-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KbM99ijPgxqPh9HkMFYewXsHeq141UqpuBbiKbYMVqaidm/lpMSapt9H/U90M0EM RAfm1eX9Ha3hQ4zbhvLczA== 0000084748-99-000005.txt : 19990517 0000084748-99-000005.hdr.sgml : 19990517 ACCESSION NUMBER: 0000084748-99-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990404 FILED AS OF DATE: 19990514 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROGERS CORP CENTRAL INDEX KEY: 0000084748 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS, MATERIALS, SYNTH RESINS & NONVULCAN ELASTOMERS [2821] IRS NUMBER: 060513860 STATE OF INCORPORATION: MA FISCAL YEAR END: 1228 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04347 FILM NUMBER: 99621868 BUSINESS ADDRESS: STREET 1: P.O. BOX 188 STREET 2: ONE TECHNOLOGY DRIVE CITY: ROGERS STATE: CT ZIP: 06263-0188 BUSINESS PHONE: 860 774-96 10-Q 1 Total pages included - 14 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended April 4, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________________ Commission file number 1-4347 ROGERS CORPORATION (Exact name of Registrant as specified in its charter) Massachusetts 06-0513860 (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) P.O. Box 188, One Technology Drive, Rogers, Connecticut 06263-0188 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (860) 774-9605 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares outstanding of the Registrant's classes of common stock as of May 2, 1999: Capital Stock, $1 Par Value - 7,644,340 shares ROGERS CORPORATION AND SUBSIDIARIES FORM 10-Q April 4, 1999 INDEX Page No. PART I - FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited): Consolidated Statements of Income -- Three Months Ended April 4, 1999 and April 5, 1998 3 Consolidated Balance Sheets -- April 4, 1999 and January 3, 1999 4-5 Consolidated Statements of Cash Flows -- Three Months Ended April 4, 1999 and April 5, 1998 6 Supplementary Notes 7-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-12 PART II - OTHER INFORMATION Item 6. Reports on Form 8-K 13 SIGNATURES 13 - 2 - PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except Per Share Amounts) Three Months Ended: April 4, 1999 April 5, 1998 (13 weeks) (14 weeks) Net Sales $ 64,904 $ 58,313 Cost of Sales 46,570 42,233 Selling and Administrative Expenses 8,853 7,272 Research and Development Expenses 2,624 2,611 Total Costs and Expenses 58,047 52,116 Operating Income 6,857 6,197 Other Income less Other Charges (392) (148) Interest Income, Net 58 231 Income Before Income Taxes 6,523 6,280 Income Taxes: Federal and Foreign 1,787 1,696 State 39 125 Net Income $ 4,697 $ 4,459 Net Income Per Share (Note G): Basic $ .62 $ .59 Diluted $ .60 $ .56 Shares Used in Computing (Note G): Basic 7,613,000 7,586,000 Diluted 7,842,000 7,960,000 The accompanying notes are an integral part of the consolidated financial statements. - 3 - ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ASSETS (Dollars in Thousands) April 4, 1999 January 3, 1999 Current Assets: Cash and Cash Equivalents $ 10,712 $ 9,593 Marketable Securities -- 256 Accounts Receivable, Net 39,741 32,590 Inventories: Raw Materials 7,736 10,392 In-Process and Finished 13,142 12,365 Total Inventories 20,878 22,757 Current Deferred Income Taxes 3,444 3,481 Assets Held for Sale, Net of Valuation Reserves of $492 in each period (Note B) 5,158 5,158 Other Current Assets 652 487 Total Current Assets 80,585 74,322 Property, Plant and Equipment, Net of Accumulated Depreciation of $71,136 and $69,051 77,088 74,811 Investment in Unconsolidated Joint Venture 4,843 5,467 Pension Asset 4,606 4,606 Goodwill and Other Intangibles, Net 14,855 14,935 Other Assets 1,936 2,033 Total Assets $183,913 $176,174 The accompanying notes are an integral part of the consolidated financial statements. - 4 - ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS - CONTINUED LIABILITIES AND SHAREHOLDERS' EQUITY (Dollars in Thousands) April 4, 1999 January 3, 1999 Current Liabilities: Accounts Payable $ 17,204 $ 17,766 Current Maturities of Long-Term Debt 600 600 Accrued Employee Benefits and Compensation 8,377 6,577 Accrued Income Taxes Payable 2,770 1,059 Taxes, Other than Federal and Foreign Income 1,623 1,038 Other Accrued Liabilities 6,739 5,265 Total Current Liabilities 37,313 32,305 Long-Term Debt, less Current Maturities 13,687 13,687 Noncurrent Deferred Income Taxes 5,781 5,938 Noncurrent Pension Liability 3,703 3,703 Noncurrent Retiree Health Care and Life Insurance Benefits 6,268 6,268 Other Long-Term Liabilities 3,817 4,042 Shareholders' Equity: Capital Stock, $1 Par Value: Authorized Shares 50,000,000; Issued Shares 7,643,766 and 7,630,466 7,644 7,630 Additional Paid-In Capital 33,432 33,323 Unrealized Gain/(Loss) on Marketable Securities -- (2) Minimum Pension Liability 78 78 Treasury Stock (38,400 and 12,800 shares) (1,058) (423) Currency Translation Adjustment 199 1,272 Retained Earnings 73,049 68,353 Total Shareholders' Equity 113,344 110,231 Total Liabilities and Shareholders' Equity $183,913 $176,174 The accompanying notes are an integral part of the consolidated financial statements. - 5 - ROGERS CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (Dollars in Thousands) Three Months Ended: April 4, April 5, 1999 1998 CASH FLOWS PROVIDED BY (USED IN) OPERATING ACTIVITIES: Net Income $ 4,697 $ 4,459 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: Depreciation and Amortization 2,980 2,236 Equity in Undistributed (Income) Loss of Unconsolidated Joint Ventures, Net 51 42 Noncurrent Pension and Postretirement Benefits 75 531 Other, Net (180) 247 Changes in Operating Assets and Liabilities Excluding Effects of Acquisition of Assets: Accounts Receivable (6,248) (4,493) Inventories 1,514 (1,217) Prepaid Expenses (192) (32) Accounts Payable and Accrued Expenses 5,147 771 Net Cash Provided by Operating Activities 7,844 2,544 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES: Capital Expenditures (2,898) (7,397) Acquisition of Business (4,302) -- Proceeds from Sale of Property, Plant and Equipment 4 -- Proceeds from Sale of Marketable Securities 256 -- Purchase of Marketable Securities -- (258) Investment in Unconsolidated Joint Ventures and Affiliates 737 333 Net Cash (Used in) Investing Activities (6,203) (7,322) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES: Proceeds from Short and Long-Term Borrowings 164 284 Repayments of Debt Principal -- (265) Acquisition of Treasury Stock (635) -- Proceeds from Sale of Capital Stock 123 630 Net Cash Provided by (Used in) Financing Activities (348) 649 Effect of Exchange Rate Changes on Cash (173) (399) Net Increase/(Decrease) in Cash and Cash Equivalents 1,120 (4,528) Cash and Cash Equivalents at Beginning of Year 9,592 18,791 Cash and Cash Equivalents at End of Quarter $ 10,712 $ 14,263 The accompanying notes are an integral part of the consolidated financial statements. - 6 - ROGERS CORPORATION AND SUBSIDIARIES SUPPLEMENTARY NOTES A. The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. For further information, refer to the audited consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the fiscal year ended January 3, 1999. B. Net Assets Held for Sale consist of land and a building in Chandler, Arizona, currently being leased to the purchaser of the Company's Flexible Interconnections Business in 1993. C. In September 1997 the Company cancelled its $5.0 million unsecured revolving credit agreement with Fleet National Bank and replaced it with an unsecured multi-currency revolving credit agreement, also with Fleet. Under the new arrangement, the Company can borrow up to $15.0 million, or the equivalent in Belgian Francs and/or Japanese Yen. Amounts borrowed under this agreement are to be paid in full by September 19, 2002. The Company borrowed 390,207,039 Belgian Francs under the new arrangement to facilitate the Rogers Induflex acquisition in Belgium in September 1997. D. Interest paid during the first three months of 1999 and 1998 was $153,000 and $231,000, respectively. E. Income taxes paid were $100,256 and $79,634 in the first three months of 1999 and 1998, respectively. F. The components of comprehensive income, net of related tax, for the three month periods ended April 4, 1999 and April 5, 1998 are as follows: Three Months Ended (Dollars in Thousands) April 4, 1999 April 5, 1998 Net income $ 4,697 $ 4,459 Foreign currency translation adjustments (1,073) (945) Unrealized gains on securities 2 3 Comprehensive income $ 3,626 $ 3,517 - 7 - SUPPLEMENTARY NOTES, CONTINUED G. The following table sets forth the computation of basic and diluted earnings per share in conformity with Statement of Financial Accounting Standards No. 128, "Earnings per Share": (Dollars in Thousands, Except Per Share Amounts) April 4, April 5, 1999 1998 Numerator: Net income $4,697 $4,459 Denominator: Denominator for basic earnings per share - weighted-average shares 7,613 7,586 Effect of stock options 229 374 Denominator for diluted earnings per share - adjusted weighted-average shares and assumed conversions 7,842 7,960 Basic earnings per share $ .62 $ .59 Diluted earnings per share $ .60 $ .56 H. The Company's fiscal year begins on the Monday nearest January 1 and ends on the Sunday nearest December 31. The fiscal year ending January 2, 2000 is a 52 week year and the quarter ending April 4, 1999 is a 13 week quarter. The fiscal year ended January 3, 1999 was a 53 week year and the quarter ended April 5, 1998 was a 14 week quarter. I. The Company adopted Statement of Financial Accounting Standards (FAS) No. 131, "Disclosures about Segments of an Enterprise and Related Information" in 1998 which changes the way the Company reports information about its operating segments. The quarterly information required by FAS No. 131 is presented below. Polymer Electronic Materials Materials Total (Dollars in Millions) Three Months ended April 4, 1999 Net Sales $32.5 $32.4 $64.9 Operating Income 4.1 2.8 6.9 Three Months ended April 5, 1998 Net Sales $29.8 $28.5 $58.3 Operating Income 2.7 3.5 6.2 Inter-segment sales, which are generally priced with reference to costs or prevailing market prices, are not material in relation to consolidated net sales and have been eliminated from the sales data in the previous tables. - 8 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net Sales of $65 million were up 11% over the record results of the first quarter of 1998. Combined Sales, which include one-half of the sales from the Company's two 50% owned joint ventures, grew 10% to $72 million for the quarter. The sales increase is primarily attributable to the rapid growth in sales of a customized FLEX-I-MID material to Hutchinson Technology Incorporated (HTI) and to the sales coming from two acquisitions completed since September 1998. Sales of Polymer Materials for the first three months increased 9% from the comparable 1998 period. Contributing to this increase in almost equal amounts were the Imation dampening sleeve business acquired at the end of September, 1998, and the engineered molding compounds business acquired from Cytec Fiberite in January of 1999. Both businesses have also had a positive impact on earnings in 1999. These more than offset the slight decline in sales of nitrophyl floats and the impact of several major programs of our silicone materials business unit reaching end-of-life status during 1998. Sales of Electronic Materials for the first quarter increased 14% over the same period in 1998. Sales of FLEX-I-MID adhesiveless laminate materials to HTI, the world leader in suspension assemblies for hard disk drives, continued to grow rapidly making an increasingly important contribution to sales. However, percentage margins on these sales are lower than for products Rogers manufactures. The materials are supplied by Mitsui Chemicals, Inc. under a Rogers technology license. The Company in turn resells the materials to HTI for its trace suspension assemblies which are used in advanced disk drives. First quarter sales of flexible circuit materials that Rogers manufactures were down 17% from the first three months of 1998. The largest producer of flexible circuits in the United States, and a major customer, experienced a decline in sales in 1998. Sales of flexible circuit materials to other customers increased dramatically but were not able to make up the difference. High frequency circuit material sales for wireless communications applications were at a record level in 1999 helped by growing demand in Europe and Asia. European needs for the Company's commercial microwave materials will now be primarily met by the recently completed laminating facility at the Company's Ghent, Belgium, operation. Profits before and after tax and earnings per share for the first three months of 1999 were the highest for any quarter in the Company's history. Compared with the record first quarter last year, earnings rose 5% from $4.5 million to $4.7 million. Diluted earnings per share for the quarter were $.60, up from $.56 in the first three months of 1998, an increase of 7%. - 9 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Manufacturing profit as a percentage of sales was 28% in the first quarter of both 1998 and 1999. This percentage continues to be held down by the lower margin on the sales of FLEX-I-MID materials to HTI. Selling and administrative expenses for the first three months of 1999 increased in both dollars and as a percentage of sales over the comparable 1998 period. The increase primarily reflects the strengthening of Sales and Marketing capabilities at both the Corporate and the divisional levels, and the continued development of information systems. It also includes higher payroll costs related to bonus accruals and terminations. Research and Development expense was approximately the same in the first three months of 1999 ($ 2,624,000) and 1998 ($2,611,000). Major development activities in circuit materials included process and product improvements to the RO3000 and RO4000 high frequency circuit board materials which are designed for use in high volume, low cost commercial wireless communication applications. These activities included the development of a bondply addition to the RO4000 family that will allow multi-layer circuit boards to be made using RO4000 laminates, as well as the development of materials with improved thermal properties. Flexible circuit materials development efforts focused on the introduction of a new epoxy based adhesive system, R/flex Crystal, on manufacturing improvements designed to significantly improve the dimensional stability of R/flex laminates, and on development of new flexible circuit materials. PORON materials development activities included formulations for industrial footwear, and healthcare applications; in addition, new thinner adhesive-backed R/bak tapes are being developed for the flexographic printing market. Molding materials development continued to emphasize tougher, more dimensionally stable materials for small electrical motor commutators and integration of the Cytec acquisition technology into Rogers. Net interest income for 1999 decreased significantly from 1998 due mainly to the lower cash balances in 1999. The 1998 balance also included a refund of interest received from the Internal Revenue Service. Under present arrangements the Company can borrow up to $15.0 million or the equivalent in Belgian Francs and/or Japanese Yen under an unsecured multi-currency revolving credit agreement with Fleet National Bank. Amounts borrowed under this agreement are to be repaid in full by September 19, 2002. The Company has borrowed 390 million Belgian Francs under this agreement as of April 4, 1999. - 10 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED Other income less other charges decreased by more than $200,000 when comparing 1999 first quarter with the comparable 1998 period. Lower royalty and joint venture income account for a significant portion of this decrease. Profits of Rogers Inoac Corporation, the Company's joint venture with Inoac Corporation, are improving despite continued weakness in the Japanese economy and the loss last year of a major customer in the disk drive industry. Durel Corporation, our joint venture with 3M in electroluminescent lamps had record first quarter sales in 1999; however, the substantial costs associated with the patent infringement lawsuit brought by Durel to protect its proprietary technology resulted in a first quarter loss for this joint venture and overall lower joint venture income for the Company. The Durel lawsuit trial is scheduled to begin in June and the Company remains hopeful of a favorable income. Net cash provided by operating activities in the first three months of 1999 totaled $7.8 million compared with $2.5 million in the comparable 1998 period. This increase is attributable to the change in the level of Accrued Expenses, lower inventory levels and higher depreciation expense in 1999. In 1998 investments in capital equipment topped $7 million in the first quarter and finished at $29 million for the year. In 1999 capital expenditures will be reduced to more traditional levels and the first quarter totaled $2.9 million. Management anticipates that capital spending for 1999, primarily for new process equipment and new information systems capability will total about $15 million. It is anticipated that this spending will be financed with internally generated funds. Management expects strong operating cash flow for 1999 and believes that in the near term internally generated funds and its credit facility with Fleet National Bank will be sufficient to meet the needs of the business. The Company continually reviews and assesses its lending relationships. The year 2000 issue is the result of computer programs using two digits rather than four to define the applicable year. Such software may recognize a date using "00" as the year 1900 rather than the year 2000. This could result in systems failures or miscalculations leading to disruptions in a company's activities and operations. If a company, its significant customers, or suppliers fail to make necessary modifications and conversions on a timely basis, the year 2000 issue could have a material adverse effect on a company's operations. The Company is conducting a review of its systems and operations, including systems currently being implemented, to identify computer hardware, software, and process control systems that do not properly recognize dates after December 31, 1999, including those linked to third party systems. The Company is now in the process of - 11 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED reprogramming or replacing hardware, software, and process control systems as necessary to ensure compliance with year 2000 requirements. The Company is confident that its own internal systems are year 2000 compliant or planned upgrades will be in place. The Company has also initiated communications, primarily in the form of questionnaires, with third parties whose computer systems' functionality could directly impact the operations of the Company. The costs of the Company's year 2000 compliance efforts are being funded with cash flows from operations and are being expensed as incurred. In total these costs are not expected to be substantially different from the normal, recurring costs that are incurred for systems development and implementation. Although the Company is not aware of any material operational issues or costs associated with preparing its internal systems for the year 2000, there can be no assurance that the Company will not experience serious unanticipated negative consequences and/or material costs caused by undetected errors or defects in the technology used in its internal operating systems which are composed predominantly of third party software and hardware technology. Non-compliance by any of the Company's major distributors, suppliers, customers, vendors, or financial organizations could result in business disruptions that could have a material adverse effect on the Company's results of operations, liquidity and financial condition. The Company will develop a contingency plan based on its assessment of significant third party compliance. The goal of the contingency plan will be to minimize the Company's exposure to work slowdowns or business disruptions and any adverse effects on the Company's results of operations. The Company is subject to federal, state, and local laws and regulations concerning the environment and is currently engaged in proceedings involving a number of sites under these laws, as a participant in a group of potentially responsible parties (PRPs). The Company is currently involved as a PRP in five cases involving waste disposal sites, all of which are Superfund sites. Several of these proceedings are at a preliminary stage and it is impossible to estimate the cost of remediation, the timing and extent of remedial action which may be required by governmental authorities, and the amount of liability, if any, of the Company alone or in relation to that of any other PRPs. The Company also has been seeking to identify insurance coverage with respect to several of these matters. Where it has been possible to make a reasonable estimate of the Company's liability, a reserve has been established. Insurance proceeds have only been taken into account when they have been confirmed by or received from the insurance company. Actual costs to be incurred in future periods may vary from these estimates. Based on facts - 12 - ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONTINUED presently known to it, the Company does not believe that the outcome of these proceedings will have a material adverse effect on its financial position. In addition to the above proceedings, the Company has been actively working with the Connecticut Department of Environmental Protection (CT DEP) related to certain polychlorinated biphenyl (PCB) contamination in the soil beneath a section of cement flooring at its Woodstock, Connecticut facility. The Company has developed a remediation plan which has been approved by the CT DEP, and it is expected that removal of soil contamination will be completed in 1999. On the basis of estimates prepared by environmental engineers and consultants, the Company recorded a reserve of approximately $900,000 in 1994, and based on updated estimates provided an additional $700,000 in 1997 and $600,000 in 1998 for costs related to this matter. During 1995, $300,000 was charged against this reserve and $200,000 per year was charged in 1996, 1997 and 1998. Management believes, based on facts currently available, that the implementation of the aforementioned remediation will not have a material additional adverse impact on earnings. In this same matter the Unites States Environmental Protection Agency (EPA) has alleged that the Company improperly disposed of PCBs. An administrative law judge found the Company liable for this alleged disposal and assessed a penalty of approximately $300,000. The Company has reflected this fine in expense in 1998 but disputes the EPA allegations and has appealed the administrative law judge's findings and penalty assessment. The Company has not had any material recurring costs and capital expenditures relating to environmental matters, except as specifically described in the preceding statements. Statements in this report that are not strictly historical may be deemed to be "forward-Looking" statements which should be considered as subject to the many uncertainties that exist in the Company's operations and environment. These uncertainties, which include economic conditions, market demand and pricing, competitive and cost factors, and the like, are incorporated by reference in the Rogers Corporation 1998 Form 10-K filed with the Securities and Exchange Commission. Such factors could cause actual results to differ materially from those in the forward-looking statements. - 13 - PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) List of Exhibits: (27) Financial Data Schedule (b) There were no reports on Form 8-K filed for the three months ended April 4, 1999. SIGNATURES 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 thereunto duly authorized. ROGERS CORPORATION (Registrant) s/ Frank H. Roland __________________________________ Frank H. Roland Vice President, Finance and Chief Financial Officer Dated: May 14, 1999 EX-27 2
5 1,000 3-MOS JAN-02-2000 APR-04-1999 10712 0 40243 502 20878 80585 148224 71136 183913 37313 0 0 0 7644 105700 183913 64904 64904 46570 58047 392 0 (58) 6523 1826 4697 0 0 0 4697 .62 .60
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