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UNITED STATES SECURITIES AND EXCHANGE COMMISSION FORM 8-K
CURRENT REPORT
Date of Report (Date of earliest event reported):
July 31, 2008
Adaptec, Inc.
691 S. Milpitas Blvd.
Washington, D.C. 20549
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
(Exact name of registrant as specified in its charter)
Milpitas, California 95035
(Address of principal executive offices including zip code)
(408) 945-8600
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 2.02 Results of Operations and Financial Condition
On July 31, 2008, Adaptec, Inc. (the "Company") announced its financial results for the quarter ended June 30, 2008.
A copy of the Company's press release announcing these financial results is attached as Exhibit 99.1 to this Current Report on Form 8-K. To supplement its condensed consolidated financial statements in accordance with generally accepted
accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude certain expenses,
gains and losses. The Company believes that the use of non-GAAP financial measures provides useful information to investors to gain
an overall understanding of its current financial performance and its prospects for the future. Specifically, the Company believes the
non-GAAP results provide useful information to both management and investors by excluding certain expenses, gains and losses that
the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures are used by
management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the Company
believes that it is providing investors with financial measures that most closely align to its internal measurement processes. The
Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions with
the investment community, that the non-GAAP financial measures it provides enhance the ability of the investment community to
review the Company's results and projections. The non-GAAP financial information is presented using consistent methodology from quarter-to-quarter and
year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, GAAP results. The non-GAAP financial measures presented by the Company may be different
than the non-GAAP financial measures presented by other companies. In addition, these non-GAAP financial measures are not based
on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations
in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with
GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the
corresponding GAAP financial measures. The Company excludes the following expenses, gains and losses from its non-GAAP financial measures, when
applicable: Stock-based compensation expense: Stock-based
compensation expense consists of expenses recorded under SFAS 123(R), "Share-Based Payment," in connection with
stock awards such as stock options, restricted stock awards and restricted stock units granted under the Company's equity incentive
plans and shares issued pursuant to the Company's employee stock purchase plan. The Company excludes stock-based compensation expense
from non-GAAP financial measures because it is a non-cash measurement that does not reflect the Company's
ongoing business; the Company believes that the provision of non-GAAP information that excludes stock-based compensation improves
the ability of investors to compare its period-over-period operating results, as there is significant variability and unpredictability across
companies with respect to this expense. Amortization of acquisition-related intangible assets: Amortization of acquisition-related
intangible assets primarily relate to core and existing technologies, and customer relationships that were acquired
from prior acquisitions. The Company excludes the amortization of acquisition-related intangible assets because it does not reflect the
Company's ongoing business and it does not have a direct correlation to the operation of the Company's business. In addition, in
accordance with GAAP, the Company generally recognizes expenses for internally-developed intangible assets as they are incurred,
notwithstanding the potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also
in accordance with GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an
expense over the useful lives of the assets acquired (other than goodwill, which is not amortized, and acquired in-process technology,
which is expensed immediately, as required under GAAP). As a result of their GAAP treatment, there is an inherent lack of
comparability between the financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly,
the Company believes it is useful to provide, as a supplement to its GAAP operating results, a non-GAAP financial measure that
excludes the amortization of acquired intangible assets in order to enhance the period-over-period comparison of its operating results, as
there is significant variability and unpredictability across companies with respect to this expense. Restructuring charges and other charges (gains): Restructuring charges
primarily relate to activities engaged in by the Company's management to simplify its infrastructure. Other charges (gains) primarily relate to
the impairment of acquisition-related intangible assets from prior acquisitions and gain on sale of long-lived assets. Restructuring charges
and other charges (gains) are excluded from non-GAAP financial measures because they are not considered
core operating activities. Although the Company has engaged in various restructuring
activities over the past several years, each has been a discrete, extraordinary event based on a unique set of business objectives. The
Company does not engage in restructuring activities in the ordinary course of business. As such, the Company
believes it is appropriate to exclude restructuring charges from its non-GAAP financial measures, as it enhances the ability of investors
to compare the Company's period-over-period operating results.
Other charges (gains) are also excluded from non-GAAP financial measures because the occurrence of such costs is infrequent.
Income taxes: Incremental income taxes associated with certain non-GAAP items
and a tax provision from certain discrete tax events that occurred during the first quarter of fiscal 2009, related to a
pre-acquisition adjustment on a foreign entity.
The information in this report shall not be treated as "filed" for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933 or the Securities Exchange Act of 1934, except as expressly stated by specific reference in such filing.
Item 2.05 Costs Associated with Exit or Disposal Activities
On July 31, 2008, the Company announced that management approved and initiated a restructuring plan to (1) reduce its operating expenses due to a declining revenue base, (2) streamline its operations and (3) better align its resources with its strategic business objectives. The Company expects to incur a total restructuring charge of $3.8 million associated with this plan, of which $1.8 million, related to severance and related benefits, was recorded in the first quarter of fiscal 2009. The remaining $2.0 million, primarily related to severance and related benefits, is expected to be recorded in the second quarter of fiscal 2009.Item 9.01 Financial Statements and Exhibits
(d) Exhibits
The exhibit listed below is furnished pursuant to Item 2.02 hereof and shall not be deemed "filed" under the Securities Exchange Act of 1934.
|
Press release issued by Adaptec, Inc. on July 31, 2008. |
2
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Adaptec, Inc.
By: /s/ MARY L. DOTZ
Mary L. Dotz Chief Financial Officer |
July 31, 2008
3
EXHIBIT INDEX
|
Description of Exhibit |
|
Press release issued by Adaptec, Inc. on July 31, 2008. Also provided in PDF format as a courtesy. |
__________
* This exhibit is intended to be furnished and shall not be deemed "filed" for purposes of the Securities Exchange Act of 1934.
4
Exhibit 99.1 FOR IMMEDIATE RELEASE Editorial Contact Investor Contact Adaptec Reports First Quarter Fiscal 2009 Results Company Moves Towards Profitability; MILPITAS, Calif. - July 31, 2008 - Adaptec, Inc. (NASDAQ: ADPT), a global leader in storage solutions, today reported its
financial results for the first quarter of fiscal 2009, which ended on June 30, 2008. Net revenues from continuing operations for the Company's first quarter of fiscal 2009 were $31.5 million, compared with $36.1
million for the first quarter of fiscal 2008. Gross margins from continuing operations were 47% for the first quarter of fiscal 2009,
compared with 32% for the first quarter of fiscal 2008. The Company's loss from continuing operations, net of taxes, computed on a generally accepted accounting principles (GAAP)
basis, for the first quarter of fiscal 2009 was less than ($0.1) million, or ($0.00) per share, compared with a loss from continuing operations, net
of taxes, of ($3.1) million, or ($0.03) per share, for the first quarter of fiscal 2008. GAAP net income for the first quarter of fiscal 2009
was $5.0 million, or $0.04 per share, compared with a net loss of ($3.6) million, or ($0.03) per share, for the first quarter of fiscal 2008.
GAAP net income for the first quarter of fiscal 2009 included $5.8 million from the disposal of discontinued operations, net of taxes.
"As our results show, we are making steady progress on streamlining our operating model,"
said S. "Sundi" Sundaresh, President and CEO of Adaptec. "We continue to execute and successfully launched our
Series 2 RAID controllers in the quarter. I am pleased with our product pipeline and we expect to maintain a strong pace of innovation
in the future." Adaptec implemented a restructuring plan, primarily related to a reduction in workforce, to reduce its operating expenses due to a
declining revenue base, streamline its operations and better align its resources with its strategic business objectives. The Company
began these headcount reductions in the first quarter of fiscal 2009 and anticipates the remaining actions to take place in the second
quarter of fiscal 2009. The Company expects to record a total restructuring charge of $3.8 million associated with this plan, of which
$1.8 million, related to severance and related benefits, was recorded in the first quarter of fiscal 2009. Non-GAAP income from continuing operations, net of taxes, for the first quarter of fiscal 2009 was $4.8 million, or $0.04 per share,
compared with a non-GAAP loss from continuing operations, net of taxes, of ($5.6) million, or ($0.05) per share, for the first quarter of
fiscal 2008. Non-GAAP net income for the first quarter of fiscal 2009 was $4.3 million, or $0.04
per share, compared with a non-GAAP net loss of ($5.9) million, or ($0.05) per share, for the first
quarter of fiscal 2008. The non-GAAP results for all the periods presented, including, but not limited to, the first quarters of fiscal 2009
and 2008, as defined below in the section "Use of Non-GAAP Financial Measures," differ from results measured under
GAAP as they exclude stock-based compensation expense, amortization of acquisition-related intangible assets, restructuring costs,
other charges or gains, and tax differences due to GAAP versus non-GAAP measurements. A complete reconciliation between GAAP
and non-GAAP information referred to in this release is provided in the attached tables at the end of this press release. Conference Call The Adaptec first quarter fiscal 2009 earnings conference call is scheduled for 1:45 p.m. Pacific
Time on July 31, 2008. Individuals may participate via webcast by visiting www.adaptec.com/investor 15 minutes prior to the call. A
telephone replay of the teleconference will be available through August 14, 2008 by calling (888) 203-1112 in the U.S. or
(719) 457-0820 internationally and referencing reservation number 4308350
Adaptec, Inc.
(408) 957-2393
NMN Advisors
(510) 451-2952
Earnings per Share from Continuing Operations GAAP ($0.00) and $0.04 Non-GAAP
About Adaptec
Adaptec, Inc. (NASDAQ: ADPT) provides trusted storage solutions that reliably move, manage, and protect critical data and digital content. Adaptec's software and hardware-based solutions are delivered through leading original equipment manufacturers (OEMs) and channel partners to provide storage connectivity, data protection, and networked storage to enterprises, government organizations, medium and small businesses worldwide. More information is available at www.adaptec.com.
Safe Harbor Statement
This news release may include forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. Forward-looking statements are statements regarding future events or the future performance of Adaptec, and include statements regarding Adaptec's expectation that it will complete the remaining actions relating to its restructuring plan during the second quarter of fiscal 2009 and the total anticipated charge it expects to incur related to this restructuring plan, Adaptec's progress with respect to streamlining its operating model and its expectation regarding maintaining a strong pace of innoviation in the future. These forward-looking statements are based on current expectations, forecasts and assumptions and involve a number of risks and uncertainties that could cause actual results to differ materially from those anticipated by these forward-looking statements. These risks include: if we do not meet our restructuring objectives, we may have to continue to implement additional plans in order to reduce our operating costs; achieving necessary support from the contract manufacturers to which we have outsourced manufacturing, assembly and packaging of our products; retaining key management; Adaptec's ability to launch new software products; difficulty in forecasting the volume and timing of customer orders; reduced demand in the server, network storage and desktop computer markets; our target markets' failure to accept, or delay in accepting, network storage and other advanced storage solutions, including our SAS, SATA and iSCSI lines of products; decline in consumer acceptance of our current products; the timing and volume of orders by OEM customers for storage products; our ability to control and manage costs associated with the delivery of new products; and the adverse effects of the intense competition we face in our business. For a more complete discussion of risks related to our business, reference is made to the section titled "Risk Factors" included in our Annual Report on Form 10-K/A for the year ended March 31, 2008 on file with the Securities and Exchange Commission. Adaptec assumes no obligation to update any forward-looking information that is included in this release.
Adaptec is a registered trademark in the United States and other countries. Other product and company names are trademarks or registered trademarks of their respective owners.
###
Adaptec, Inc. To supplement its condensed consolidated financial statements in accordance with
generally accepted accounting principles (GAAP), the Company's earnings release contains non-GAAP financial measures that exclude
certain expenses, gains and losses. The Company believes that the use of non-GAAP financial measures provides useful information
to investors to gain an overall understanding of its current financial performance and its prospects for the future. Specifically, the
Company believes the non-GAAP results provide useful information to both management and investors by excluding certain expenses,
gains and losses that the Company believes are not indicative of its core operating results. In addition, non-GAAP financial measures
are used by management for budgeting and forecasting as well as subsequently measuring the Company's performance, and the
Company believes that it is providing investors with financial measures that most closely align to its internal measurement processes.
The Company also believes, based on feedback provided to the Company during its earnings calls' Q&A sessions and discussions
with the investment community, that the non-GAAP financial measures it provides enhance the ability of the investment community to
review the Company's results and projections. The non-GAAP financial information is presented using consistent methodology from quarter-to-quarter and
year-to-year. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be
considered a substitute for, or superior to, GAAP results. The non-GAAP financial measures presented by the Company may be different
than the non-GAAP financial measures presented by other companies. In addition, these non-GAAP financial measures are not based
on any comprehensive set of accounting rules or principles. The Company believes that non-GAAP financial measures have limitations
in that they do not reflect all of the amounts associated with the Company's results of operations as determined in accordance with
GAAP and that these measures should only be used to evaluate the Company's results of operations in conjunction with the
corresponding GAAP financial measures. The Company excludes the following expenses, gains and losses from its non-GAAP financial measures, when
applicable: Stock-based compensation expense: Stock-based compensation expense consists of expenses
recorded under SFAS 123(R), "Share-Based Payment," in connection with stock awards such as stock options,
restricted stock awards and restricted stock units granted under the Company's equity incentive plans and shares issued pursuant to
the Company's employee stock purchase plan. The Company excludes stock-based compensation expense from non-GAAP financial
measures because it is a non-cash measurement that does not reflect the Company's ongoing business; the Company believes that the
provision of non-GAAP information that excludes stock-based compensation improves the ability of investors to compare its period-
over-period operating results, as there is significant variability and unpredictability across companies with respect to this expense. Amortization of acquisition-related intangible assets: Amortization of acquisition-related intangible
assets primarily relate to core and existing technologies, and customer relationships that were acquired from prior
acquisitions. The Company excludes the amortization of acquisition-related intangible assets because it does not reflect the Company's
ongoing business and it does not have a direct correlation to the operation of the Company's business. In addition, in accordance with
GAAP, the Company generally recognizes expenses for internally-developed intangible assets as they are incurred, notwithstanding the
potential future benefit such assets may provide. Unlike internally-developed intangible assets, however, and also in accordance with
GAAP, the Company generally capitalizes the cost of acquired intangible assets and recognizes that cost as an expense over the
useful lives of the assets acquired (other than goodwill, which is not amortized, and acquired in-process technology, which is expensed
immediately, as required under GAAP). As a result of their GAAP treatment, there is an inherent lack of comparability between the
financial performance of internally-developed intangible assets and acquired intangible assets. Accordingly, the Company believes it is
useful to provide, as a supplement to its GAAP operating results, a non-GAAP financial measure that excludes the amortization of
acquired intangible assets in order to enhance the period-over-period comparison of its operating results, as there is significant
variability and unpredictability across companies with respect to this expense. Restructuring charges and other charges (gains): Restructuring charges primarily relate to activities engaged in
by the Company's management to simplify its infrastructure. Other charges (gains) primarily relate to the impairment of
acquisition-related intangible assets from prior acquisitions and gain on sale of long-lived assets. Restructuring charges and other charges
(gains) are excluded from non-GAAP financial measures because they are not considered core operating activities.
Although the Company has engaged in various restructuring activities over the past several years, each has been a
discrete, extraordinary event based on a unique set of business objectives. The Company does not engage in restructuring activities
in the ordinary course of business. As such, the Company believes it is appropriate to exclude restructuring charges
from its non-GAAP financial measures, as it enhances the ability of investors to compare the Company's period-over-period operating
results.
Other charges (gains) are also excluded from non-GAAP financial measures because the occurrence of such costs is infrequent.
Income taxes: Incremental income taxes associated with certain non-GAAP items
and a tax provision from certain discrete tax events that occurred during the first quarter of fiscal 2009, related to a
pre-acquisition adjustment on a foreign entity.
GAAP Condensed Consolidated Statements of Operations
(unaudited)
Three-Month Period Ended
----------------------------------------------------
June 30, March 31, June 30,
2008 2008 2007
---------------- ---------------- ----------------
(in thousands, except per share amounts)
Net revenues $ 31,503 $ 35,588 $ 36,102
Cost of revenues 16,821 19,106 24,593
---------------- ---------------- ----------------
Gross profit 14,682 16,482 11,509
---------------- ---------------- ----------------
Operating expenses:
Research and development 5,903 6,824 10,416
Selling, marketing
and administrative 9,497 11,682 13,460
Amortization of acquisition-
related intangible assets -- 631 643
Restructuring charges 1,837 613 1,526
Other charges (gains) -- 2,205 (5,914)
---------------- ---------------- ----------------
Total operating expenses 17,237 21,955 20,131
---------------- ---------------- ----------------
Loss from continuing operations (2,555) (5,473) (8,622)
Interest and other income 5,262 7,979 6,721
Interest expense (841) (872) (1,014)
---------------- ---------------- ----------------
Income (loss) from continuing operations
before income taxes 1,866 1,634 (2,915)
Provision for income taxes 1,913 315 214
---------------- ---------------- ----------------
Income (loss) from continuing operations, (47) 1,319 (3,129)
net of taxes
Discontinued operations, net of taxes
Loss from discontinued
operations, net of taxes (734) (1,398) (506)
Income from disposal of
discontinued operations,
net of taxes 5,794 623 --
---------------- ---------------- ----------------
Income (loss) from discontinued operations,
net of taxes 5,060 (775) (506)
---------------- ---------------- ----------------
Net income (loss) $ 5,013 $ 544 $ (3,635)
================ ================ ================
Income (loss) per common share:
Basic
Continuing operations $ (0.00) $ 0.01 $ (0.03)
Discontinued operations $ 0.04 $ (0.01) $ (0.00)
Net income (loss) $ 0.04 $ 0.00 $ (0.03)
Diluted
Continuing operations $ (0.00) $ 0.01 $ (0.03)
Discontinued operations $ 0.04 $ (0.01) $ (0.00)
Net income (loss) $ 0.04 $ 0.00 $ (0.03)
Shares used in computing
income (loss) per share:
Basic 119,192 119,163 117,897
Diluted 119,192 119,887 117,897
Adaptec, Inc.
Adaptec, Inc.
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Reconciliation of GAAP to Non-GAAP Operating Results
(unaudited)
Three-Month Period Ended
----------------------------------------------------
June 30, March 31, June 30,
2008 2008 2007
---------------- ---------------- ----------------
(in thousands)
GAAP income (loss) from continuing
operations, net of taxes $ (47) $ 1,319 $ (3,129)
Stock-based compensation expense 1,386 1,787 1,444
Amortization of acquisition-
related intangible assets -- 631 643
Restructuring charges 1,837 613 1,526
Other charges (gains) -- 2,205 (5,914)
Income taxes 1,617 90 (160)
---------------- ---------------- ----------------
Non-GAAP income (loss) from continuing
operations, net of taxes $ 4,793 $ 6,645 $ (5,590)
================ ================ ================
Adjustment for interest expense on 3/4%
Convertible Notes, net of taxes 762 743 --
---------------- ---------------- ----------------
Adjusted Non-GAAP income (loss) from continuing
operations, net of taxes - used only to
calculate diluted earnings per share $ 5,555 $ 7,388 $ (5,590)
================ ================ ================
GAAP net income (loss) $ 5,013 $ 544 $ (3,635)
Stock-based compensation expense 1,386 1,787 1,444
Amortization of acquisition-
related intangible assets -- 631 643
Restructuring charges 1,837 613 1,526
Other charges (gains) -- 2,205 (5,914)
Income taxes 1,617 90 (160)
Loss (income) from discontinued
operations, net of taxes (5,563) (131) 203
---------------- ---------------- ----------------
Non-GAAP net income (loss) $ 4,290 $ 5,739 $ (5,893)
================ ================ ================
Adjustment for interest expense on 3/4%
Convertible Notes, net of taxes 762 743 --
---------------- ---------------- ----------------
Adjusted Non-GAAP net income (loss) - used only
to calculate diluted earnings per share $ 5,052 $ 6,482 $ (5,893)
================ ================ ================
Shares used in computing
income (loss) per share:
Basic - GAAP and Non-GAAP 119,192 119,163 117,897
Diluted - GAAP 119,192 119,887 117,897
Employee stock options and other 1,067 -- --
3/4% Convertible Notes 19,224 19,224 --
---------------- ---------------- ----------------
Diluted - Non-GAAP 139,483 139,111 117,897
---------------- ---------------- ----------------
Summary Balance Sheet and Cash Flow Data
(unaudited)
As of
----------------------------------------------------------
Balance Sheet Data June 30, 2008 March 31, 2008 June 30, 2007
- ------------------------------------------------------------ ------------------ ------------------ ------------------
(in thousands)
Cash, cash equivalents and marketable securities $ 631,604 $ 626,216 $ 591,459
Accounts receivable, net 19,635 23,204 28,337
Inventories 6,147 9,926 24,678
Other intangible assets -- -- 4,837
Other assets 42,437 40,741 57,806
------------------ ------------------ ------------------
Total assets $ 699,823 $ 700,087 $ 707,117
================== ================== ==================
Current liabilities $ 30,082 $ 31,439 $ 56,774
Current portion of convertible notes 225,402 225,321 --
Convertible notes, less current portion and other
long-term obligations 17,894 19,231 232,378
Stockholders' equity 426,445 424,096 417,965
------------------ ------------------ ------------------
Total liabilities and stockholders' equity $ 699,823 $ 700,087 $ 707,117
================== ================== ==================
Three-Month Period Ended
----------------------------------------------------------
Cash Flow Data June 30, 2008 March 31, 2008 June 30, 2007
- ------------------------------------------------------------ ------------------ ------------------ ------------------
(in thousands)
Net income (loss) $ 5,013 $ 544 $ (3,635)
Less: Income (loss) from discontinued operations, net of taxes 5,060 (775) (506)
------------------ ------------------ ------------------
Income (loss) from continuing operations, net of taxes (47) 1,319 (3,129)
Adjustments to reconcile income (loss) from continuing
operations, net of taxes, to net cash provided by
(used in) operations:
Non-cash P&L items:
Stock-based compensation 1,386 1,787 1,444
Inventory-related charges 197 411 2,376
Depreciation and amortization 1,316 1,712 3,006
Impairment of long-lived assets -- 2,321 --
Gain on sale of long-lived assets -- -- (6,735)
Other items 60 368 72
Changes in assets and liabilities 4,644 14,819 (742)
------------------ ------------------ ------------------
Net cash provided by (used in) operating activities
of continuing operations 7,556 22,737 (3,708)
Net cash provided by (used in) operating activities
of discontinued operations (151) 2,776 1,665
------------------ ------------------ ------------------
Net cash provided by (used in) operating activities $ 7,405 $ 25,513 $ (2,043)
================== ================== ==================
Other significant cash flow activities:
Proceeds from issuance of common stock 3 36 636
Proceeds from sale of long-lived assets -- -- 19,881
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