SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
For the quarterly period ended March 31, 2000
Commission File Number 1-12744
MARTIN MARIETTA MATERIALS, INC.
North Carolina | 56-1848578 | |||
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) | |||
2710 Wycliff Road, Raleigh, NC | 27607-3033 | |||
(Address of principal executive offices) | (Zip Code) | |||
Registrants telephone number, including area code | 919-781-4550 | |||
Former name: | None |
|
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 [ ]
Indicate the number of shares outstanding of each of the issuers classes of Common Stock, as of the latest practicable date.
Class | Outstanding as of April 30, 2000 | |||
Common Stock, $.01 par value | 46,758,182 |
Page 1 of 18
Exhibit Index is on Page 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
FORM 10-Q
For the Quarter Ended March 31, 2000
INDEX
Page | ||||||||
Part I. | Financial Information: | |||||||
Item 1. | Financial Statements. | |||||||
Condensed Consolidated Balance Sheets March 31, 2000 and December 31, 1999 | 3 | |||||||
Condensed Consolidated Statements of Earnings Three Months Ended March 31, 2000 and 1999 | 4 | |||||||
Condensed Consolidated Statements of Cash Flows Three Months Ended March 31, 2000 and 1999 | 5 | |||||||
Notes to Condensed Consolidated Financial Statements | 6 | |||||||
Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations. | 9 | ||||||
Part II. | Other Information: | |||||||
Item 1. | Legal Proceedings. | 14 | ||||||
Item 4. | Submission of Matters to a Vote of Security Holders. | 14 | ||||||
Item 5. | Other Information. | 14 | ||||||
Item 6. | Exhibits and Reports on Form 8-K. | 15 | ||||||
Signatures | 16 | |||||||
Exhibit Index | 17 |
Page 2 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
March 31, | December 31, | |||||||||
2000 | 1999 | |||||||||
(Dollars in Thousands) | ||||||||||
ASSETS | ||||||||||
Current assets: | ||||||||||
Cash and cash equivalents | $ | | $ | 3,403 | ||||||
Accounts receivable, net | 194,152 | 197,554 | ||||||||
Inventories, net | 186,924 | 172,865 | ||||||||
Other current assets | 30,765 | 29,543 | ||||||||
Total Current Assets | 411,841 | 403,365 | ||||||||
Property, plant and equipment | 1,686,660 | 1,653,208 | ||||||||
Allowances for depreciation, depletion and amortization | (827,807 | ) | (806,215 | ) | ||||||
Net property, plant and equipment | 858,853 | 846,993 | ||||||||
Cost in excess of net assets acquired | 373,509 | 375,327 | ||||||||
Other noncurrent assets | 122,202 | 116,889 | ||||||||
Total Assets | $ | 1,766,405 | $ | 1,742,574 | ||||||
LIABILITIES AND SHAREHOLDERS EQUITY | ||||||||||
Total Current Liabilities | $ | 204,834 | $ | 182,696 | ||||||
Long-term debt and commercial paper | 601,654 | 602,011 | ||||||||
Other noncurrent liabilities | 184,026 | 183,861 | ||||||||
Total Liabilities | 990,514 | 968,568 | ||||||||
Shareholders equity: | ||||||||||
Common stock, par value $.01 per share | 467 | 467 | ||||||||
Additional paid-in capital | 354,676 | 354,046 | ||||||||
Retained earnings | 420,748 | 419,493 | ||||||||
Total Shareholders Equity | 775,891 | 774,006 | ||||||||
Total Liabilities and Shareholders Equity | $ | 1,766,405 | $ | 1,742,574 | ||||||
See accompanying notes to condensed consolidated financial statements.
Page 3 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
Three Months Ended | ||||||||||
March 31, | ||||||||||
2000 | 1999 | |||||||||
(Dollars in Thousands, Except Per Share Data) | ||||||||||
Net sales | $ | 276,131 | $ | 241,061 | ||||||
Cost of sales | 231,773 | 201,319 | ||||||||
Gross Profit | 44,358 | 39,742 | ||||||||
Selling, general and administrative expenses | 23,592 | 22,746 | ||||||||
Research and development | 620 | 932 | ||||||||
Earnings from Operations | 20,146 | 16,064 | ||||||||
Interest expense | (10,169 | ) | (9,246 | ) | ||||||
Other income and (expenses), net | 1,346 | 5,378 | ||||||||
Earnings before Taxes on Income | 11,323 | 12,196 | ||||||||
Taxes on Income | 3,993 | 4,256 | ||||||||
Net Earnings | $ | 7,330 | $ | 7,940 | ||||||
Net Earnings Per Common Share | ||||||||||
Basic | $ | 0.16 | $ | 0.17 | ||||||
Diluted | $ | 0.16 | $ | 0.17 | ||||||
Average Number of Common Shares Outstanding | ||||||||||
Basic | 46,725,456 | 46,635,302 | ||||||||
Diluted | 46,885,058 | 46,901,716 |
See accompanying notes to condensed consolidated financial statements.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
Three Months Ended | |||||||||
March 31, | |||||||||
2000 | 1999 | ||||||||
(Dollars in Thousands) | |||||||||
Net cash provided by operating activities | $ | 26,741 | $ | 29,220 | |||||
Investing activities: | |||||||||
Additions to property, plant and equipment | (34,002 | ) | (29,002 | ) | |||||
Acquisitions, net | (14,218 | ) | 184 | ||||||
Other investing activities, net | 2,205 | 730 | |||||||
Net cash used for investing activities | (46,015 | ) | (28,088 | ) | |||||
Financing activities: | |||||||||
Net principal (repayments)/borrowings on long-term debt | (7,573 | ) | (360 | ) | |||||
Dividends paid | (6,075 | ) | (6,063 | ) | |||||
Loans payable | 28,226 | (1,000 | ) | ||||||
Issuance of common stock | 631 | 692 | |||||||
Net cash provided by (used for) financing activities | 15,209 | (6,731 | ) | ||||||
Net decrease in cash and cash equivalents | (4,065 | ) | (5,599 | ) | |||||
Cash and cash equivalents, beginning of period | 3,403 | 14,586 | |||||||
(Book overdraft) cash and cash equivalents, end of period | $ | (662 | ) | $ | 8,987 | ||||
See accompanying notes to condensed consolidated financial statements.
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MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. | The accompanying unaudited condensed consolidated financial statements of Martin Marietta Materials, Inc. (the Corporation) have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to the Quarterly Report on Form 10-Q and to Article 10 of Regulation S-X. The Corporation has continued to follow the accounting policies set forth in the audited consolidated financial statements and related notes thereto included in the Corporations Annual Report on Form 10-K for the year ended December 31, 1999, filed with the Securities and Exchange Commission on March 27, 2000. In the opinion of management, the interim financial information provided herein reflects all adjustments (consisting of normal recurring accruals) necessary for a fair presentation of the results of operations for the interim periods. The results of operations for the three months ended March 31, 2000, are not necessarily indicative of the results to be expected for the full year. | |
2. | Inventories |
March 31, | December 31, | |||||||
2000 | 1999 | |||||||
(Dollars in Thousands) | ||||||||
Finished products | $ | 157,954 | $ | 143,776 | ||||
Product in process and raw materials | 9,057 | 9,972 | ||||||
Supplies and expendable parts | 26,913 | 25,862 | ||||||
193,924 | 179,610 | |||||||
Less allowances | (7,000 | ) | (6,745 | ) | ||||
Total | $ | 186,924 | $ | 172,865 | ||||
3. | Long-Term Debt |
March 31, | December 31, | |||||||
2000 | 1999 | |||||||
(Dollars in Thousands) | ||||||||
6.9% Notes, due 2007 | $ | 124,957 | $ | 124,956 | ||||
7% Debentures, due 2025 | 124,218 | 124,215 | ||||||
5.875% Notes, due 2008 | 199,079 | 199,059 | ||||||
Commercial paper, interest rates ranging from 5.96% to 6.33% | 205,000 | 180,000 | ||||||
Acquisition notes, interest rates ranging from 5.60% to 10.00% | 5,232 | 12,395 | ||||||
Other notes | 4,372 | 1,108 | ||||||
662,858 | 641,733 | |||||||
Less current maturities | (61,204 | ) | (39,722 | ) | ||||
Total | $ | 601,654 | $ | 602,011 | ||||
Page 6 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. | Long-Term Debt (continued) | |
No borrowings were outstanding under either of the Corporations revolving credit agreements at March 31, 2000. However, these agreements support commercial paper borrowings of $205 million outstanding at March 31, 2000, of which $150 million has been classified as long-term debt in the Corporations consolidated balance sheet based on managements ability and intention to maintain this debt outstanding for at least one year. At May 1, 2000, $210 million was outstanding under the Corporations commercial borrowing obligations. See the Liquidity and Capital Resources discussion contained in the Managements Discussion and Analysis of Financial Condition and Results of Operations on page 11 of this Form 10-Q. | ||
The Corporations interest payments were approximately $7.6 million in 2000 and $6.4 million in 1999 for the three months ended March 31. | ||
4. | Income Taxes | |
The Corporations effective income tax rate for the first three months was 35.3% in 2000 and 34.9% in 1999. The effective rate for the first quarter of 2000 was slightly higher than the current federal corporate income tax rate of 35% due to the effect of several offsetting factors. The Corporations effective tax rate reflects the effect of state income taxes and the impact of differences in book and tax accounting arising from the net permanent benefits associated with the depletion allowances for mineral reserves, amortization of certain goodwill balances, foreign operating earnings, and earnings from nonconsolidated investments. | ||
The Corporations income tax payments were approximately $2.3 million in 2000 and $3.9 million in 1999, for the three months ended March 31. | ||
5. | Contingencies | |
In the opinion of management and counsel, it is unlikely that the outcome of litigation and other proceedings, including those pertaining to environmental matters, relating to the Corporation and its subsidiaries, will have a material adverse effect on the results of the Corporations operations or its financial position. |
Page 7 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6. | Other Matters | |
In June 1998, the FASB issued the Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (FAS 133), which was required to be adopted in years beginning after June 15, 1999. The FASB amended FAS 133 and issued Statement of Financial Accounting Standards No. 137, Accounting for Derivative Instruments and Hedging Activities Deferral of the Effective Date of FASB Statement No. 133 (FAS 137), which was issued in June 1999. FAS 137 deferred the effective date of adoption of FAS 133 until all fiscal quarters of all fiscal years beginning after June 15, 2000. Because of the Corporations minimal use of derivatives, if any, management does not anticipate that the adoption of FAS 133 will have a significant impact on net earnings or the financial position of the Corporation. |
Page 8 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
OVERVIEW Martin Marietta Materials, Inc., (the Corporation) operates in two principal business segments: aggregates products and magnesia-based products. The Corporations sales and earnings are predominately derived from its aggregates segment, which processes and sells granite, sandstone, limestone, and other aggregates products from a network of approximately 300 quarries and distribution facilities in more than 20 states in the southeastern, southwestern, midwestern and central regions of the United States and in the Bahama Islands and Canada. The divisions products are used primarily by commercial customers principally in domestic construction of highways and other infrastructure projects and for commercial and residential buildings. As a result of 1998 and 1999 acquisitions of asphalt production, ready mixed concrete operations and road construction companies, the Corporation vertically integrated in other construction materials businesses in Louisiana, Arkansas and Texas. The magnesia-based products segment produces refractory materials and dolomitic lime used in domestic and foreign basic steel production and produces chemicals products used in industrial, agricultural and environmental applications. The magnesia-based products segment derives a major portion of its sales and earnings from the products used in the steel industry.
RESULTS OF OPERATIONS Consolidated net sales for the quarter were $276.1 million, a 14% increase over 1999 first quarter sales of $241.0 million. Consolidated earnings from operations were $20.1 million in the first three months of 2000 compared with $16.1 million in the first three months of 1999. Consolidated net earnings for the quarter were $7.3 million, or $0.16 per diluted share, a decrease of $0.6 million from 1999 first quarter net earnings of $7.9 million, or $0.17 per diluted share.
Sales for the Aggregates division increased 17% to $243.7 million for the first quarter of 2000, compared with the year-earlier period. The divisions operating profits were $17.7 million for the period compared to the prior years first quarter earnings from operations of $15.6 million. The increase in sales resulted primarily from strong performance in both volume and pricing in the Corporations heritage aggregates operations. Operating margin from heritage operations increased almost 100 basis points during the quarter when compared to the prior years comparable quarter. During the quarter, the division was able to overcome the negative impact of record snowfall in North Carolina, as well as a significant increase in diesel fuel costs in excess of the comparable prior-year period.
The Aggregates divisions business is significantly impacted by seasonal changes and other weather-related conditions. Consequently, the Aggregates divisions production and shipment levels coincide with general construction activity levels, most of which occur in the divisions markets typically during the spring, summer, and fall seasons. Management continues to believe the construction industrys overall aggregates annual consumption level and the Corporations annual production and shipments, excluding acquisitions, will experience moderate overall growth for the full year 2000, compared with the prior year. Further, management continues to believe that average selling prices for heritage aggregates operations are expected to increase 3% to 4%, outpacing potential increases in production costs in 2000 for comparable heritage aggregates operations. During the quarter ended March 31, 2000, heritage aggregates shipments volume increased almost 2% and average selling prices increased 4.6%. However, because of the potentially significant impact of weather on the Corporations operations, first quarter results are not necessarily indicative of expected performance for the year. Yet, for 2000, management currently believes that strong first-quarter performance will be followed by strong performance for the year; although there are no guarantees of such performance.
The Magnesia Specialties division had first quarter 2000 sales of $32.4 million, a slight increase of approximately 1% compared with the first three months of 1999. The divisions first quarter earnings from operations increased to $2.4 million from $0.5 million in the first quarter of 1999, as business experienced a stronger operating environment as compared to the prior year. Magnesia Specialties divisions increased sales and earnings in the first quarter resulted from improving steel industry performance, continued strong chemicals sales and a better balance between production and sales.
(Continued)
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
First Quarter Ended March 31, 2000 and 1999
The following table presents net sales, gross profit, selling, general and administrative expense, and earnings from operations data for the Corporation and each of its divisions for the three months ended March 31, 2000 and 1999. In each case, the data is stated as a percentage of net sales, of the Corporation or the relevant division, as the case may be:
Three Months Ended | ||||||||||||||||||
March 31, | ||||||||||||||||||
(Dollars in Thousands) | ||||||||||||||||||
2000 | 1999 | |||||||||||||||||
% of | % of | |||||||||||||||||
Amount | Net Sales | Amount | Net Sales | |||||||||||||||
Net sales: | ||||||||||||||||||
Aggregates | $ | 243,727 | 100.0 | $ | 208,943 | 100.0 | ||||||||||||
Magnesia Specialties | 32,404 | 100.0 | 32,118 | 100.0 | ||||||||||||||
Total | 276,131 | 100.0 | 241,061 | 100.0 | ||||||||||||||
Gross profit: | ||||||||||||||||||
Aggregates | 37,255 | 15.3 | 34,335 | 16.4 | ||||||||||||||
Magnesia Specialties | 7,103 | 21.9 | 5,407 | 16.8 | ||||||||||||||
Total | 44,358 | 16.1 | 39,742 | 16.5 | ||||||||||||||
Selling, general & administrative expense: | ||||||||||||||||||
Aggregates | 19,438 | 8.0 | 18,419 | 8.8 | ||||||||||||||
Magnesia Specialties | 4,154 | 12.8 | 4,327 | 13.5 | ||||||||||||||
Total | 23,592 | 8.5 | 22,746 | 9.4 | ||||||||||||||
Earnings from operations: | ||||||||||||||||||
Aggregates | 17,734 | 7.3 | 15,598 | 7.5 | ||||||||||||||
Magnesia Specialties | 2,412 | 7.4 | 466 | 1.5 | ||||||||||||||
Total | $ | 20,146 | 7.3 | $ | 16,064 | 6.7 |
(Continued)
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
First Quarter Ended March 31, 2000 and 1999
Other income and expenses, net, for the quarter ended March 31, was $1.3 million in income in 2000 compared with $5.4 million in 1999. In addition to several offsetting amounts, other income and expenses, net, are comprised generally of interest income, gains and losses associated with the disposition of certain assets, gains and losses related to certain amounts receivable, income from non-operating services, costs associated with the commercialization of certain new technologies, and net equity earnings from non-consolidated investments. Further, in 1999, other income and expenses, net, included a non-recurring settlement from an antitrust claim.
Interest expense was $10.2 million in the first quarter, compared to $9.2 million in the first quarter of 1999.
The Corporations estimated effective income tax rate for the first three months was 35.3% in 2000 and 34.9% in 1999. See Note 4 of the Notes to Condensed Consolidated Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES Net cash flow provided by operating activities during the first quarter of 2000 was $26.7 million compared with $29.2 million in the comparable period of 1999. The cash flow for both 2000 and 1999 was principally from earnings, before deducting depreciation, depletion and amortization, offset by working capital requirements. Depreciation, depletion and amortization was $33.1 million and $29.4 million for the three months ended March 31, 2000 and 1999, respectively. The seasonal nature of the construction aggregates business impacts quarterly net cash provided by operating activities when compared with the year. Full year 1999 net cash provided by operating activities was $223.7 million, compared with $29.2 million provided by operations in the first quarter of 1999.
First quarter capital expenditures, exclusive of acquisitions, were $34.0 million in 2000 and $29.0 million in 1999. Capital expenditures are expected to be approximately $220 million for 2000, exclusive of acquisitions. Comparable full year capital expenditures were $137.8 million in 1999. During the first quarter 2000, the Corporation spent $14.2 million in continuation of its expansion strategy.
The Corporation continues to rely upon internally generated funds and access to capital markets, including its two revolving credit agreements and a cash management facility, to meet its liquidity requirements, finance its operations, and fund its capital requirements. With respect to the Corporations ability to access the public market, currently, management has the authority to file a universal shelf registration statement with the Commission for up to $500 million in issuance of either debt or equity securities. It should be noted, however, that the Corporation has not determined the timing when, or the amount for which, it may file such shelf registration.
(Continued)
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
First Quarter Ended March 31, 2000 and 1999
The Corporations ability to borrow or issue debt securities is dependent, among other things, upon prevailing economic, financial and market conditions.
Based on prior performance and current expectations, the Corporations management believes that cash flows from internally generated funds and its access to capital markets are expected to continue to be sufficient to provide the capital resources necessary to fund the operating needs of its existing businesses, cover debt service requirements, and allow for payment of dividends in 2000. The Corporation may be required to obtain additional levels of financing in order to fund certain strategic acquisitions if any such opportunities arise. Currently, the Corporations senior unsecured debt is rated A by Standard & Poors and A3 by Moodys. The Corporations commercial paper obligations are rated A-1 by Standard & Poors, P-2 by Moodys and F-1 by Fitch IBCA, Inc. While management believes its credit ratings will remain at an investment-grade level, no assurance can be given that these ratings will remain at the above-mentioned levels.
Page 12 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
First Quarter Ended March 31, 2000 and 1999
ACCOUNTING CHANGES The accounting changes that currently impact the Corporation are included in Note 6 to the Condensed Consolidated Financial Statements.
OTHER MATTERS Investors are cautioned that statements in this Quarterly Report on Form 10-Q that relate to the future are, by their nature, uncertain and dependent upon numerous contingencies including political, economic, regulatory, climatic, competitive, and technological any of which could cause actual results and events to differ materially from those indicated in such forward-looking statements. Additional information regarding these and other risk factors and uncertainties may be found in the Corporations other filings, which are made from time, to time with the Securities and Exchange Commission.
Page 13 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Part I. Item 3. Legal Proceedings of the Martin Marietta Materials, Inc. Annual Report on Form 10-K for the year ended December 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders.
(b) No matters were submitted to a vote of security holders during the first quarter of 1999.
Item 5. Other Information.
On March 23, 2000, the Corporation announced the resolution of a lawsuit brought by Vulcan Materials against Martin Marietta Materials Southwest, Inc. (a wholly-owned subsidiary of Martin Marietta Materials, Inc. that is formerly known as Redland Stone Products Company), headquartered in San Antonio, Texas and other defendants. All parties have resolved the issues in the case, have entered into mutual releases and have agreed to dismiss all claims and counterclaims.
Page 14 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
Exhibit No. | Document | |||
11.01 | Martin Marietta Materials, Inc. and Consolidated Subsidiaries Computation of Earnings per Share for the Quarter ended March 31, 2000 and 1999 | |||
27.01 | Financial Data Schedule (for Securities and Exchange Commission use only) |
Page 15 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
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.
MARTIN MARIETTA MATERIALS, INC. | |
(Registrant) |
Date: May 12, 2000
By: /s/ JANICE K. HENRY |
|
|
Janice K. Henry | |
Senior Vice President, Chief | |
Financial Officer and Treasurer |
Page 16 of 18
MARTIN MARIETTA MATERIALS, INC. AND CONSOLIDATED SUBSIDIARIES
EXHIBIT INDEX
Exhibit No. | Document | Page | ||||||
11.01 | Martin Marietta Materials, Inc. and Consolidated Subsidiaries Computation of Earnings per Share for the Quarter Ended March 31, 2000 and 1999 | |||||||
27.01 | Financial Data Schedule (for Securities and Exchange Commission use only) |
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