-----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, CGvnKPZhNxIKsFwRy4owCiMOwNmINtRWyEl5sEFqC21Y9XWG0i39+jWRz5AO+wZM ctrkqaMiRX1fTXQpT8wDzA== 0000914760-99-000149.txt : 19990813 0000914760-99-000149.hdr.sgml : 19990813 ACCESSION NUMBER: 0000914760-99-000149 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: THOMAS INDUSTRIES INC CENTRAL INDEX KEY: 0000097886 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC LIGHTING & WIRING EQUIPMENT [3640] IRS NUMBER: 610505332 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-05426 FILM NUMBER: 99685537 BUSINESS ADDRESS: STREET 1: 4360 BROWNBORO ROAD STREET 2: SUITE 300 CITY: LOUISVILLE STATE: KY ZIP: 40207 BUSINESS PHONE: 5028934600 MAIL ADDRESS: STREET 1: 4360 BROWNBORO ROAD STREET 2: SUITE 300 CITY: LOUISVILLE STATE: KY ZIP: 40207 10-Q 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ X ] For the quarterly period ended: June 30, 1999 ------------------------------------------------ OR TRANSITION REPORT PURSUANT TO SECTION 12 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [ ] For the transition period from to ------------------------ ----------------------- Commission File Number 1-5426. ------------------------------ THOMAS INDUSTRIES INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Delaware 61-0505332 - ---------------------------------------- ------------------------------ (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 4360 Brownsboro Road, Louisville, Kentucky 40207 - ---------------------------------------- ------------------------------ (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code: 502/893-4600 ------------------------------ 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 twelve 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 issuer's Common Stock, $1 par value, as of July 31, 1999, was 15,797,124 shares. PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) THOMAS INDUSTRIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) (Dollars in Thousands Except Amounts Per Share) Three Months Ended Six Months Ended June 30 June 30 ------------------ ------------------ 1999 1998 1999 1998 ---- ---- ---- ---- Net sales $47,467 $46,336 $93,768 $94,545 Cost of products sold 30,391 29,058 59,884 59,639 ------ ------ ------ ------ Gross profit 17,076 17,278 33,884 34,906 Selling, general, and administrative expenses 10,100 10,075 21,352 21,183 Equity income from Lighting 5,652 5,211 10,637 8,322 ------ ------ ------ ------ Operating income 12,628 12,414 23,169 22,045 Interest expense 1,137 1,581 2,322 3,057 Interest income and other 543 79 1,044 258 ------ ------ ------ ------ Income before income taxes 12,034 10,912 21,891 19,246 Income taxes 4,753 4,037 8,736 7,121 ------ ------ ------ ------ Net income $ 7,281 $ 6,875 $13,155 $12,125 ====== ====== ====== ====== Net income per share Basic $.46 $.43 $.83 $.76 Diluted $.45 $.42 $.81 $.74 Dividends declared per share $.075 $.075 $.15 $.15 Weighted average number of shares outstanding Basic 15,791 15,874 15,775 15,869 Diluted 16,254 16,524 16,188 16,474 Effective August 30, 1998, Thomas Industries Inc. ("Thomas") and The Genlyte Group ("Genlyte") formed Genlyte Thomas Group LLC ("GTG"), combining Thomas' lighting business with Genlyte (the "Joint Venture"). Genlyte has a 68% interest in GTG, and Thomas holds a 32% interest, which is accounted for using the equity method of accounting. Thomas changed its method of accounting for the lighting business contributed to GTG to the equity method effective January 1, 1998, the beginning of Thomas' prior fiscal year, restating results for the quarters ended March 31 and June 30, 1998. The restatement of results using the equity method for the 1998 quarterly periods prior to consummation of the Joint Venture had no effect on net income or common shareholders' equity but did reduce its revenues, costs, assets, and liabilities, and changed certain components of cash flow. See notes to condensed consolidated financial statements. THOMAS INDUSTRIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (Dollars in Thousands) (Unaudited) June 30 December 31 1999 1998* ---- ---- ASSETS Current assets Cash and cash equivalents $ 14,862 $ 18,205 Accounts receivable, less allowance (1999--$632; 1998--$656) 23,078 19,205 Inventories: Finished products 5,237 5,352 Raw materials 8,427 9,196 Work in process 4,457 5,638 ------- ------- 18,121 20,186 Deferred income taxes 2,867 2,997 Other current assets 4,216 3,650 ------- ------- Total current assets 63,144 64,243 Investment in GTG 153,224 147,386 Property, plant, and equipment 73,977 73,115 Less accumulated depreciation and amortization 41,249 39,114 ------- ------- 32,728 34,001 Note receivable from GTG 22,287 22,287 Intangible assets--less accumulated amortization 7,733 8,248 Other assets 5,086 6,194 ------- ------- Total assets $284,202 $282,359 ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities Notes payable $ -0- $ 235 Accounts payable 6,764 5,794 Other current liabilities 19,717 20,592 Current portion of long-term debt 7,782 7,782 ------- ------- Total current liabilities 34,263 34,403 Deferred income taxes 5,738 5,863 Long-term debt (less current portion) 40,555 48,298 Other long-term liabilities 4,281 3,108 ------- ------- Total liabilities 84,837 91,672 Shareholders' equity Preferred Stock, $1 par value, 3,000,000 shares authorized--none issued -- -- Common Stock, $1 par value, shares authorized: 60,000,000; 1999--17,533,893 1998--17,485,909 17,534 17,486 Capital surplus 110,658 110,412 Retained earnings 99,066 88,277 Accumulated other comprehensive income (6,771) (4,351) Less cost of treasury shares: (1999--1,743,150; 1998--1,744,400) (21,122) (21,137) ------- ------- Total shareholders' equity 199,365 190,687 ------- ------- Total liabilities and shareholders' equity $284,202 $282,359 ======= ======= *Derived from the audited December 31, 1998, consolidated balance sheet. See notes to condensed consolidated financial statements. THOMAS INDUSTRIES INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) Six Months Ended June 30 ---------------- 1999 1998 Operating activities: Net income $13,155 $12,125 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 3,933 3,748 Deferred income taxes 200 311 Equity income from Lighting (10,637) (8,322) Distributions from/cash used by Lighting 5,390 (13,017) Other items 56 316 Changes in operating assets and liabilities: Accounts receivable (4,619) (3,979) Inventories 847 (298) Accounts payable 1,177 (3,330) Accrued expenses and other liabilities 892 (1,301) Other 474 (2,962) ------ ------- Net cash provided by (used in) operating activities 10,868 (16,709) Investing activities: Purchases of property, plant, and equipment (3,270) (2,901) Sale of property, plant, and equipment 12 1 ------ ------- Net cash used in investing activities (3,258) (2,900) Financing activities: (Payments on) proceeds from notes payable to banks, net (218) 19,348 Payments on long-term debt, net (7,743) (6,505) Dividends paid (2,377) (2,379) Other (282) 141 ------ ------- Net cash provided by (used in) financing activities (10,620) 10,605 Effect of exchange rate change (333) (50) ------- ------ Net decrease in cash and cash equivalents (3,343) (9,054) Cash and cash equivalents at beginning of period 18,205 17,352 ------ ------ Cash and cash equivalents at end of period $14,862 $ 8,298 ====== ====== See notes to condensed consolidated financial statements. THOMAS INDUSTRIES INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Note A - Basis of Presentation - ------------------------------ The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial reporting and with the instructions to Form 10-Q and Article 10-01 of Regulation S-X. Accordingly, they do not include all the information and footnotes required by generally accepted accounting principles for complete financial statements. The results of operations for the six-month period ended June 30, 1999, are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. In the opinion of management, all adjustments considered necessary for a fair presentation have been included. For further information, refer to the consolidated financial statements and footnotes included in the Company's Annual Report on Form 10-K for the year ended December 31, 1998. Effective August 30, 1998, Thomas and Genlyte formed GTG, combining Thomas' lighting business with Genlyte. Genlyte has a 68% interest in GTG, and Thomas holds a 32% interest, which is accounted for using the equity method of accounting. Thomas changed its method of accounting for the lighting business contributed to GTG to the equity method effective January 1, 1998, the beginning of Thomas' prior fiscal year, restating results for the quarters ended March 31 and June 30, 1998. The restatement of results using the equity method for the 1998 quarterly periods prior to consummation of the Joint Venture had no effect on net income or common shareholders' equity but did reduce its revenues, costs, assets, and liabilities, and changed certain components of cash flow. (See Note D.) Note B - Contingencies - ---------------------- In the normal course of business, the Company is a party to legal proceedings and claims. When costs can be reasonably estimated, appropriate liabilities for such matters are recorded. While management currently believes the amount of ultimate liability, if any, with respect to these actions will not materially affect the financial position, results of operations, or liquidity of the Company, the ultimate outcome of any litigation is uncertain. Were an unfavorable outcome to occur, the impact could be material to the Company. Note C - Comprehensive Income - ----------------------------- Reconciliation of net income to total comprehensive income for the periods indicated follows. For the three months ended June 30: 1999 1998 ---- ---- Net income $7,281 $6,875 Minimum pension liability 1 -- Foreign currency translation (699) (601) ----- ----- Comprehensive income $6,583 $6,274 ===== ===== For the six months ended June 30: Net income $13,155 $12,125 Minimum pension liability 1 -- Foreign currency translation (2,421) (802) ------ ------ Comprehensive income $10,735 $11,323 ====== ====== Note D - Genlyte Thomas Group LLC - --------------------------------- The following table contains certain unaudited financial information for the Joint Venture. Genlyte Thomas Group LLC Condensed Financial Information (Dollars in Thousands) Balance sheet as of June 30, 1999: Current assets $330,385 Long-term assets 210,095 Current liabilities 132,347 Long-term liabilities 119,905 Three Months Six Months Ended Ended June 30, 1999 June 30, 1999 ------------- ------------- Income statement: Net sales $243,645 $481,121 Gross profits 79,470 156,848 Earnings before interest and taxes 21,236 40,390 Net income* 19,314 36,546 *Amounts recorded by Thomas Industries Inc.: Equity income from GTG $6,181 $11,695 Amortization of excess investment (529) (1,058) ----- ------ Equity income reported by Thomas $5,652 $10,637 ===== ====== Note E - Receivables from Affiliate - ----------------------------------- Included in Other Long-Term Assets at June 30, 1999, is $22,287,000 which represents a debt equalization note payable to Thomas by GTG related to the formation of the Joint Venture. Interest on the principal amount outstanding under the note accrues at a variable rate based on LIBOR plus the Offshore Rate Margin and is payable on a quarterly basis. The principal amount of the note is due on August 29, 2003, and may be prepaid in whole or in part at any time without premium or penalty. Note F - Segment Disclosures - ---------------------------- Three Months Ended Six Months Ended June 30 June 30 ------------- -------------- 1999 1998 1999 1998 ---- ---- ---- ---- Total net sales including intercompany sales Compressors & Vacuum Pumps $51,007 $51,055 $101,301 $104,193 Intercompany sales Compressors & Vacuum Pumps $(3,540) $(4,719) $ (7,533) $ (9,648) ------ ------ ------- ------- Net sales to unaffiliated customers Compressors & Vacuum Pumps $47,467 $46,336 $ 93,768 $ 94,545 ====== ====== ======= ======= Operating income Compressors & Vacuum Pumps $ 8,363 $ 8,724 $ 16,128 $ 17,378 Lighting* 5,652 5,211 10,637 8,322 Corporate (1,387) (1,521) (3,596) (3,655) ------ ------ ------- ------- $12,628 $12,414 $ 23,169 $ 22,045 ====== ====== ======= ======= *Represents 32% of GTG net income less amortization of excess investment. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations - --------------------- Net sales during the second quarter ended June 30, 1999, which were a record for any second quarter for the Compressor & Vacuum Pump business, were $47.5 million compared to $46.3 million for the second quarter 1998. The 1998 net sales reflect the application of the equity method with respect to the Company's lighting business, which was contributed to GTG effective August 30, 1998, retroactive to January 1, 1998, and therefore include only net sales for the Compressor & Vacuum Pump Segment. The North American operations improved over the first quarter results and rebounded significantly from a weak 1998 second quarter. Our European operations continue to be soft, including sales to the U.S. market. Net sales for the six-month period ended June 30, 1999, were $93.8 million compared to $94.5 million for the prior year. The shortfall was attributable to a weak first quarter in 1999, primarily from softness in European sales. Operating income for the second quarter ended June 30, 1999, was $12.6 million compared to $12.4 million for the second quarter 1998. The $8.4 million posted in the second quarter of 1999 by the Compressor & Vacuum Pump Segment improved nicely over the $7.8 million recorded in the first quarter of 1999 but was slightly off from the $8.7 million in the second quarter 1998. North American operating income improved over the second quarter of 1998 due to stronger sales. European operating income decreased from the second quarter 1998 level due to lower sales related to a general weakness in the European market and competitive pressures in the U.S. market. Net equity earnings from GTG also contributed favorably to the second quarter 1999 improvement over 1998 by $.4 million. The 1998 operating income reflects the application of the equity method for the Lighting Segment retroactive to January 1, 1998. Operating income for the six-month period ended June 30, 1999, was $23.2 million compared to $22.0 million for the six-month period in 1998. This increase was due to the strength of the GTG earnings, which more than offset the reduction in our Compressor & Vacuum Pump Segment. Net income for the 1999 second quarter of $7.3 million was 5.9% higher than the $6.9 million for the comparable 1998 period. It was also a record for any quarter in the Company's history. Net income for the six-month period ended June 30, 1999, was $13.2 million compared to $12.1 million for the six-month period in 1998. The quarter and six-month increases over 1998 were due primarily to the increase in GTG's earnings, lower interest expense, and higher interest income as noted below. Interest expense for the 1999 second quarter was $1.1 million, or 28.1% lower than the prior-year amount of $1.6 million. The decrease was attributed primarily to a significant reduction in short-term debt, which was higher in the second quarter of 1998 due to the funding of working capital needs of the Lighting business. Also, long-term debt of $7.7 million was paid down on January 31, 1999, which reduced interest expense over the prior-year amount. Interest income was $.3 million higher in the 1999 second quarter versus the 1998 second quarter. The six-month period for 1999 reflected a $.6 million increase in interest income over the prior year. These increases are primarily due to interest received from GTG on a $22,287,000 note payable to Thomas. Included in Other Long-Term Assets at June 30, 1999,is $22,287,000 which represents the debt equalization note payable to Thomas by GTG related to the formation of the Joint Venture. Interest on the principal amount outstanding under the note accrues at a variable rate based on LIBOR plus the Offshore Rate Margin and is payable on a quarterly basis. The principal amount of the note is due on August 29, 2003, and may be prepaid in whole or in part at any time without premium or penalty. Working capital of $28.9 million at June 30, 1999, is $1.0 million lower than the amount at December 31, 1998. Accounts receivable at June 30, 1999, have increased by 20.2% since December 31, 1998, due to higher sales volume. The number of days sales in receivables at June 30, 1999, compared to December 31, 1998, has decreased to 46.9 days from 49.1. Inventory turnover at June 30, 1999, of 5.3 times per year improved significantly from the December 31, 1998, level of 4.5. Certain loan agreements of the Company include restrictions on working capital, operating leases, tangible net worth, and the payment of cash dividends and stock distributions. Under the most restrictive of these arrangements, retained earnings of $60.2 million are not restricted at June 30, 1999. As of June 30, 1999, the Company had available credit of $12.0 million with banks under short-term borrowing arrangements which was unused, and a $30 million revolving line of credit that expires in 2002, which was unused. Anticipated funds from operations, along with available short-term credit, are expected to be sufficient to meet cash requirements in the year ahead. Cash in excess of operating requirements will continue to be invested in investment grade, short-term securities. Year 2000 Issue - --------------- In the third quarter of 1996, the Company recognized the need to ensure that its operations would not be adversely affected by Year 2000 computer hardware and software failures. Certain systems would fail, unless modified, to properly handle date-sensitive calculations for dates that crossed the century. Such systems could fail because the systems use only two digits rather than four to define a specific year. These failures would pose known risks to the future integrity of the Company's financial reports and to virtually all aspects of the Company's operations, including the Company's ability to process sales transactions, fulfill customer orders, and receive and manage inventories and other assets. Plans for achieving internal Year 2000 compliance were finalized during 1996 and included a goal to be complete by the end of the third quarter 1998. Accordingly, the Company completed a high level analysis of the scope of the issues to be addressed, created a team of IT resources, and contracted with a major software consulting firm to assist in the Year 2000 remediation efforts. The discovery phase of the problems and the plan for remediation were completed in 1997. Remediation and testing were completed on most systems during 1998. The objective of these efforts is to achieve Year 2000 compliance with a minimal effect on customer service or other disruption to, or loss of integrity in, business or financial operations. At this date, sources of potential failure have been identified, and we believe that they have all been remediated. We believe that all critical software is now compliant. The Company has performed a preliminary assessment of its material non- Information Technology systems such as CAD systems, PBX systems, Environmental Control systems, Elevator Control systems, and numeric control devices and, based upon this preliminary assessment, believes that these systems are Year 2000 compliant. The Company has initiated communications with its major suppliers and customers to determine their Year 2000 compliant status and to identify any issues or problems with respect to their Year 2000 preparedness that might adversely affect their companies. The Company is continuing its efforts to obtain such assurances from all critical suppliers. Failure of these third parties could have a material impact on operations and/or the Company's ability to deliver products. Contingency planning is being established and will be implemented in an effort to minimize any impact from Year 2000 related failures. Through June 30, 1999, approximately $2.4 million in costs, which includes Compressors & Vacuum Pumps and Lighting costs, has been incurred in the Company's efforts to achieve Year 2000 compliant systems. These costs have been incurred over the 1996-1999 time frame and have not been, nor are expected to be, a material incremental cost having an impact on the Company's operations, financial condition, or liquidity and include the costs for both its Vacuum Pump & Compressor business and the Company's former Lighting business. These costs consist primarily of outsourced consulting and remediation efforts. Any remaining costs for the Company are expected to be less than $25,000. There have been no major system projects cancelled or delayed as a result of the Company's Year 2000 costs. The above expectations are subject to uncertainties. For example, if the Company is unsuccessful in identifying or fixing all Year 2000 problems in our critical operations, or if we are affected by the inability of our suppliers or major customers to continue operations due to such problems, our results of operations or financial condition could be materially affected. The Company has a minority interest in GTG, which has advised the Company that it is currently in the process of identifying and remediating its Year 2000 issues as well as conducting a review to gain reasonable assurances that its business partners are addressing Year 2000 issues. If GTG is unsuccessful in identifying or remediating all Year 2000 problems in its critical operations, or if it is affected by the inability of its suppliers or major customers to continue operations due to such problems, this could have an impact on the Company's financial results and condition. New European Currency - --------------------- Eleven European countries (The European Monetary Union) have implemented a single currency zone as of January 1, 1999. The new currency (Euro) will eventually replace the existing currencies of the participating countries. It is expected that this transition from the various currencies to the Euro will occur over a three-year period. Since the Company's European Operations may have to accommodate dual currencies during this period, modifications to our third-party software at our European locations may be necessary. A team has been formed to monitor EMU developments, evaluate the requirements, develop and execute action plans and work with our third party software providers to address this issue. While management currently believes the Company will be able to accommodate any required changes in its operations without significant costs, there can be no assurance that the Company, its customers, suppliers and service providers or government agencies will all meet the Euro currency requirements in a timely manner. Such failure to complete the necessary work on a timely basis could result in material financial risk. Item 3. Quantitative and Qualitative Disclosures about Market Risk The Company's long-term debt bears interest at fixed rates; therefore, the Company's results of operations would only be affected by interest rate changes to the extent that variable rate, short-term notes payable are outstanding. At June 30, 1999, short-term notes payable are not significant. The Company has significant operations consisting of sales and manufacturing activities in foreign countries. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company manufactures or distributes its products. Currency exposures are concentrated in Germany but exist to a lesser extent in other parts of Western Europe and Asia. PART II. OTHER INFORMATION - ------- ----------------- Item 4. Submission of Matters to a Vote of Security Holders (a) A regular Annual Meeting of Shareholders was held on April 15, 1999 (b) Class I Directors elected at the Annual Meeting of Shareholders were Gene P. Gardner, Lawrence E. Gloyd, and William M. Jordan. Directors whose term of office as a director continued after the meeting were Timothy C. Brown, Wallace H. Dunbar, H. Joseph Ferguson, Franklin J. Lunding, Jr., and Anthony A. Massaro. (c) The voting at the Annual Meeting of Shareholders was as follows: Proposal No. 1 -- Election of Directors For Withheld --- -------- Gene P. Gardner 13,548,326 159,355 Lawrence E. Gloyd 13,542,668 165,013 William M. Jordan 13,556,440 151,241 Proposal No. 2 -- Approval of the amendment of the Corporation's 1995 Incentive Stock Plan to increase the number of shares of Common Stock reserved for the Plan by 750,000 shares For Against Abstain --- ------- ------- 10,329,072 3,275,072 103,537 Item 6. Exhibits and Reports on Form 8-K (a) Exhibits (27) Financial Data Schedule. (b) No reports on Form 8-K were filed during the quarter. 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 thereunto duly authorized. THOMAS INDUSTRIES INC --------------------------------------- Registrant /s/ Phillip J. Stuecker --------------------------------------- Phillip J. Stuecker, Vice President and Chief Financial Officer Date August 12, 1999 EX-27 2
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 14,862 0 23,710 632 18,121 63,144 73,977 41,249 284,202 34,263 40,555 0 0 17,525 181,840 284,202 93,768 93,768 59,884 59,884 9,615 56 2,322 21,891 8,736 13,155 0 0 0 13,155 .83 .81
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