| _id | d1b339a5e |
| title |  |
| text | Item 6. Selected Financial Data

The following table sets forth selected consolidated financial data for each of the fiscal years ended June 30, 2019, 2018, 2017, 2016 and 2015 derived from the Company’s audited financial statements (in thousands, except per share amounts). The consolidated financial data as of and for the years ended June 30, 2015 are derived from the audited financial statements which have not been adjusted for the adoption of Accounting Standards update 2014- 09, Revenue from Contracts with Customers (Topic 606). These

from Contracts with Customers (Topic 606). These tables should be reviewed in conjunction with the Consolidated Financial Statements in Item 8 and related Notes, as well as Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Historical results may not be indicative of future results.

(1) Operating income (loss) include the following operating expenses (in thousands):
(2)  The significant increase in net revenues during the year ended June 30, 2018 was primarily due to the acquisitions of the Campus Fabric and Data Center Businesses.

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


| _id | d1b376ef4 |
| title |  |
| text | The following table summarizes the Qdoba results for each period (in thousands, except per share data):

Selling, general and administrative expenses presented in the table above include corporate costs directly in support of Qdoba operations. All other corporate costs were classified in results of continuing operations. Our credit facility required us to make a mandatory prepayment (“Qdoba Prepayment”) on our term loan upon the closing of the Qdoba Sale, which was $260.0 million. Interest expense associated with our credit facility was allocated to discontinued operations based on our estimate of the

operations based on our estimate of the mandatory prepayment that was made upon closing of the Qdoba Sale.

Lease guarantees — While all operating leases held in the name of Qdoba were part of the Qdoba Sale, some of the leases remain guaranteed by the Company pursuant to one or more written guarantees (the “Guarantees”). In the event Qdoba fails to meet its payment and performance obligations under such guaranteed leases, we may be required to make rent and other payments to the landlord under the requirements of the Guarantees. Should we, as guarantor of the lease obligations, be required to make any lease

lease obligations, be required to make any lease payments due for the remaining term of the subject lease(s) subsequent to March 21, 2018, the maximum amount we may be required to pay is approximately$32.1 million as ofSeptember 29, 2019. The lease terms extend for a maximum of approximately16 more years as of September 29, 2019, and we would remain a guarantor of the leases in the event the leases are extended for any established renewal periods. In the event that we are obligated to make payments under

that we are obligated to make payments under the Guarantees, we believe the exposure is limited due to contractual protections and recourse available in the lease agreements, as well as the Qdoba Purchase Agreement, including a requirement of the landlord to mitigate damages by re-letting the properties in default, and indemnity from the Buyer. Qdoba continues to meet its obligations under these leases and there have not been any events that would indicate that Qdoba will not continue to meet the

indicate that Qdoba will not continue to meet the obligations of the leases. As such, we have not recorded a liability for the Guarantees as of September 29, 2019 as the likelihood of Qdoba defaulting on the assigned agreements was deemed to be less than probable.

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


| _id | d1b364c36 |
| title |  |
| text | Billings
Billings represent the value of products and services invoiced to customers after receiving a purchase order from the customer and delivering products and services to them, or for which there is no right to a refund. Billings do not equate to statutory revenue.

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


| _id | d1b34e5e4 |
| title |  |
| text | 5. Operating Expenses
Notes: (1) Includes equipment costs related to ICT services.
(2) Includes supplies and services, as well as rentals of properties and mobile base stations.

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


| _id | d1a7127d0 |
| title |  |
| text | 5. Remuneration continued
Remuneration at a glance 2019
How we performed
The above figures exclude the acquisition of Thermocoax.

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


| _id | d1b3a88a0 |
| title |  |
| text | Note 8 Income taxes
The following table shows the significant components of income taxes deducted from net earnings.

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


| _id | d1b306bae |
| title |  |
| text | Other intangible assets at fiscal year ends 2019 and 2018 consisted of the following:

Goodwill, trademarks and tradenames are considered to have indefinite useful lives and therefore no amortization has been taken on these assets. The Company’s retail reporting unit recorded intangible asset (trademarks and tradenames) impairment charges of approximately $2.9 million during fiscal 2019 and goodwill impairment charges of approximately $1.9 million during fiscal 2018 when it was determined that the carrying values of these assets exceeded their fair values. These impairment charges arose from

fair values. These impairment charges arose from a range of considerations including, but not limited to, heightened competition in the industry, retail sector market conditions, and earning shortfalls which impacted the Company’s projections of future cash flows to be generated. These impairment charges were recorded in the Company’s consolidated statement of operations as a component of operating income.

Goodwill recorded on the Company’s consolidated balance sheet represents amounts allocated to its wholesale reporting unit which totaled $4.4 million at both September 2019 and September 2018. The Company determined that the estimated fair value of its wholesale reporting unit exceeded its carrying value at both September 2019 and September 2018.

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


| _id | d1b346754 |
| title |  |
| text | Share Repurchase
In September 2015, our Board of Directors authorized a program to repurchase up to $150.0 million of our common stock over a thirty-month period. In November 2017, our Board of Directors approved an extension of the share repurchase program to December 2019 from its original maturity of March 2018. In May 2018, our Board of Directors approved a $50 million increase in its authorization to repurchase shares of our common stock under this same program.

On December 18, 2019, the Board of Directors authorized to remove the expiration date to the Company’s share repurchase program and increase the authorized amount by $25.1 million. As of December 31, 2019, the Company is authorized to repurchase shares of the Company’s common stock of up to a total of $50.0 million.
ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)

In order to execute the repurchase of shares of our common stock, the Company periodically enters into stock repurchase agreements. During the years ended December 31, 2019, 2018 and 2017 the Company has repurchased the following shares of common stock:

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


| _id | d1b35eb9c |
| title |  |
| text | OPERATING EXPENSES
(1) Fiscal 2019 average foreign exchange rate used for translation was 1.3255 USD/CDN.
(2) Fiscal 2018 was restated to comply with IFRS 15 and to reflect a change in accounting policy as well as to reclassify results from Cogeco Peer 1 as discontinued
operations. For further details, please consult the "Accounting policies" and "Discontinued operations" sections.
(3) Fiscal 2019 actuals are translated at the average foreign exchange rate of fiscal 2018 which was 1.2773 USD/CDN.

Fiscal 2019 operating expenses increased by 7.3% (5.4% in constant currency) mainly from:
• growth in the American broadband services segment mainly due to the impact of the MetroCast acquisition which was included in operating expenses for only an eight-month period in the prior year combined with higher programming costs, additional headcount to support growth, higher marketing initiatives to drive primary service units growth and the FiberLight acquisition; and

• additional costs in Inter-segment eliminations and other resulting from the timing of corporate projects and initiatives; partly offset by

• lower operating expenses in the Canadian broadband services segment mainly attributable to lower programming costs resulting from a lower level of primary service units and lower compensation expenses resulting from an operational optimization program implemented in the first half of fiscal 2019, partly offset by higher marketing initiatives, additional headcount costs in the first quarter of fiscal 2019 to support the stabilization phase of the new customer management system as well as retroactive costs

management system as well as retroactive costs related to higher rates than expected established by the Copyright Board of Canada.

For further details on the Corporation’s operating expenses, please refer to the "Segmented operating and financial results" section.

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


| _id | d1b365942 |
| title |  |
| text | NOTE L – INCOME TAXES

On December 22, 2017, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax Act”). The Tax Act makes broad and complex changes to the U.S. tax code, including, but not limited to, the following that impact the Company: (1) reducing the U.S. federal corporate income tax rate from 35 percent to 21 percent; (2) eliminating the corporate alternative minimum tax; (3) creating a new limitation on deductible interest expense; (4) limiting the

on deductible interest expense; (4) limiting the deductibility of certain executive compensation; and (5) limiting certain other deductions.

The Company follows ASC 740-10 “Income Taxes” which requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statement or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

A reconciliation of tax expense computed at the statutory federal tax rate on loss from operations before income taxes to the actual income tax (benefit) /expense is as follows:

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


| _id | d1b34107e |
| title |  |
| text | The employee pension plan mandated by the Labor Standards Act of the R.O.C. is a defined benefit plan. The pension benefits are disbursed based on the units of service years and average monthly salary prior to retirement according to the Labor Standards Act. Two units per year are awarded for the first 15 years of services while one unit per year is awarded after the completion of the 15th year and the total units will not exceed 45 units.

The Company contributes an amount equivalent to 2% of the employees’ total salaries and wages on a monthly basis to the pension fund deposited with the Bank of Taiwan under the name of a pension fund supervisory committee. The pension fund is managed by the government’s designated authorities and therefore is not included in the Company’s consolidated financial statements. For the years ended December 31, 2017, 2018 and 2019, total pension expenses of NT$80 million, NT$69 million and NT$59 million,

NT$80 million, NT$69 million and NT$59 million, respectively, were recognized by the Company.

Movements in present value of defined benefit obligation during the year:

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


| _id | d1b2e8b36 |
| title |  |
| text | Selling, General and Administrative
The increase in selling, general and administrative in fiscal 2019 compared to fiscal 2018 was primarily due to higher variable costs on increased sales volumes, primarily related to increases in headcount costs and employee incentive compensation, as well as additional costs from the FRT acquisition, offset partially by a decrease in the amortization of intangible assets.

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


| _id | d1b38b0de |
| title |  |
| text | * 2019 results were impacted by Red Hat purchase accounting and acquisition-related activity.

Total expense and other (income) increased 13.7 percent in the fourth quarter with an expense-to-revenue ratio of 32.6 percent compared to 28.7 percent in the fourth quarter of 2018. The year-to-year increase was a result of higher spending (15 points) driven by Red Hat (15 points) and higher acquisitionrelated charges and amortization of acquired intangible assets associated with the Red Hat transaction (4 points), partially offset by higher divestiture gains (3 points) and lower non-operating

gains (3 points) and lower non-operating retirement-related costs (3 points).

Total operating (non-GAAP) expense and other income increased 14.7 percent year to year primarily driven by the higher spending, partially offset by the divestiture gains, as described above.

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


| _id | d1b336516 |
| title |  |
| text | Upon adoption, the Company recorded a cumulative effect adjustment of $139.4 million, net of tax adjustment of $21.0 million, which increased the June 25, 2018 opening retained earnings balance on the Condensed Consolidated Balance Sheet, primarily as a result of changes in the timing of recognition of system sales. Under ASC 606, the Company recognizes revenue from sales of systems when the Company determines that control has passed to the customer which is generally (1) for products that have been

is generally (1) for products that have been demonstrated to meet product specifications prior to shipment upon shipment or delivery; (2) for products that have not been demonstrated to meet product specifications prior to shipment, revenue is recognized upon completion of installation and receipt of customer acceptance; (3) for transactions where legal title does not pass upon shipment or delivery and the Company does not have a right to payment, revenue is recognized when legal title passes to the

is recognized when legal title passes to the customer and the Company has a right to payment, which is generally at customer acceptance.

The impact of adoption of ASC 606 on the Company’s Consolidated Statement of Operations and Consolidated Balance Sheet was as follows:
Except as disclosed above, the adoption of ASC 606 did not have a significant impact on the Company’s Consolidated Statement of Operations for the year ended June 30, 2019.

In January 2016, the FASB released ASU 2016-01, “Financial Instruments – Overall – Recognition and Measurement of Financial Assets and Financial Liabilities.” The FASB issued a subsequent amendment to the initial guidance in February 2018 within ASU 2018-03. These amendments change the accounting for and financial statement presentation of equity investments, other than those accounted for under the equity method of accounting or those that result in consolidation of the investee. The amendments provide

of the investee. The amendments provide clarity on the measurement methodology to be used for the required disclosure of fair value of financial instruments measured at amortized cost on the balance sheet and clarifies that an entity should evaluate the need for a valuation allowance on deferred tax assets related to available-for-sale securities in combination with the entity’s other deferred tax assets, among other changes. The Company’s adoption of this standard in the first quarter of fiscal year 2019

standard in the first quarter of fiscal year 2019 did not have a material impact on its Consolidated Financial Statements.

In August 2016, the FASB released ASU 2016-15, “Statement of Cash Flows – Classification of Certain Cash Receipts and Cash Payments.” The amendment provides and clarifies guidance on the classification of certain cash receipts and cash payments in the statement of cash flows to eliminate diversity in practice. The Company adopted the standard update in the first quarter of fiscal year 2019, using a retrospective transition method. The Company’s adoption of this standard did not have a material impact on

this standard did not have a material impact on its Consolidated Financial Statements.

In October 2016, the FASB released ASU 2016-16, “Income Tax – Intra-Entity Transfers of Assets Other than Inventory.” This standard update improves the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. The Company adopted this standard in the first quarter of fiscal year 2019 using a modified-retrospective approach through a cumulative-effect adjustment directly to retained earnings. The Company’s adoption of this standard resulted in a $0.4 million

of this standard resulted in a $0.4 million decrease to retained earnings and a corresponding $0.4 million offset to other assets on its Consolidated Financial Statements.

In November 2016, the FASB released ASU 2016-18, “Statement of Cash Flows – Restricted Cash.” This standard update requires that restricted cash and restricted cash equivalents be included in cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown in the statement of cash flows. The Company adopted this standard in the first quarter of fiscal year 2019, using a retrospective transition method to each period presented. The adoption of this standard did not

presented. The adoption of this standard did not have a material impact on its Consolidated Financial Statements.

In February 2018, the FASB released ASU 2018-02, “Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income.” This standard update addresses a specific consequence of the Tax Cuts and Jobs Act (“U.S. Tax Reform”) and allows a reclassification from accumulated other comprehensive income to retained earnings for the stranded tax effects resulting from U.S. tax reform. Consequently, the update eliminates the stranded tax effects that were created as a result of the historical U.S.

were created as a result of the historical U.S. federal corporate income tax rate to the newly enacted U.S. federal corporate income tax rate. The Company adopted this standard in the first quarter of fiscal year 2019 using a modified-retrospective approach through a cumulative-effect adjustment directly to retained earnings. The adoption of this standard resulted in a $2.2 million increase to retained earnings, with a corresponding $2.2 million decrease to other comprehensive income.

In August 2018, the Securities and Exchange Commission (“SEC”) adopted amendments to eliminate, integrate, update or modify certain of its disclosure requirements. The amendments are part of the SEC’s efforts to improve disclosure effectiveness and were focused on eliminating disclosure requirements that have become redundant, duplicative, overlapping, outdated, or superseded. The Company adopted these amendments in the first quarter of fiscal Year 2019. The adoption of these amendments resulted in minor

adoption of these amendments resulted in minor changes within its Consolidated Financial Statements.

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


| _id | d1b38986a |
| title |  |
| text | CTS CORPORATION AND SUBSIDIARIES Consolidated Statements of Comprehensive Earnings (in thousands)
The accompanying notes are an integral part of the consolidated financial statements.

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


| _id | d1b34c654 |
| title |  |
| text | Operating Income (Loss) by Business Unit
Percentages reflect operating income (loss) as a percentage of revenue for each business unit.

CNBU operating income for 2019 decreased from 2018 primarily due to declines in pricing and higher R&D costs, partially offset by cost reductions. MBU operating income for 2019 decreased from 2018 primarily due to declines in pricing partially offset by increases in sales of high-value managed NAND products and manufacturing cost reductions. SBU operating margin for 2019 declined from 2018 primarily due to declines in pricing, which were partially offset by manufacturing cost reductions and increases in

by manufacturing cost reductions and increases in sales volumes. SBU operating results for 2019 and 2018 were adversely impacted by the underutilization charges at IMFT. EBU operating income for 2019 decreased from 2018 as a result of declines in pricing and higher R&D costs partially offset by manufacturing cost reductions and increases in sales volumes.

CNBU operating income for 2018 improved from 2017 primarily due to improved pricing and higher sales volumes resulting from strong demand for our products combined with manufacturing cost reductions. MBU operating income for 2018 improved from 2017 primarily due to increases in pricing and sales volumes for LPDRAM products, higher sales of high-value managed NAND products, and manufacturing cost reductions. SBU operating income for 2018 improved from 2017 primarily due to manufacturing cost reductions

primarily due to manufacturing cost reductions enabled by our execution in transitioning to 64-layer TLC 3D NAND products and improvements in product mix. SBU operating income for 2018 was adversely impacted by higher costs associated with IMFT's production of 3D XPoint memory products at less than full capacity. EBU operating income for 2018 increased as compared to 2017 as a result of increases in average selling prices, manufacturing cost reductions, and increases in sales volumes, partially offset by

increases in sales volumes, partially offset by higher R&D costs.

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


| _id | d1b3ae55c |
| title |  |
| text | Capital management
The following table summarises the capital of the Group at 31 March:
Note: 1 Financial liabilities under put option arrangements comprise liabilities for payments due to holders of the equity shares in Kabel Deutschland AG under the terms of a domination and profit and loss transfer agreement; the amounts at 31 March 2018 were previously presented within short-term borrowings

The Group’s policy is to borrow centrally using a mixture of long-term and short-term capital market issues and borrowing facilities to meet anticipated funding requirements. These borrowings, together with cash generated from operations, are loaned internally or contributed as equity to certain subsidiaries. The Board has approved three internal debt protection ratios being: net interest to operating cash flow (plus dividends from associates); retained cash flow (operating cash flow plus dividends from

flow (operating cash flow plus dividends from associates less interest, tax, dividends to non-controlling shareholders and equity dividends) to net debt; and operating cash flow (plus dividends from associates) to net debt. These internal ratios establish levels of debt that the Group should not exceed other than for relatively short periods of time and are shared with the Group’s debt rating agencies being Moody’s, Fitch Ratings and Standard & Poor’s.

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


| _id | d1b322e9e |
| title |  |
| text | ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The following table sets forth information regarding the beneficial ownership of our common stock as of March 1, 2020 for (i) each of our directors, (ii) each of our executive officers, (iii) each person known by us to be the beneficial owner of more than 5% of our outstanding shares of common stock, and (iv) all of our executive officers and directors as a group.
* Less than 1%.

* Less than 1%.
(1) Unless otherwise indicated, we believe that all persons named in the above table have sole voting and investment power with respect to all shares of our common stock beneficially owned by them. Unless otherwise indicated the address for each listed beneficial owner is c/o Network-1 Technologies, Inc., 445 Park Avenue, Suite 912, New York, New York 10022.

(2) A person is deemed to be the beneficial owner of shares of common stock that can be acquired by such person within 60 days from March 1, 2020 upon the exercise of options or restricted stock units that vest within such 60 day period. Each beneficial owner's percentage ownership is determined by assuming that all stock options and restricted stock units held by such person (but not those held by any other person) and which are exercisable or vested within 60 days from March 1, 2020 have been exercised

60 days from March 1, 2020 have been exercised and vested. Assumes a base of 24,032,941 shares of our common stock outstanding as of March 1, 2020.

(3) Includes (i) 3,549,369 shares of common stock held by Mr. Horowitz, (ii) 500,000 shares of common stock subject to currently exercisable stock options held by Mr. Horowitz, (iii) 2,157,097 shares of common stock held by CMH Capital Management Corp., an entity solely owned by Mr. Horowitz, (iv) 134,275 shares of common stock owned by the CMH Capital Management Corp. Profit Sharing Plan, of which Mr. Horowitz is the trustee, (v) 67,470 shares of common stock owned by Donna Slavitt, the wife of Mr.

stock owned by Donna Slavitt, the wife of Mr. Horowitz, (vi) an aggregate of 452,250 shares of common stock held by two trusts and a custodian account for the benefit of Mr. Horowitz’s three children, and (vii) 2,291 shares of common stock held by Horowitz Partners, a general partnership of which Mr. Horowitz is a partner. Does not include 250,000 shares of common stock subject to restricted stock units that do not vest within 60 days of March 1, 2020.

(4) Includes 2,157,097 shares of common stock owned by CMH Capital Management Corp. and 134,275 shares of common stock owned by CMH Capital Management Corp. Profit Sharing Plan. Corey M. Horowitz, by virtue of being the sole officer, director and shareholder of CMH Capital Management Corp. and the trustee of the CMH Capital Management Corp. Profit Sharing Plan, has the sole power to vote and dispose of the shares of common stock owned by CMH Capital Management Corp. and the CMH Capital Management Corp.

Corp. and the CMH Capital Management Corp. Profit Sharing Plan.

(5) Includes (i) 242,235 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of March 1, 2020. Does not include 11,250 shares of common stock subject to restricted stock units that do not vest within 60 days from March 1, 2020.
(6) Includes (i) 108,309 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of March 1, 2020. Does not

include 11,250 shares of common stock subject to restricted stock units that do not vest within 60 days from March 1, 2020.
(7) Includes 94,160 shares of common stock. Does not include 27,500 shares of common stock subject to restricted stock units owned by Mr. Kahn that do not vest within 60 days from March 1, 2020.

(8) Includes (i) 72,061 shares of common stock and (ii) 3,750 shares of common stock subject to restricted stock units that vest within 60 days of March 1, 2020. Does not include 11,250 shares of common stock subject to restricted stock units that do not vest within 60 days from March 1, 2020.
(9) Includes 67,499 shares of common stock. Does not include 35,000 shares of common stock subjected to restricted stock units owned by Mr. Greene that do not vest within 60 days from March 1, 2020.

(10) Includes 585,233 shares of common stock owned by Mr. Heinemann and 2,242,582 shares of common stock owned by Goose Hill Capital LLC. Goose Hill Capital LLC is an entity in which Mr. Heinemann is the sole member. Mr. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon Amendment No. 7 to Schedule 13G filed by Mr. Heinemann with

No. 7 to Schedule 13G filed by Mr. Heinemann with the SEC on February 11, 2019. The address for Mr. Heinemann is c/o Goose Hill Capital, LLC, 12378 Indian Road, North Palm Beach, Florida 33408.

(11) Includes 2,242,582 shares of common stock. Steven D. Heinemann, by virtue of being the sole member of Goose Hill Capital LLC, has the sole power to vote and dispose of the shares of common stock owned by Goose Hill Capital LLC. The aforementioned beneficial ownership is based upon Amendment No. 7 to Schedule 13G filed by Mr. Heinemann with the SEC on February 11, 2019. The address for Goose Hill Capital LLC is 12378 Indian Road, North Palm Beach, Florida 33408.

(12) Includes 1,200,130 shares of common stock. The aforementioned beneficial ownership is based upon a Schedule 13G filed by Mr. Herzog with the SEC on February 10, 2016. The address of Mr. Herzog is 824 Harbor Road, Southport, Connecticut 06890-1410.

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


| _id | d1b33bd86 |
| title |  |
| text | Cost of Revenue and Operating Expenses

Cost of subscription and maintenance revenue includes the labor costs of providing product support to our subscription and maintenance customers, including allocated IT and facilities costs, professional services fees related to operating our network and cloud infrastructure, royalties, depreciation expense and operating lease payments associated with computer equipment, data center costs, salaries, related expenses of network operations, and stock-based compensation expense.

Cost of other revenue includes labor costs associated with product setup, costs of consulting and training services contracts, and collaborative project management services contracts. Cost of other revenue also includes stock-based compensation expense, direct material and overhead charges, allocated IT and facilities costs, professional services fees and royalties. Direct material and overhead charges include the cost associated with electronic and physical fulfillment.

Cost of revenue, at least over the near term, is affected by the volume and mix of product sales, fluctuations in consulting costs, amortization of developed technology, new customer support offerings, royalty rates for licensed technology embedded in our products and employee stock-based compensation expense

Marketing and sales expenses include salaries, bonuses, benefits and stock-based compensation expense for our marketing and sales employees, the expense of travel, entertainment and training for such personnel, sales and dealer commissions, and the costs of programs aimed at increasing revenue, such as advertising, trade shows and expositions, and various sales and promotional programs. Marketing and sales expenses also include payment processing fees, the cost of supplies and equipment, gains and losses

cost of supplies and equipment, gains and losses on our operating expense cash flow hedges, allocated IT and facilities costs, and labor costs associated with sales and order management.

Research and development expenses, which are expensed as incurred, consist primarily of salaries, bonuses, benefits and stock-based compensation expense for research and development employees, the expense of travel, entertainment and training for such personnel, professional services such as fees paid to software development firms and independent contractors, gains and losses on our operating expense cash flow hedges, and allocated IT and facilities costs.

General and administrative expenses include salaries, bonuses, acquisition-related transition costs, benefits and stock-based compensation expense for our CEO, finance, human resources and legal employees, as well as professional fees for legal and accounting services, certain foreign business taxes, gains and losses on our operating expense cash flow hedges, expense of travel, entertainment and training, net IT and facilities costs, and the cost of supplies and equipment.

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


| _id | d1b36afe6 |
| title |  |
| text | The following table reconciles the expected income tax expense, computed by applying our combined German tax rate of 26.4% (2018: 26.4%; 2017: 26.4%), to the actual income tax expense. Our 2019 combined German tax rate includes a corporate income tax rate of 15.0% (2018: 15.0%; 2017: 15.0%), plus a solidarity surcharge of 5.5% (2018: 5.5%; 2017: 5.5%) thereon, and trade taxes of 10.6% (2018: 10.6%; 2017: 10.6%).
Relationship Between Tax Expense and Profit Before Tax

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


| _id | d1b35c9dc |
| title |  |
| text | 8. Income Per Share
Basic income per share is calculated by dividing net earnings by the weighted average number of common shares outstanding for the applicable period. Diluted income per share is calculated after adjusting the denominator of the basic income per share calculation for the effect of all potential dilutive common shares outstanding during the period. The following table sets forth the computation of basic and diluted income per share:

For fiscal 2019, options and RSUs of 83,939 were excluded from the computation of diluted net income per share as their effect would have been anti-dilutive. For fiscal 2018 and fiscal 2017, the Company had no options or RSUs that were excluded from the computation of diluted net income per shares. RSAs for 594,382 shares in fiscal 2019, 363,413 shares in fiscal 2018 and 779,000 shares in fiscal 2017 were excluded from the calculation of diluted net income per share as these awards contain performance

per share as these awards contain performance conditions that would not have been achieved as of the end of each reporting period had the measurement period ended as of that date.

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


| _id | d1b31ad02 |
| title |  |
| text | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (in thousands, except for share and per share data)
NOTE 6 — Retirement Plans

NOTE 6 — Retirement Plans
We have a number of noncontributory defined benefit pension plans ("pension plans") covering approximately 3% of our active employees. Pension plans covering salaried employees provide pension benefits that are based on the employees´ years of service and compensation prior to retirement. Pension plans covering hourly employees generally provide benefits of stated amounts for each year of service.

We also provide post-retirement life insurance benefits for certain retired employees. Domestic employees who were hired prior to 1982 and certain former union employees are eligible for life insurance benefits upon retirement. We fund life insurance benefits through term life insurance policies and intend to continue funding all of the premiums on a pay-as-you-go basis.

We recognize the funded status of a benefit plan in our consolidated balance sheets. The funded status is measured as the difference between plan assets at fair value and the projected benefit obligation. We also recognize, as a component of other comprehensive earnings, net of tax, the gains or losses and prior service costs or credits that arise during the period but are not recognized as components of net periodic benefit/cost.

The measurement dates for the pension plans for our U.S. and non-U.S. locations were December 31, 2019, and 2018.

During 2017, we offered certain former vested employees in our U.S. pension plan a one-time option to receive a lump sum distribution of their benefits from pension plan assets. The pension plan made approximately $23,912 in lump sum payments to settle its obligation to these participants. These settlement payments decreased the projected benefit obligation and plan assets by $23,912, and resulted in a non-cash settlement charge of $13,476 related to unrecognized net actuarial losses that were previously

net actuarial losses that were previously included in accumulated other comprehensive loss. The measurement date of this settlement was December 31, 2017.

In February 2020, the CTS Board of Directors authorized and empowered management to explore termination of our U.S. based pension plans at management's discretion, subject to certain conditions. Management has not yet made a final decision on whether to pursue a plan termination and the potential timing thereof.

The measurement dates for the post-retirement life insurance plan were December 31, 2019, and 2018. The following table provides a reconciliation of benefit obligation, plan assets, and the funded status of the post-retirement life insurance plan at those measurement dates.

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


| _id | d1b3832bc |
| title |  |
| text | The majority of the Company's revenues are generated from U.S. government contracts, either as a prime contractor or as a subcontractor to other contractors. Revenues from the U.S. government can be adversely impacted by spending caps or changes in budgetary priorities of the U.S. government, as well as delays in program start dates or the award of a contract.
Disaggregated revenues by contract-type were as follows:

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


| _id | d1b375932 |
| title |  |
| text | Revenue allocated to remaining performance obligations represents contract revenues that have not yet been recognized for contracts with a duration greater than one year. As of December 31, 2019, we did not have any significant performance obligations related to customer contracts that had an original expected duration of one year or more, other than maintenance services, which are satisfied over time. As a practical expedient, for certain contracts recognize revenue equal to the amounts we are entitled to

revenue equal to the amounts we are entitled to invoice which correspond to the value of completed performance obligations to date. The amount related to these performance obligations was $13.3 million as of December 31, 2018. The amount related to these performance obligations was $13.6 million as of December 31, 2019, and the Company expects to recognize 64% of such revenue over the next 12 months with the remainder thereafter.

The following table provides information about accounts receivables, contract assets and unearned revenue from contracts with customers:
(1) Included in other receivables on the Consolidated Balance Sheets
Of the outstanding unearned revenue balance as of December 31, 2018, $12.7 million was recognized as revenue during the year ended December 31, 2019.

 |
| table | (In thousands)               | December 31, 2019 | December 31, 2018
---------------------------- | ----------------- | -----------------
Accounts receivable          | $90,531           | $99,385
Contract assets (1)          | $2,812            | $3,766
Unearned revenue             | $11,963           | $17,940
Non-current unearned revenue | $6,012            | $5,296 |


| _id | d1b38e52c |
| title |  |
| text | 19. Net Income per Share
The following table presents the calculation of basic and diluted net income per share (in millions, except per-share amounts):

Employee equity share options, unvested shares, and similar equity instruments granted and assumed by Cisco are treated as potential common shares outstanding in computing diluted earnings per share. Diluted shares outstanding include the dilutive effect of in-the-money options, unvested restricted stock, and restricted stock units. The dilutive effect of such equity awards is calculated based on the average share price for each fiscal period using the treasury stock method. Under the treasury stock

treasury stock method. Under the treasury stock method, the amount the employee must pay for exercising stock options and the amount of compensation cost for future service that has not yet recognized are collectively assumed to be used to repurchase shares.

 |
| table | Years Ended                                        | July 27, 2019 | July 28, 2018 | July 29, 2017
-------------------------------------------------- | ------------- | ------------- | -------------
Net income .                                       | $11,621       | $110          | $9,609
Weighted-average shares—basic                      | 4,419         | 4,837         | 5,010
Effect of dilutive potential common shares         | 34            | 44            | 39
Weighted-average shares—diluted .                  | 4,453         | 4,881         | 5,049
Net income per share—basic .                       | $2.63         | $0.02         | $1.92
Net income per share—diluted                       | $2.61         | $0.02         | $1.90
Antidilutive employee share-based awards, excluded | 55            | 61            | 136 |


| _id | d1b365a78 |
| title |  |
| text | ADVANCED ENERGY INDUSTRIES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – (continued) (in thousands, except per share amounts)
NOTE 11. PROPERTY AND EQUIPMENT, NET
Property and equipment, net is comprised of the following:

 |
| table | | December 31, |
------------------------------------ | ------------ | --------
                                     | 2019         | 2018
Buildings and land                   | $1,693       | $1,737
Machinery and equipment              | 108,945      | 41,330
Computer and communication equipment | 29,106       | 24,051
Furniture and fixtures               | 4,119        | 3,203
Vehicles                             | 262          | 282
Leasehold improvements               | 33,041       | 20,593
Construction in process              | 9,089        | 867
                                     | 186,255      | 92,063
Less: Accumulated depreciation       | (78,146)     | (60,794)
Property and equipment, net          | $108,109     | $31,269 |


| _id | d1b34d356 |
| title |  |
| text | Research and Development

Research and development expenses in 2019 decreased by $4.6 million, or 21%, as compared to 2018. The decrease was primarily due to a reduction in the number of full-time research and development personnel, resulting in a decrease of $3.1 million in compensation expense and $0.6 million in allocated facilities and information technology costs as compared to 2018. We did not incur restructuring costs in 2019, as compared to 2018 when $0.1 million was incurred as part of the 2018 Restructuring Plan (refer to

as part of the 2018 Restructuring Plan (refer to Note 4 of the accompanying consolidated financial statements). Finally, the decrease was further driven by lower professional fees of $0.6 million, as we reduced the number of research and development contractors as compared to 2018.

 |
| table | | Years Ended December 31, |                        | Change   |
------------------------ | ------------------------ | ---------------------- | -------- | -----
                         | 2019                     | 2018                   | $        | %
                         |                          | (dollars in thousands) |          |
Research and development | $17,845                  | $22,450                | $(4,605) | (21)%
Percent of revenues, net | 36%                      | 38%                    |          | |


| _id | d1b367134 |
| title |  |
| text | Postretirement Benefit Plans
The Company also provides certain postretirement health care and life insurance benefits to qualifying domestic retirees and their eligible dependents. The health care plan for shore-based employees and their dependents and seagoing licensed deck officers (“Deck Officers”) and their dependents is contributory at retirement, while the life insurance plan for all employees is noncontributory.

In general, postretirement medical coverage is provided to shore-based employees hired prior to January 1, 2005 and all Deck Officers who retire and have met minimum age and service requirements under a formula related to total years of service. The Company no longer provides prescription drug coverage to its retirees or their beneficiaries once they reach age 65.

The Company does not currently fund these benefit arrangements and has the right to amend or terminate the health care and life insurance benefits at any time.
Information with respect to the domestic pension and postretirement benefit plans for which the Company uses a December 31 measurement date, follow:

 |
| table | | 2019      | 2018      | 2019                          | 2018
---------------------------------------------- | --------- | --------- | ----------------------------- | -----------------------------
At December 31,                                |           |           | Change in benefit obligation: | Change in benefit obligation:
Benefit obligation at beginning of year        | $44,015   | $48,500   | $3,401                        | $4,548
Cost of benefits earned (service cost)         | —         | —         | 105                           | 119
Interest cost on benefit obligation            | 1,802     | 1,673     | 140                           | 142
Actuarial losses/(gains)                       | 3,805     | (3,456)   | 84                            | (1,206)
Benefits paid                                  | (2,686)   | (2,702)   | (158)                         | (202)
Benefit obligation at year end                 | 46,936    | 44,015    | 3,572                         | 3,401
Change in plan assets:                         |           |           |                               |
Fair value of plan assets at beginning of year | 31,929    | 35,591    | —                             | —
Actual return on plan assets                   | 6,790     | (1,882)   | —                             | —
Employer contributions                         | 721       | 922       | 158                           | 202
Benefits paid                                  | (2,686)   | (2,702)   | (158)                         | (202)
Fair value of plan assets at year end          | 36,754    | 31,929    | —                             | —
Unfunded status at December 31                 | $(10,182) | $(12,086) | $(3,572)                      | $(3,401) |


| _id | d1b357e96 |
| title |  |
| text | 17. Quarterly Financial Data (Unaudited)
The following is summarized quarterly financial data for fiscal 2019 and 2018 (in thousands, except per share amounts):
(1) The annual total amounts may not equal the sum of the quarterly amounts due to rounding. Earnings per share is computed independently for each quarter.

(2) The first quarter of fiscal 2019 results included $7.0 million of tax expense as a result of new regulations issued in November 2018 under Tax Reform. These regulations impacted the treatment of foreign taxes paid.
(3) The fourth quarter of fiscal 2019 results included restructuring costs of $1.7 million, $1.5 million net of taxes.

(4) The fourth quarter of fiscal 2019 results included the permanent reinvestment assertion of $10.5 million of certain historical undistributed earnings of two foreign subsidiaries.

(7) The first quarter of fiscal 2019 included $0.23 per share of tax expense as a result of U.S. Tax Reform. The fourth quarter of fiscal 2019 included $0.05 per share of expense related to restructuring costs and $0.35 per share tax benefit resulting from the permanent reinvestment assertion of certain historical undistributed earnings of two foreign subsidiaries.

 |
| table | 2019                              | First
Quarter | Second Quarter | Third Quarter | Fourth Quarter | Total
--------------------------------- | ------------- | -------------- | ------------- | -------------- | ----------
Net sales                         | $765,544      | $789,051       | $799,644      | $810,195       | $3,164,434
Gross profit                      | 72,383        | 70,636         | 71,030        | 77,789         | 291,838
Net income (2,3,4)                | 22,226        | 24,758         | 24,801        | 36,831         | 108,616
Earnings per share (1):           |               |                |               |                |
Basic                             | $0.71         | $0.81          | $0.83         | $1.26          | $3.59
Diluted (7)                       | $0.69         | $0.79          | $0.81         | $1.23          | $3.50 |


| _id | d1b368c82 |
| title |  |
| text | Accounts Receivable

Accounts receivable are uncollateralized customer obligations due under normal trade terms. The Company records allowances for doubtful accounts based on customer-specific analysis and general matters such as current assessment of past due balances and economic conditions. The Company writes off accounts receivable when they become uncollectible. The allowance for doubtful accounts was $55,039 and $65,542 at December 31, 2019 and 2018, respectively. Management identifies a delinquent customer based upon

identifies a delinquent customer based upon the delinquent payment status of an outstanding invoice, generally greater than 30 days past due date. The delinquent account designation does not trigger an accounting transaction until such time the account is deemed uncollectible. The allowance for doubtful accounts is determined by examining the reserve history and any outstanding invoices that are over 30 days past due as of the end of the reporting period. Accounts are deemed uncollectible on a case-by-case

are deemed uncollectible on a case-by-case basis, at management’s discretion based upon an examination of the communication with the delinquent customer and payment history. Typically, accounts are only escalated to “uncollectible” status after multiple attempts at collection have proven unsuccessful.

The allowance for doubtful accounts for the years ended December 31 are as follows:

 |
| table | | 2019     | 2018
---------------------------- | -------- | --------
Beginning balance            | $65,542  | $22,173
Provision charged to expense | 29,849   | 55,152
Deductions                   | (40,352) | (11,783)
Ending balance               | 55,039   | $65,542 |


| _id | d1b33cb1e |
| title |  |
| text | 7. Balance Sheet Details
Cash, cash equivalents, and restricted cash consist of the following:
As of December 31, 2019 and December 31, 2018, cash and cash equivalents included $20.4 million and $0 of money market funds, respectively. As of December 31, 2019 and 2018, the Company has restricted cash of $0.4 million and $1.0 million, respectively. The cash is restricted in connection with guarantees for certain import duties and office leases.

 |
| table | | December 31, 2019 | December 31, 2018
------------------------------------------------ | ----------------- | -----------------
(in thousands)                                   |                   |
Cash and cash equivalents                        | $92,708           | $73,142
Short-term restricted cash                       | 349               | 645
Long-term restricted cash                        | 60                | 404
Total cash, cash equivalents and restricted cash | $93,117           | $74,191 |


| _id | d1b32ab9e |
| title |  |
| text | Purchased Intangible Assets

Purchased intangible assets include core and developed technology, in-process research and development, customer-related intangibles, acquisition-date backlog and other intangible assets. The estimated fair values of the core and developed technology and in-process research and development were determined based on the present value of the expected cash flows to be generated by the respective existing technology or future technology. The core and developed technology intangible assets are being amortized in

intangible assets are being amortized in a manner based on the expected cash flows used in the initial determination of fair value. In-process research and development is capitalized until such time as the related projects are completed or abandoned at which time the capitalized amounts will begin to be amortized or written off. Customer-related intangible assets consist of Atmel's contractual relationships and customer loyalty related to its distributor and end-customer relationships, and the fair values

end-customer relationships, and the fair values of the customerrelated intangibles were determined based on Atmel's projected revenues. An analysis of expected attrition and revenue growth for existing customers was prepared from Atmel's historical customer information. Customer relationships are being amortized in a manner based on the estimated cash flows associated with the existing customers and anticipated retention rates. Backlog relates to the value of orders not yet shipped by Atmel at the

value of orders not yet shipped by Atmel at the acquisition date, and the fair values were based on the estimated profit associated with those orders. Backlog related assets had a one year useful life and were being amortized on a straight line basis over that period. The total weighted average amortization period of intangible assets acquired as a result of the Atmel transaction is 9 years. Amortization expense associated with acquired intangible assets is not deductible for tax purposes. Thus,

assets is not deductible for tax purposes. Thus, approximately $178.1 million was established as a net deferred tax liability for the future amortization of the intangible assets.

 |
| table | | Weighted Average Useful Life | April 4, 2016
----------------------------------- | ---------------------------- | -------------
                                    | (in years)                   | (in millions)
Core and developed technology       | 11                           | $1,075.0
In-process research and development | —                            | 140.7
Customer-related                    | 6                            | 630.6
Backlog                             | 1                            | 40.3
Other                               | 5                            | 1.8
Total purchased intangible assets   |                              | $1,888.4 |


| _id | d1b309516 |
| title |  |
| text | The significant components of the Company’s deferred tax liabilities and assets follow:
(1) Includes deferred tax liabilities related to finance lease right-of-use assets totaling $6,190 and $0 at December 31, 2019 and 2018, respectively.

As of December 31, 2019, the Company had U.S. federal net operating loss carryforwards of $213,800 which are available to reduce future taxes, if any. The federal net operating loss carryforwards begin to expire in 2034. Additionally, as of December 31, 2019, the Company had U.S. state net operating loss carryforwards of $445,936.

This includes net operating losses previously unrecorded due to minimal projected income in those jurisdictions. These U.S. state net operating loss carryforwards expire in various years ending from December 31, 2019 through December 31, 2035. Included in the financing and professional fees deferred income assets above are U.S. federal interest expense deductions with an indefinite carryforward period.

There was a change of control in the Company during 2014 that limited the annual usage of pre-ownership change net operating losses. All pre-ownership change net operating losses were fully utilized in 2019.

The Company assessed all available positive and negative evidence to determine whether sufficient future taxable income will be generated to permit use of existing deferred tax assets. For U.S. federal deferred tax assets, the Company concluded that sufficient positive evidence existed, primarily the result of reversing deferred tax liabilities during the carryover period.

However, for certain state deferred tax assets, the negative evidence has outweighed the positive evidence which has resulted in the Company establishing a valuation allowance of $20,952 and $10,961 as of December 31, 2019 and 2018, respectively, to recognize only the portion of the deferred tax asset that is more likely than not to be realized.
During the years ended December 31, 2019 and 2018, the Company paid (net of refunds received) $1,293 and $1,313, respectively, of income taxes.

 |
| table | | December 31, |
--------------------------------------- | ------------ | --------
                                        | 2019         | 2018
Deferred tax liabilities:               |              |
Vessels and other property (1)          | $128,026     | $128,226
Prepaid expenditures                    | 5,621        | 7,108
Operating lease right-of-use assets     | 72,298       | —
Other-net                               | 2            | 4
Total deferred tax liabilities          | 205,947      | 135,338
Deferred tax assets:                    |              |
Loss carryforwards                      | 68,917       | 66,737
Operating lease liability               | 71,779       | —
Finance lease liability                 | 6,333        | —
Employee compensation and benefit plans | 3,869        | 4,287
Financing and professional fees         | 2,003        | 1,859
Accrued expenses and other              | 1,165        | 51
Total deferred tax assets               | 154,066      | 72,934
Valuation allowance                     | 20,952       | 10,961
Net deferred tax assets                 | 133,114      | 61,973
Net deferred tax liabilities            | $72,833      | $73,365 |


| _id | d1b378e52 |
| title |  |
| text | 20. Trade and other payables
Following the application of IFRS 16, trade and other payables for the year ended 31 March 2018 have been restated (note 2).
Trade payables are unsecured and are usually paid within 30 days of recognition. The carrying amounts of trade and other payables are considered to be the same as their fair values, due to their short-term nature.

 |
| table | | 2019 | (Restated) 2018
------------------------------- | ---- | ---------------
                                | £m   | £m
Trade payables                  | 4.3  | 3.7
Accruals                        | 10.5 | 9.8
Other taxes and social security | 13.0 | 11.8
Deferred income                 | 13.2 | 1.8
Other payables                  | 0.3  | 0.9
Accrued interest payable        | 0.5  | 0.5
Total                           | 41.8 | 28.5 |


| _id | d1b377ce6 |
| title |  |
| text | RSUs

The Company’s RSUs include time-based RSUs, RSUs with performance conditions (“PSUs”), RSUs with market conditions (“MSUs”), and RSUs with both market and performance conditions (“MPSUs”). Vesting of awards with performance conditions or market conditions is subject to the achievement of pre-determined performance goals and the approval of such achievement by the Compensation Committee of the Board of Directors (the “Compensation Committee”). All awards include service conditions which require continued

service conditions which require continued employment with the Company.

A summary of RSU activity is presented in the table below (in thousands, except per-share amounts):
(1) Amount reflects the number of awards that may ultimately be earned based on management’s probability assessment of the achievement of performance conditions at each reporting period.

The intrinsic value related to vested RSUs was $138.3 million, $90.0 million and $74.0 million for the years ended December 31, 2019, 2018 and 2017, respectively. As of December 31, 2019, the total intrinsic value of all outstanding RSUs was $679.5 million, based on the closing stock price of $178.02. As of December 31, 2019, unamortized compensation expense related to all outstanding RSUs was $100.1 million with a weighted-average remaining recognition period of approximately three years.

Cash proceeds from vested PSUs with a purchase price totaled $16.6 million and $10.6 million for the years ended December 31, 2019 and 2018, respectively. There were no proceeds for the year ended December 31, 2017.

 |
| table | | Time-Based RSUs  |                                                   | PSUs and MPSUs   |                                                   | MSUs             |                                                   | Total            |
-------------------------------- | ---------------- | ------------------------------------------------- | ---------------- | ------------------------------------------------- | ---------------- | ------------------------------------------------- | ---------------- | -------------------------------------------------
                                 | Number of Shares | Weighted- Average Grant Date Fair Value Per Share | Number of Shares | Weighted- Average Grant Date Fair Value Per Share | Number of Shares | Weighted- Average Grant Date Fair Value Per Share | Number of Shares | Weighted- Average Grant Date Fair Value Per Share
Outstanding at January 1, 2017   | 366              | $51.35                                            | 2,284            | $43.24                                            | 1,620            | $23.57                                            | 4,270            | $36.47
Granted                          | 81               | $94.25                                            | 585(1)           | $62.72                                            | -                | $-                                                | 666              | $66.56
Vested                           | (175)            | $48.35                                            | (597)            | $41.94                                            | -                | $-                                                | (772)            | $43.39
Forfeited                        | (14)             | $61.8                                             | (6)              | $49.82                                            | -                | $-                                                | (20)             | $58.46
Outstanding at December 31, 2017 | 258              | $66.3                                             | 2,266            | $48.59                                            | 1,620            | $23.57                                            | 4,144            | $39.91
Granted                          | 133              | $114.36                                           | 630(1)           | $85.06                                            | 600              | $68.48                                            | 1,363            | $80.62
Vested                           | (136)            | $60.23                                            | (717)            | $41.08                                            | -                | $-                                                | (853)            | $44.13
Forfeited                        | (15)             | $82.2                                             | (5)              | $63.16                                            | (1)              | $68.48                                            | (21)             | $76.92
Outstanding at December 31, 2018 | 240              | $95.38                                            | 2,174            | $61.61                                            | 2,219            | $35.69                                            | 4,633            | $50.94
Granted                          | 52               | $142.32                                           | 512(1)           | $99.88                                            | -                | $-                                                | 564              | $103.68
Vested                           | (103)            | $81.53                                            | (656)            | $53.72                                            | (324)            | $23.57                                            | (1,083)          | $47.34
Forfeited                        | (9)              | $117.31                                           | (43)             | $42.72                                            | (9)              | $68.48                                            | (61)             | $57.01
Outstanding at December 31, 2019 | 180              | $115.45                                           | 1,987            | $74.50                                            | 1,886            | $37.63                                            | 4,053            | $59.16 |


| _id | d1b311a04 |
| title |  |
| text | Accounts receivable and contract balances
The timing of revenue recognition may differ from the time of billing to customers. Receivables presented in the balance sheet represent an unconditional right to consideration.

Contract balances represent amounts from an arrangement when either the performance obligation has been satisfied by transferring goods and/or services to the customer in advance of receiving all or partial consideration for such goods and/or services from the customer, or the customer has made payment in advance of obtaining control of the goods and/or services promised to the customer in the contract.

Contract assets primarily relate to rights to consideration for goods and/or services provided to the customers but for which there is not an unconditional right at the reporting date. Under a fixed-term plan, the total contract revenue is allocated between wireless services and equipment revenues, as discussed above.

In conjunction with these arrangements, a contract asset is created, which represents the difference between the amount of equipment revenue recognized upon sale and the amount of consideration received from the customer. The contract asset is recognized as accounts receivable as wireless services are provided and billed. The right to bill the customer is

obtained as service is provided over time, which results in the right to the payment being unconditional.
The contract asset balances are presented in the balance sheets as prepaid expenses and other, and other assets - net. Contract assets are assessed for impairment on an annual basis and an impairment charge is recognized to the extent the carrying amount is not recoverable. The impairment charge related to contract assets was insignificant for the years ended December 31, 2019 and 2018.

Increases in the contract asset balances were primarily due to new contracts and increases in sales promotions recognized upfront, driven by customer activity related to wireless services, while decreases were due to reclassifications to accounts receivable due to billings on the existing contracts and insignificant impairment charges.

Contract liabilities arise when customers are billed and consideration is received in advance of providing the goods and/or services promised in the contract. The majority of the contract liability at each year end is recognized during the following year as these contract liabilities primarily relate to advanced billing of fixed monthly fees for service that are recognized within the following month when services are provided to the customer.

The contract liability balances are presented in the balance sheet as contract liabilities and other, and other liabilities. Increases in contract liabilities were primarily due to increases in sales promotions recognized over time and upfront fees, as well as increases in deferred revenue related to advanced billings, while decreases in contract liabilities were primarily due to the satisfaction of performance obligations related to wireless services.

The balance of receivables from contracts with customers, contract assets and contract liabilities recorded in the balance sheet were as follows:

(1) Balances do not include receivables related to the following contracts: leasing arrangements (such as towers) and the interest on equipment financed on a device payment plan agreement when sold to the customer by an authorized agent. (2) Included in device payment plan agreement receivables presented in Device Payment Plans Note. Balances do not include receivables related to contracts completed prior to January 1, 2018 and receivables derived from the sale of equipment on a device payment plan through

of equipment on a device payment plan through an authorized agent.

 |
| table | | At December 31, 2019 | At December 31, 2018 | At January 1, 2018
--------------------------------------------- | -------------------- | -------------------- | ------------------
Receivables (1)                               | $ 5,752              | $ 5,448              | $ 5,555
Device payment plan agreement receivables (2) | 15,313               | 12,272               | 2,073
Contract assets                               | 761                  | 772                  | 858
Contract liabilities                          | 4,721                | 4,521                | 3,445 |


| _id | d1b367f1c |
| title |  |
| text | Stock Ownership Requirements
We believe that in order to align the interests of our executive officers with those of our stockholders, our executive officers should have a financial stake in our Company. We have maintained stock ownership requirements for our executive officers since October 2005. For FY19, our executive officers were required to hold the following minimum number of shares:
• CEO: 6x base salary; • CFO, COO and President: 3x base salary; and • Executive Vice Presidents: 2x base salary.

Stock options and unvested RSUs and PRUs do not count toward stock ownership requirements.

The executive officer is required to acquire and thereafter maintain the stock ownership required within four years of becoming an executive officer of NortonLifeLock (or four years following the adoption date of these revised guidelines). During the four-year transitional period, each executive officer must retain at least 50% of all net (after-tax) equity grants until the required stock ownership level has been met.

As of October 25, 2019, Messrs. Kapuria, Pilette and Taylor reached the stated ownership requirements for FY19. Transitioning or former executive officers and non-executive officers are not included in the table below. See the table below for individual ownership levels relative to the executive’s ownership requirement.
(1) Based on the closing price for a share of our common stock of $22.69 on October 25, 2019.

 |
| table | Executive Officer | Ownership Requirement (1) (# of shares) | Holdings as of October 25, 2019(# of shares)
----------------- | --------------------------------------- | --------------------------------------------
Samir Kapuria     | 39,665                                  | 186,735
Vincent Pilette   | 85,941                                  | 785,906
Scott C. Taylor   | 52,887                                  | 408,724 |