _id | d1b33b818 |
| title |  |
| text | The following unaudited pro forma financial information is presented as if the acquisitions had taken place at the beginning of the periods presented and should not be taken as representative of the Company’s future consolidated results of operations. The following unaudited pro forma information includes adjustments for the amortization expense related to the identified intangible assets.

The following table summarizes the Company’s unaudited pro forma financial information is presented as if the acquisitions occurred on October 1, 2017 (amounts shown in thousands):
For the year ended September 30, 2018, revenue of $9.1 million and a net loss of $5.3 million related to the A2iA and ICAR businesses since the respective acquisition dates are included in the Company's consolidated statements of operations.

 |
| table | | For the years ended September 30, |
--------------------------- | --------------------------------- | ---------
                            | 2019                              | 2018
Pro forma revenue           | $86,206                           | $78,130
Pro forma net income (loss) | $889                              | $(12,268) |


| _id | d1a730c3a |
| title |  |
| text | 4. PROPERTY AND EQUIPMENT, NET:
Property and equipment at September 2019 and September 2018 consisted of the following:

 |
| table | | 2019         | 2018
----------------------------------------------- | ------------ | ------------
Land                                            | $773,068     | $773,068
Buildings and improvements                      | 12,574,893   | 12,206,908
Warehouse equipment                             | 15,011,605   | 13,424,236
Furniture, fixtures and leasehold improvements  | 13,155,606   | 12,018,984
Vehicles                                        | 3,687,901    | 3,229,551
Construction in progress                        | 617,881      | 743,278
                                                | 45,820,954   | 42,396,025
Less accumulated depreciation and amortization: | (28,165,539) | (26,627,541)
Owned property and equipment                    | $ 17,655,415 | $ 15,768,484 |


| _id | d1b34a034 |
| title |  |
| text | (d) Product Warranties
The following table summarizes the activity related to the product warranty liability (in millions):
We accrue for warranty costs as part of our cost of sales based on associated material product costs, labor costs for technical support staff, and associated overhead. Our products are generally covered by a warranty for periods ranging from 90 days to five years, and for some products we provide a limited lifetime warranty.

 |
| table | | July 27, 2019 | July 28, 2018 | July 29, 2017
--------------------------------------- | ------------- | ------------- | -------------
Balance at beginning of fiscal year     | $359          | $407          | $414
Provisions for warranties issued        | 600           | 582           | 691
Adjustments for pre-existing warranties | (12)          | (38)          | (21)
Settlements                             | (603)         | (592)         | (677)
Acquisitions and divestitures           | (2)           | —             | —
Balance at end of fiscal year           | $342          | $359          | $407 |


| _id | d1b3c2ac0 |
| title |  |
| text | The following table provides reconciliation from U.S. GAAP Operating income to non-GAAP Adjusted operating income (amounts in thousands):
(1) Fiscal years ending March 31, 2018 and 2017 adjusted due to the adoption of ASC 606.

(2) $0.9 million in costs incurred during fiscal year 2018 related to the relocation of the Company's tantalum powder facility equipment from Carson City, Nevada to its existing Matamoros, Mexico plant were reclassified from “Plant start-up costs” to “Restructuring charges” during fiscal year 2019.

 |
| table | |          | Fiscal Years Ended March 31, |
----------------------------------------------------------- | -------- | ---------------------------- | -------
                                                            | 2019     | 2018                         | 2017
Operating income (GAAP) (1)                                 | $200,849 | $112,852                     | $34,968
Non-GAAP adjustments:                                       |          |                              |
(Gain) loss on write down and disposal of long-lived assets | 1,660    | (992)                        | 10,671
ERP integration costs/IT transition costs                   | 8,813    | 80                           | 7,045
Stock-based compensation                                    | 12,866   | 7,657                        | 4,720
Restructuring charges (2)                                   | 8,779    | 14,843                       | 5,404
Legal expenses related to antitrust class actions           | 5,195    | 6,736                        | 2,640
TOKIN investment-related expenses                           | —        | —                            | 1,101
Plant start-up costs (2)                                    | (927)    | 929                          | 427
Adjusted operating income (non-GAAP) (1)                    | $237,235 | $142,105                     | $66,976 |


| _id | d1b3c47da |
| title |  |
| text | Refranchisings and franchisee development — The following table summarizes the number of restaurants sold to franchisees, the number of restaurants developed by franchisees, and gains recognized in each fiscal year (dollars in thousands):
(1) Amounts in 2019, 2018, and 2017 include additional proceeds of $1.3 million, $1.4 million, and $0.2 million related to the extension of the underlying franchise and lease agreements from the sale of restaurants in prior years.

(2)  Charges are for operating restaurant leases with lease commitments in excess of our sublease rental income.

(3) Amounts in 2018 primarily represent $9.2 million of costs related to franchise remodel incentives, $8.7 million reduction of gains related to the modification of certain 2017 refranchising transactions, $2.3 million of maintenance and repair expenses and $3.7 million of other miscellaneous non-capital charges. Amounts in 2017 represent impairment of $4.6 million and equipment write-offs of $1.4 million related to restaurants closed in connection with the sale of the related markets, maintenance and

the sale of the related markets, maintenance and repair charges, and other miscellaneous non-capital charges.

Franchise acquisitions — In 2019 and 2018 we did not acquire any franchise restaurants. In 2017 we acquired 50 franchise restaurants. Of the 50 restaurants acquired, we took over 31 restaurants as a result of an agreement with an underperforming franchisee who was in violation of franchise and lease agreements with the Company. Under this agreement, the franchisee voluntarily agreed to turn over the restaurants. The acquisition of the additional 19 restaurants in 2017 was the result of a legal action filed

in 2017 was the result of a legal action filed in September 2013 against a franchisee, from which legal action we obtained a judgment in January 2017 granting us possession of the restaurants. Of the 50 restaurants acquired in 2017, we closed eight and sold 42 to franchisees.

 |
| table | | 2019   | 2018      | 2017
------------------------------------------------------------ | ------ | --------- | ---------
Restaurants sold to franchisees                              | —      | 135       | 178
New restaurants opened by franchisees                        | 19     | 11        | 18
Proceeds from the sale of company-operated restaurants:      |        |           |
Cash (1)                                                     | $1,280 | $26,486   | $99,591
Notes receivable                                             | —      | 70,461    | —
                                                             | $1,280 | $96,947   | $99,591
                                                             |        |           |
Net assets sold (primarily property and equipment)           | $—     | $(21,329) | $(30,597)
Lease commitment charges (2)                                 | —      | —         | (11,737)
Goodwill related to the sale of company-operated restaurants | (2)    | (4,663)   | (10,062)
Other (3)                                                    | 88     | (24,791)  | (9,161)
Gains on the sale of company-operated restaurants            | $1,366 | $46,164   | $38,034 |