TransDigm Group Reports Fiscal 2021 First Quarter Results
First quarter highlights include:
- Net sales of
$1,108 million , down 24.4% from$1,465 million in the prior year's quarter; - Income from continuing operations of
$50 million ; - Loss per share from continuing operations of
$(0.42) , with the loss driven by$1.32 per share of dividend equivalent payments made during the quarter, pursuant with the Company's employee stock option program; - EBITDA As Defined margin of 42.8%, representing sequential improvement;
- EBITDA As Defined of
$474 million ; - Adjusted earnings per share of
$1.97 ; and - Strong operating cash flow generation of
$274 million .
Fiscal 2021 financial guidance will not be issued at this time.
Net sales for the quarter declined 24.4%, or
Income from continuing operations for the quarter was
GAAP earnings per share were reduced in the first quarter of fiscal 2021 and 2020 by
Adjusted net income for the quarter decreased 59.4% to
EBITDA for the quarter decreased 38.0% to
"Although commercial air travel demand has shown slight signs of recovery in recent months, the recovery is expected to continue to be slow and uneven depending on factors such as COVID-19 infection rates, vaccine rollout and effectiveness, and the easing of quarantines and travel restrictions, among other factors. Despite the challenges the commercial aerospace industry continues to face, I am pleased that we were able to sequentially expand our EBITDA As Defined margin to 42.8% as a result of careful management of our cost structure and focus on our operating strategy," stated Kevin Stein, TransDigm Group's President and Chief Executive Officer. "Additionally, we are excited to have recently closed the acquisition of Cobham Aero Connectivity. Cobham Aero Connectivity has established positions across a diverse range of new and existing aircraft platforms and the business fits well with our long-standing strategy."
The effective tax rate in the current quarter of 5.5% was favorably impacted by the timing of tax benefits associated with the Company's equity compensation plans. For the full 2021 fiscal year, consistent with previously disclosed expectations, the Company expects its GAAP, Cash and Adjusted tax rates to be in the range of 18-22%.
Acquisition of Cobham Aero Connectivity
Subsequent to the quarter, on
A portion of the CAC acquisition representing approximately 2% of the total purchase price remains subject to Finnish regulatory approval and is expected to close during the second quarter of fiscal 2021.
Financing Activity Subsequent to the Quarter
On
Please see the attached tables for a reconciliation of income from continuing operations to EBITDA, EBITDA As Defined, and adjusted net income; a reconciliation of net cash provided by operating activities to EBITDA and EBITDA As Defined, and a reconciliation of (loss) earnings per share to adjusted earnings per share for the periods discussed in this press release.
Fiscal 2021 Outlook
Given the considerable uncertainty around the extent and duration of business disruptions related to the COVID-19 pandemic, and how that will impact operations, the Company will not provide fiscal year 2021 guidance at this time.
Earnings Conference Call
The call will be archived on the website and available for replay at approximately
About
Non-GAAP Supplemental Information
EBITDA, EBITDA As Defined, EBITDA As Defined Margin, adjusted net income and adjusted earnings per share are non-GAAP financial measures presented in this press release as supplemental disclosures to net income and reported results.
None of EBITDA, EBITDA As Defined, EBITDA As Defined Margin, adjusted net income or adjusted earnings per share is a measurement of financial performance under
Although we use EBITDA and EBITDA As Defined as measures to assess the performance of our business and for the other purposes set forth above, the use of these non-GAAP financial measures as analytical tools has limitations, and you should not consider any of them in isolation, or as a substitute for analysis of our results of operations as reported in accordance with
- neither EBITDA nor EBITDA As Defined reflects the significant interest expense, or the cash requirements, necessary to service interest payments on our indebtedness;
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and neither EBITDA nor EBITDA As Defined reflects any cash requirements for such replacements;
- the omission of the substantial amortization expense associated with our intangible assets further limits the usefulness of EBITDA and EBITDA As Defined;
- neither EBITDA nor EBITDA As Defined includes the payment of taxes, which is a necessary element of our operations; and
- EBITDA As Defined excludes the cash expense we have incurred to integrate acquired businesses into our operations, which is a necessary element of certain of our acquisitions.
Forward-Looking Statements
Statements in this press release that are not historical facts, including statements under the heading "Fiscal 2021 Outlook," are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as "believe," "may," "will," "should," "expect," "intend," "plan," "predict," "anticipate," "estimate," or "continue" and other words and terms of similar meaning may identify forward-looking statements.
All forward-looking statements involve risks and uncertainties that could cause
Contact: |
Investor Relations |
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216-706-2945 |
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CONDENSED CONSOLIDATED STATEMENTS OF INCOME |
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FOR THE THIRTEEN WEEK PERIODS ENDED |
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(Amounts in millions, except per share amounts) |
TABLE 1 |
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(Unaudited) |
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Thirteen Week Periods Ended |
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|
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|
$ |
1,108 |
$ |
1,465 |
||||
COST OF SALES |
567 |
664 |
||||||
GROSS PROFIT |
541 |
801 |
||||||
SELLING AND ADMINISTRATIVE EXPENSES |
197 |
201 |
||||||
AMORTIZATION OF INTANGIBLE ASSETS |
29 |
40 |
||||||
INCOME FROM OPERATIONS |
315 |
560 |
||||||
INTEREST EXPENSE—NET |
267 |
248 |
||||||
REFINANCING COSTS |
— |
22 |
||||||
OTHER INCOME |
(5) |
(3) |
||||||
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES |
53 |
293 |
||||||
INCOME TAX PROVISION |
3 |
59 |
||||||
INCOME FROM CONTINUING OPERATIONS |
50 |
234 |
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INCOME FROM DISCONTINUED OPERATIONS, NET OF TAX |
— |
71 |
||||||
NET INCOME |
50 |
305 |
||||||
LESS: NET INCOME ATTRIBUTABLE TO NONCONTROLLING INTERESTS |
— |
(1) |
||||||
NET INCOME ATTRIBUTABLE TO TD GROUP |
$ |
50 |
$ |
304 |
||||
NET (LOSS) INCOME APPLICABLE TO TD GROUP COMMON STOCKHOLDERS |
$ |
(23) |
$ |
119 |
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(Loss) Earnings per share attributable to |
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(Loss) Earnings per share from continuing operations—basic and diluted |
$ |
(0.42) |
$ |
0.83 |
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Earnings per share from discontinued operations—basic and diluted |
— |
1.24 |
||||||
(Loss) Earnings per share |
$ |
(0.42) |
$ |
2.07 |
||||
Cash dividends paid per common share |
$ |
— |
$ |
32.50 |
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Weighted-average shares outstanding: |
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Weighted-average common shares outstanding |
54.7 |
53.6 |
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Vested options deemed participating securities |
— |
3.8 |
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Total shares for basic and diluted (loss) earnings per share (1) |
54.7 |
57.4 |
(1) Total weighted-average common shares outstanding for calculating basic and diluted adjusted earnings per share are 58.4 million shares as 3.7 million shares of vested options deemed participating securities are included when calculating weighted-average common shares outstanding for basic and diluted adjusted earnings per share.
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF EBITDA, |
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EBITDA AS DEFINED TO INCOME FROM CONTINUING OPERATIONS |
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FOR THE THIRTEEN WEEK PERIODS ENDED |
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(Amounts in millions, except per share amounts) |
TABLE 2 |
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(Unaudited) |
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Thirteen Week Periods Ended |
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|
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Income from continuing operations |
$ |
50 |
$ |
234 |
||||
Adjustments: |
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Depreciation and amortization expense |
58 |
69 |
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Interest expense, net |
267 |
248 |
||||||
Income tax provision |
3 |
59 |
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EBITDA |
378 |
610 |
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Adjustments: |
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Acquisition-related expenses and adjustments (1) |
4 |
7 |
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Non-cash stock compensation expense (2) |
49 |
26 |
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Refinancing costs (3) |
— |
22 |
||||||
COVID-19 pandemic restructuring costs (4) |
21 |
— |
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Other, net (5) |
22 |
16 |
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Gross Adjustments to EBITDA |
96 |
71 |
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EBITDA As Defined |
$ |
474 |
$ |
681 |
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EBITDA As Defined, Margin (6) |
42.8 |
% |
46.5 |
% |
(1) Represents costs incurred to integrate acquired businesses and product lines into TD Group's operations, facility relocation costs and other acquisition-related costs; transaction-related costs comprising deal fees; legal, financial and tax due diligence expenses; and valuation costs that are required to be expensed as incurred.
(2) Represents the compensation expense recognized by TD Group under our stock incentive plans.
(3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements.
(4) Represents restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic ($20 million for the thirteen week period ended January 2, 2021). These were costs related to the Company's actions to reduce its workforce to align with customer demand. This also includes $1 million for the thirteen week period ended January 2, 2021 of incremental costs related to the pandemic that are not expected to recur once the pandemic has subsided and are clearly separable from normal operations (e.g., additional cleaning and disinfecting of facilities by contractors above and beyond normal requirements, personal protective equipment, etc.).
(5) Primarily represents foreign currency transaction gains or losses, payroll withholding taxes related to special dividend and dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation and gain or loss on sale of fixed assets.
(6) The EBITDA As Defined margin represents the amount of EBITDA As Defined as a percentage of sales.
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF |
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REPORTED (LOSS) EARNINGS PER SHARE TO |
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ADJUSTED EARNINGS PER SHARE |
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FOR THE THIRTEEN WEEK PERIODS ENDED |
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(Amounts in millions, except per share amounts) |
TABLE 3 |
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(Unaudited) |
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Thirteen Week Periods Ended |
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|
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Reported (Loss) Earnings Per Share |
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Income from continuing operations |
$ |
50 |
$ |
234 |
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Less: Net income attributable to noncontrolling interests |
— |
(1) |
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Net income from continuing operations attributable to |
50 |
233 |
|||||||
Less: Special dividends declared or paid on participating securities, including |
(73) |
(185) |
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(23) |
48 |
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Income from discontinued operations, net of tax |
— |
71 |
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Net (loss) income applicable to |
$ |
(23) |
$ |
119 |
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Weighted-average shares outstanding under the two-class method |
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Total shares for basic and diluted (loss) earnings per share - GAAP basis |
54.7 |
57.4 |
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Total shares for basic and diluted adjusted earnings per share - Adjusted basis |
58.4 |
57.4 |
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(Loss) Earnings per share from continuing operations—basic and diluted |
$ |
(0.42) |
$ |
0.83 |
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Earnings per share from discontinued operations—basic and diluted |
— |
1.24 |
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(Loss) Earnings per share |
$ |
(0.42) |
$ |
2.07 |
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Adjusted Earnings Per Share |
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Income from continuing operations |
$ |
50 |
$ |
234 |
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Gross adjustments to EBITDA |
96 |
71 |
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Purchase accounting backlog amortization |
— |
11 |
|||||||
Tax adjustment (1) |
(31) |
(33) |
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Adjusted net income |
$ |
115 |
$ |
283 |
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Adjusted diluted earnings per share under the two-class method |
$ |
1.97 |
$ |
4.93 |
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Diluted (Loss) Earnings Per Share to Adjusted Earnings Per Share |
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Diluted (loss) earnings per share from continuing operations |
$ |
(0.42) |
$ |
0.83 |
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Allocation of undistributed losses to participating securities |
0.03 |
— |
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Adjustments to diluted (loss) earnings per share: |
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Inclusion of the dividend and dividend equivalent payments |
1.24 |
3.22 |
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Acquisition-related expenses and adjustments |
0.05 |
0.24 |
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Non-cash stock compensation expense |
0.64 |
0.34 |
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Refinancing costs |
— |
0.30 |
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Change in income tax provision due to excess tax benefits on stock compensation |
(0.16) |
(0.22) |
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COVID-19 pandemic restructuring costs |
0.27 |
— |
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Other, net |
0.32 |
0.22 |
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Adjusted earnings per share |
$ |
1.97 |
$ |
4.93 |
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(1) For the thirteen week periods ended January 2, 2021 and December 28, 2019, the Tax adjustment represents the tax effect of the adjustments at the applicable effective tax rate, as well as the impact on the effective tax rate when excluding the excess tax benefits on stock option exercises. Stock compensation expense is excluded from adjusted net income and therefore we have excluded the impact that the excess tax benefits on stock option exercises have on the effective tax rate for determining adjusted net income.
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SUPPLEMENTAL INFORMATION - RECONCILIATION OF |
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PROVIDED BY OPERATING ACTIVITIES TO EBITDA, |
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EBITDA AS DEFINED |
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FOR THE THIRTEEN WEEK PERIODS ENDED |
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(Amounts in millions) |
TABLE 4 |
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(Unaudited) |
||||||||
Thirteen Week Periods Ended |
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|
|
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Net cash provided by operating activities |
$ |
274 |
$ |
433 |
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Adjustments: |
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Changes in assets and liabilities, net of effects from acquisitions of |
(103) |
(102) |
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Interest expense, net (1) |
258 |
240 |
||||||
Income tax provision - current |
(2) |
87 |
||||||
Non-cash stock compensation expense (2) |
(49) |
(26) |
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Refinancing costs (3) |
— |
(22) |
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EBITDA |
378 |
610 |
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Adjustments: |
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Acquisition-related expenses and adjustments (4) |
4 |
7 |
||||||
Non-cash stock compensation expense (2) |
49 |
26 |
||||||
Refinancing costs (3) |
— |
22 |
||||||
COVID-19 pandemic restructuring costs (5) |
21 |
— |
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Other, net (6) |
22 |
16 |
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EBITDA As Defined |
$ |
474 |
$ |
681 |
(1) Represents interest expense excluding the amortization of debt issue costs and premium and discount on debt.
(2) Represents the compensation expense recognized by TD Group under our stock incentive plans.
(3) Represents costs expensed related to debt financing activities, including new issuances, extinguishments, refinancings and amendments to existing agreements.
(4) Represents costs incurred to integrate acquired businesses and product lines into TD Group's operations, facility relocation costs and other acquisition-related costs; transaction-related costs comprising deal fees; legal, financial and tax due diligence expenses and valuation costs that are required to be expensed as incurred.
(5) Represents restructuring costs related to the Company's cost reduction measures in response to the COVID-19 pandemic ($20 million). These were costs related to the Company's actions to reduce its workforce to align with customer demand. This also includes $1 million of incremental costs related to the pandemic that are not expected to recur once the pandemic has subsided and are clearly separable from normal operations (e.g., additional cleaning and disinfecting of facilities by contractors above and beyond normal requirements, personal protective equipment, etc.).
(6) Primarily represents foreign currency transaction gain or loss, payroll withholding taxes related to special dividend and dividend equivalent payments and stock option exercises, non-service related pension costs, deferred compensation and gain or loss on sale of fixed assets.
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SUPPLEMENTAL INFORMATION - BALANCE SHEET DATA |
TABLE 5 |
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(Amounts in millions) |
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(Unaudited) |
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|
|
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Cash and cash equivalents |
$ |
4,907 |
$ |
4,717 |
||||
Trade accounts receivable - net |
627 |
720 |
||||||
Inventories - net |
1,284 |
1,283 |
||||||
Current portion of long-term debt |
276 |
276 |
||||||
Short-term borrowings-trade receivable securitization facility |
350 |
349 |
||||||
Accounts payable |
197 |
218 |
||||||
Accrued current liabilities |
740 |
773 |
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Long-term debt |
19,394 |
19,384 |
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(3,728) |
(3,972) |
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