Date of Report (Date of earliest event reported): | April 24, 2014 |
THE TIMKEN COMPANY |
(Exact Name of Registrant as Specified in its Charter) |
Ohio |
(State or Other Jurisdiction of Incorporation) |
1-1169 | 34-0577130 | |
(Commission File Number) | (I.R.S. Employer Identification No.) |
4500 Mt. Pleasant St., N.W., North Canton, Ohio 44720-5450 |
(Address of Principal Executive Offices) (Zip Code) |
(330) 438-3000 |
(Registrant's Telephone Number, Including Area Code) |
THE TIMKEN COMPANY | |||
By: | /s/ William R. Burkhart | ||
William R. Burkhart | |||
Senior Vice President and General Counsel | |||
Date: | April 24, 2014 |
Ex. No. | Description | |
99.1 | Press Release of The Timken Company dated April 24, 2014 |
TIMKEN | PRESS RELEASE |
• | Earns $0.90 per diluted share (EPS), or $0.88 on an adjusted basis |
• | Affirms 2014 GAAP EPS estimate of $3.15 to $3.45 per diluted share, or $3.60 to $3.90 on an adjusted basis |
• | Remains on track for planned mid-year spinoff of TimkenSteel |
2014 - 1Q | 2013 - 1Q | |||||||||||
($ in Mils.) | EPS | ($ in Mils.) | EPS | |||||||||
Net Income attributable to The Timken Company | $ | 83.5 | $ | 0.90 | $ | 75.1 | $ | 0.77 | ||||
Adjustments: | ||||||||||||
Gain on sale of land in Brazil | (22.6 | ) | - - | |||||||||
Spinoff-related costs | 11.5 | - - | ||||||||||
Charges for cost-reduction initiatives and plant rationalizations | 5 | 4.7 | ||||||||||
Provision for income taxes | 4.8 | (2.6 | ) | |||||||||
Total adjustments | (1.3 | ) | (0.02 | ) | 2.1 | 0.03 | ||||||
Net Income, after adjustments | $ | 82.2 | $ | 0.88 | $ | 77.2 | $ | 0.80 |
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TIMKEN | PRESS RELEASE |
• | Returned a total of $141 million in capital to shareholders through dividends and the repurchase of approximately 2 million common shares. In February, the company increased its dividend by 9 percent to 25 cents per share; |
• | Was awarded $55 million in new business from the U.S. Department of Defense for additional main reduction gear propulsion ship sets for the Arleigh Burke DDG 51 class ships; |
• | Filed TimkenSteel Corporation’s initial Form 10 Registration Statement for the planned separation from Timken in a tax-free spinoff, which is expected to be completed June 30, 2014; |
• | Announced two strategic joint ventures to pursue growth opportunities in emerging markets, including an agreement with United Wagon Company (UWC) to manufacture rail bearings and an agreement with European Bearing Corporation (EPK) to design and manufacture bearings aimed at serving industrial markets; and |
• | Earned recognition for the fourth time as one of the World’s Most Ethical Companies by Ethisphere, an international organization focused on the advancement of best practices in corporate governance, risk, sustainability, compliance and ethics. |
2 |
TIMKEN | PRESS RELEASE |
3 |
TIMKEN | PRESS RELEASE |
• | Mobile Industries’ sales to be down 3 to 8 percent, primarily driven by $110 million in reduced revenue resulting from planned program exits in the light vehicle sector, which concluded at the end of 2013. Offsetting this decline is anticipated improvement in rail and off-highway demand; |
• | Process Industries’ sales to be up 7 to 12 percent, driven by economic recovery across most industrial end markets, the impact of acquisitions and improved penetration in targeted original equipment sectors; |
• | Aerospace sales to be up 5 to 10 percent, due to increased demand across most end markets, led by defense; and |
• | Steel sales up 15 to 20 percent, driven by improved demand in the oil and gas and industrial end market sectors. |
4 |
TIMKEN | PRESS RELEASE |
5 |
TIMKEN | PRESS RELEASE |
Media Contact: | Investor Contact: |
Pat Burnham | Steve Tschiegg |
Global Media Relations | Director - Capital Markets & Investor Relations |
4500 Mount Pleasant Street, NW | 4500 Mount Pleasant Road, NW |
North Canton, OH 44720 U.S.A. | North Canton, OH 44720 U.S.A. |
Telephone: (330)471-3514 | Telephone: (330)471-7446 |
pat.carlson@timken.com | steve.tschiegg@timken.com |
6 |
TIMKEN | PRESS RELEASE |
The Timken Company | |||||||
CONDENSED CONSOLIDATED STATEMENT OF INCOME | |||||||
(Dollars in millions, except share data) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Net sales | $ | 1,104.5 | $ | 1,089.9 | |||
Cost of products sold | 813.5 | 815.4 | |||||
Gross Profit | $ | 291.0 | $ | 274.5 | |||
Selling, general & administrative expenses (SG&A) | 162.0 | 153.6 | |||||
Impairment and restructuring | 3.9 | 1.2 | |||||
Separation costs | 11.5 | — | |||||
Operating Income | $ | 113.6 | $ | 119.7 | |||
Other income, net | 22.0 | — | |||||
Earnings Before Interest and Taxes (EBIT) (1) | $ | 135.6 | $ | 119.7 | |||
Interest expense, net | (4.5 | ) | (5.9 | ) | |||
Income Before Income Taxes | $ | 131.1 | $ | 113.8 | |||
Provision for income taxes | 47.3 | 38.8 | |||||
Net Income | $ | 83.8 | $ | 75.0 | |||
Less: Net Income (Loss) Attributable to Noncontrolling Interest | 0.3 | (0.1 | ) | ||||
Net Income Attributable to The Timken Company | $ | 83.5 | $ | 75.1 | |||
Net Income per Common Share Attributable to The Timken Company Common Shareholders | |||||||
Basic Earnings Per Share | $ | 0.90 | $ | 0.78 | |||
Diluted Earnings Per Share | $ | 0.90 | $ | 0.77 | |||
Average Shares Outstanding | 92,172,595 | 95,848,450 | |||||
Average Shares Outstanding - assuming dilution | 93,088,111 | 96,823,483 | |||||
(1) EBIT is defined as operating income plus other income (expense). EBIT is an important financial measure used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT is useful to investors as this measure is representative of the Company's performance and cash generation. |
7 |
TIMKEN | PRESS RELEASE |
BUSINESS SEGMENTS | ||||||
(Dollars in millions) (Unaudited) | ||||||
Three Months Ended March 31, | ||||||
2014 | 2013 | |||||
Mobile Industries | ||||||
Net sales to external customers | $ | 344.5 | $ | 397.0 | ||
Intersegment sales | 0.2 | 0.1 | ||||
Total net sales | $ | 344.7 | $ | 397.1 | ||
Earnings before interest and taxes (EBIT) (1) | $ | 56.1 | $ | 51.2 | ||
EBIT Margin (1) | 16.3 | % | 12.9 | % | ||
Process Industries | ||||||
Net sales to external customers | $ | 309.8 | $ | 283.9 | ||
Intersegment sales | 0.4 | 1.3 | ||||
Total net sales | $ | 310.2 | $ | 285.2 | ||
Earnings before interest and taxes (EBIT) (1) | $ | 51.8 | $ | 42.6 | ||
EBIT Margin (1) | 16.7 | % | 14.9 | % | ||
Aerospace | ||||||
Net sales to external customers | $ | 82.7 | $ | 82.5 | ||
Earnings before interest and taxes (EBIT) (1) | $ | 6.5 | $ | 8.6 | ||
EBIT Margin (1) | 7.9 | % | 10.4 | % | ||
Steel | ||||||
Net sales to external customers | $ | 367.5 | $ | 326.5 | ||
Intersegment sales | 22.6 | 19.6 | ||||
Total net sales | $ | 390.1 | $ | 346.1 | ||
Earnings before interest and taxes (EBIT) (1) | $ | 54.4 | $ | 35.8 | ||
EBIT Margin (1) | 13.9 | % | 10.3 | % | ||
Unallocated corporate expense | $ | (21.0 | ) | $ | (19.9 | ) |
Separation costs | $ | (11.5 | ) | $ | — | |
Intersegment eliminations (expense) income (2) | $ | (0.7 | ) | $ | 1.4 | |
Consolidated | ||||||
Net sales to external customers | $ | 1,104.5 | $ | 1,089.9 | ||
Earnings before interest and taxes (EBIT) (1) | $ | 135.6 | $ | 119.7 | ||
EBIT Margin (1) | 12.3 | % | 11.0 | % | ||
(1) EBIT is defined as operating income plus other income (expense). EBIT Margin is EBIT as a percentage of net sales. EBIT and EBIT Margin are important financial measures used in the management of the business, including decisions concerning the allocation of resources and assessment of performance. Management believes that reporting EBIT and EBIT Margin is useful to investors as these measures are representative of the Company's performance and cash generation. | ||||||
(2) Intersegment eliminations represent profit or loss between the Steel segment and the Mobile Industries, Process Industries and Aerospace segments. |
8 |
TIMKEN | PRESS RELEASE |
CONDENSED CONSOLIDATED BALANCE SHEET | |||||||
(Dollars in millions) (Unaudited) | |||||||
March 31, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Cash and cash equivalents | $ | 248.3 | $ | 384.6 | |||
Restricted cash | 15.1 | 15.1 | |||||
Accounts receivable | 618.2 | 566.7 | |||||
Inventories, net | 829.7 | 809.9 | |||||
Other current assets | 158.3 | 161.2 | |||||
Total Current Assets | 1,869.6 | 1,937.5 | |||||
Property, Plant and Equipment, net | 1,559.9 | 1,558.1 | |||||
Goodwill | 358.4 | 358.7 | |||||
Non-current pension assets | 352.0 | 342.6 | |||||
Other assets | 278.1 | 281.0 | |||||
Total Assets | $ | 4,418.0 | $ | 4,477.9 | |||
LIABILITIES | |||||||
Accounts payable | $ | 266.4 | $ | 222.5 | |||
Short-term debt | 272.9 | 269.3 | |||||
Income taxes | 131.2 | 114.7 | |||||
Accrued expenses | 311.7 | 373.6 | |||||
Total Current Liabilities | 982.2 | 980.1 | |||||
Long-term debt | 206.4 | 206.6 | |||||
Accrued pension cost | 167.9 | 179.0 | |||||
Accrued postretirement benefits cost | 226.9 | 233.9 | |||||
Other non-current liabilities | 220.2 | 229.7 | |||||
Total Liabilities | 1,803.6 | 1,829.3 | |||||
EQUITY | |||||||
The Timken Company shareholders' equity | 2,601.6 | 2,636.6 | |||||
Noncontrolling Interest | 12.8 | 12.0 | |||||
Total Equity | 2,614.4 | 2,648.6 | |||||
Total Liabilities and Equity | $ | 4,418.0 | $ | 4,477.9 |
9 |
TIMKEN | PRESS RELEASE |
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS | ||||||
(Dollars in millions) (Unaudited) | ||||||
Three Months Ended March 31, | ||||||
2014 | 2013 | |||||
Cash Provided (Used) | ||||||
OPERATING ACTIVITIES | ||||||
Net income attributable to The Timken Company | $ | 83.5 | $ | 75.1 | ||
Net income (Loss) attributable to noncontrolling interest | 0.3 | (0.1 | ) | |||
Adjustments to reconcile net income to net cash provided (used) by operating activities: | ||||||
Depreciation and amortization | 49.1 | 48.4 | ||||
(Gain) loss on sale of assets | (23.2 | ) | 0.6 | |||
Pension and other postretirement expense | 15.6 | 22.5 | ||||
Pension and other postretirement benefit contributions and payments | (22.9 | ) | (117.1 | ) | ||
Changes in operating assets and liabilities: | ||||||
Accounts receivable | (51.9 | ) | (61.8 | ) | ||
Inventories | (20.8 | ) | 27.3 | |||
Accounts payable | 45.9 | 12.4 | ||||
Accrued expenses | (52.6 | ) | (74.9 | ) | ||
Income taxes | 11.2 | 31.2 | ||||
Other, net | 6.0 | (1.4 | ) | |||
Net Cash Provided (Used) By Operating Activities | $ | 40.2 | $ | (37.8 | ) | |
INVESTING ACTIVITIES | ||||||
Capital expenditures | $ | (53.8 | ) | $ | (63.4 | ) |
Acquisitions | — | (14.4 | ) | |||
Investments, net | 2.7 | 8.0 | ||||
Other | 6.1 | 0.7 | ||||
Net Cash Used by Investing Activities | $ | (45.0 | ) | $ | (69.1 | ) |
FINANCING ACTIVITIES | ||||||
Cash dividends paid to shareholders | $ | (23.1 | ) | $ | (22.1 | ) |
Purchase of treasury shares | (117.7 | ) | — | |||
Net proceeds from common share activity | 6.0 | 11.0 | ||||
Net proceeds (payments) from credit facilities | 3.9 | (7.0 | ) | |||
Other | — | — | ||||
Net Cash Used by Financing Activities | $ | (130.9 | ) | $ | (18.1 | ) |
Effect of exchange rate changes on cash | (0.6 | ) | (3.5 | ) | ||
Decrease in Cash and Cash Equivalents | $ | (136.3 | ) | $ | (128.5 | ) |
Cash and cash equivalents at beginning of period | 384.6 | 586.4 | ||||
Cash and Cash Equivalents at End of Period | $ | 248.3 | $ | 457.9 |
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TIMKEN | PRESS RELEASE |
Reconciliation of EBIT to GAAP Net Income: | |||||||
This reconciliation is provided as additional relevant information about the Company's performance. Management believes consolidated earnings before interest and taxes (EBIT) are representative of the Company's performance and therefore useful to investors. Management also believes that it is appropriate to compare GAAP net income to consolidated EBIT. | |||||||
(Dollars in millions) (Unaudited) | |||||||
Three Months Ended March 31, | |||||||
2014 | 2013 | ||||||
Net Income | $ | 83.8 | $ | 75.0 | |||
Provision for income taxes | 47.3 | 38.8 | |||||
Interest expense | 5.5 | 6.4 | |||||
Interest income | (1.0 | ) | (0.5 | ) | |||
Consolidated earnings before interest and taxes (EBIT) | $ | 135.6 | $ | 119.7 |
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TIMKEN | PRESS RELEASE |
Reconciliation of Net Income Attributable to The Timken Company, After Adjustments, to GAAP Net Income Attributable to The Timken Company and Adjusted Earnings Per Share to GAAP Earnings Per Share: | |||||||||||||||
This reconciliation is provided as additional relevant information about the Company's performance. Management believes that net income attributable to The Timken Company and diluted earnings per share, adjusted to remove: (a) steel separation-related costs; (b) gain on sale of real estate in Brazil; and (c) cost-reduction initiatives and plant rationalization costs are representative of the Company's performance and therefore useful to investors. | |||||||||||||||
(Dollars in millions, except share data) (Unaudited) | Three Months Ended March 31, | ||||||||||||||
2014 | EPS | 2013 | EPS | ||||||||||||
Net Income Attributable to The Timken Company | $ | 83.5 | $ | 0.90 | $ | 75.1 | $ | 0.77 | |||||||
Adjustments: | |||||||||||||||
Steel separation-related costs (1) | 11.5 | — | |||||||||||||
Gain on sale of real estate in Brazil (2) | (22.6 | ) | — | ||||||||||||
Cost-reduction initiatives and plant rationalization costs(3) | 5.0 | 4.7 | |||||||||||||
Provision for income taxes (4) | 4.8 | (2.6 | ) | ||||||||||||
Total Adjustments: | (1.3 | ) | (0.02 | ) | 2.1 | 0.03 | |||||||||
Net Income Attributable to The Timken Company, after adjustments | $ | 82.2 | $ | 0.88 | $ | 77.2 | $ | 0.80 | |||||||
(1) Steel separation-related costs include severance costs and professional costs associated with the Company's proposed spinoff of the steel business, net of tax. | |||||||||||||||
(2) Gain on the sale of real estate relates to the sale of the former manufacturing facility in Sao Paulo, Brazil. | |||||||||||||||
(3) Cost-reduction initiatives and plant rationalization costs relate to plant closures of the Company's manufacturing facilities in Sao Paulo, Brazil and St. Thomas, Ontario, Canada, the rationalization of certain plants, and severance related to cost reduction initiatives. | |||||||||||||||
(4) Provision for income taxes includes the tax impact on pre-tax special items, the impact of discrete tax items recorded during the respective periods, as well as adjustments to reflect the use of one overall effective tax rate on Adjusted pre-tax income in interim periods. | |||||||||||||||
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TIMKEN | PRESS RELEASE |
Reconciliation of EBIT Margin, After Adjustments, to Net Income as a Percentage of Sales and EBIT, After Adjustments, to Net Income: | ||||||||||
The following reconciliation is provided as additional relevant information about the Company's performance. Management believes that EBIT and EBIT margin, after adjustments, are representative of the Company's core operations and therefore useful to investors. | ||||||||||
(Dollars in millions, except share data) (Unaudited) | Three Months Ended March 31, | |||||||||
2014 | Percentage to Net Sales | 2013 | Percentage to Net Sales | |||||||
Net Income | $ | 83.8 | 7.6 | % | $ | 75.0 | 6.9 | % | ||
Provision for income taxes | 47.3 | 4.3 | % | 38.8 | 3.5 | % | ||||
Interest expense | 5.5 | 0.5 | % | 6.4 | 0.6 | % | ||||
Interest income | (1.0 | ) | (0.1 | )% | (0.5 | ) | — | % | ||
Consolidated earnings before interest and taxes (EBIT) | $ | 135.6 | 12.3 | % | $ | 119.7 | 11.0 | % | ||
Adjustments: | ||||||||||
Steel separation-related costs (1) | 11.5 | 1.0 | % | — | — | % | ||||
Gain on sale of real estate in Brazil (2) | (22.6 | ) | (2.0 | )% | — | — | % | |||
Cost-reduction initiatives and plant rationalization costs(3) | 5.0 | 0.5 | % | 4.7 | 0.4 | % | ||||
Total Adjustments | (6.1 | ) | (0.6 | )% | 4.7 | 0.4 | % | |||
Consolidated earnings before interest and taxes (EBIT), after adjustments | $ | 129.5 | 11.7 | % | $ | 124.4 | 11.4 | % | ||
(1) Steel separation-related costs include severance costs and professional costs associated with the Company's proposed spinoff of the steel business. | ||||||||||
(2) Gain on the sale of real estate relates to the sale of the former manufacturing facility in Sao Paulo, Brazil. | ||||||||||
(3) Cost-reduction initiatives and plant rationalization costs relate to plant closures of the Company's manufacturing facilities in Sao Paulo, Brazil and St. Thomas, Ontario, Canada, the rationalization of certain plants, and severance related to cost reduction initiatives. | ||||||||||
13 |
TIMKEN | PRESS RELEASE |
Reconciliation of EBIT Margin, After Adjustments, to EBIT as a Percentage of Sales and EBIT, After Adjustments, to EBIT: | ||||||||||
The following reconciliation is provided as additional relevant information about the Company's Mobile Industries, Process Industries, and Aerospace segment performance. Management believes that segment EBIT and EBIT margin, after adjustments, are representative of the segment's core operations and therefore useful to investors. | ||||||||||
Mobile Industries | ||||||||||
(Dollars in millions) (Unaudited) | Three Months Ended March 31, 2014 | Percentage to Net Sales | Three Months Ended March 31, 2013 | Percentage to Net Sales | ||||||
Earnings before interest and taxes (EBIT) | $ | 56.1 | 16.3 | % | $ | 51.2 | 12.9 | % | ||
Gain on sale of real estate in Brazil (1) | (22.6 | ) | (6.6 | )% | — | — | % | |||
Cost-reduction initiatives and plant rationalization costs(2) | 3.2 | 0.9 | % | 4.6 | 1.2 | % | ||||
Earnings before interest and taxes (EBIT), after adjustments | $ | 36.7 | 10.6 | % | $ | 55.8 | 14.1 | % | ||
Process Industries | ||||||||||
(Dollars in millions) (Unaudited) | Three Months Ended March 31, 2014 | Percentage to Net Sales | Three Months Ended March 31, 2013 | Percentage to Net Sales | ||||||
Earnings before interest and taxes (EBIT) | $ | 51.8 | 16.7 | % | $ | 42.6 | 14.9 | % | ||
Cost-reduction initiatives and plant rationalization costs(2) | 1.1 | 0.4 | % | 0.1 | 0.1 | % | ||||
Earnings before interest and taxes (EBIT), after adjustments | $ | 52.9 | 17.1 | % | $ | 42.7 | 15.0 | % | ||
Aerospace | ||||||||||
(Dollars in millions) (Unaudited) | Three Months Ended March 31, 2014 | Percentage to Net Sales | Three Months Ended March 31, 2013 | Percentage to Net Sales | ||||||
Earnings before interest and taxes (EBIT) | $ | 6.5 | 7.9 | % | $ | 8.6 | 10.4 | % | ||
Cost-reduction initiatives and plant rationalization costs(2) | 0.5 | 0.6 | % | — | — | % | ||||
Earnings before interest and taxes (EBIT), after adjustments | $ | 7.0 | 8.5 | % | $ | 8.6 | 10.4 | % | ||
(1) Gain on the sale of real estate relates to the sale of the former manufacturing facility in Sao Paulo, Brazil. | ||||||||||
(2) Cost-reduction initiatives and plant rationalization costs relate to plant closures of the Company's manufacturing facilities in Sao Paulo, Brazil and St. Thomas, Ontario, Canada, the rationalization of certain plants, and severance related to cost reduction initiatives. | ||||||||||
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TIMKEN | PRESS RELEASE |
Reconciliation of Total Debt to Net Debt and the Ratio of Net Debt to Capital: | |||||||||||
This reconciliation is provided as additional relevant information about the Company's financial position. Capital, used for the ratio of total debt to capital, is defined as total debt plus total shareholders' equity. Capital, used for the ratio of net debt to capital, is defined as total debt less cash and cash equivalents plus total shareholders' equity. Management believes Net Debt is an important measure of the Company's financial position, due to the amount of cash and cash equivalents. | |||||||||||
(Dollars in millions) (Unaudited) | |||||||||||
March 31, 2014 | December 31, 2013 | ||||||||||
Short-term debt | $ | 272.9 | $ | 269.3 | |||||||
Long-term debt | 206.4 | 206.6 | |||||||||
Total Debt | $ | 479.3 | $ | 475.9 | |||||||
Less: Cash, cash equivalents and restricted cash | (263.4 | ) | (399.7 | ) | |||||||
Net Debt | $ | 215.9 | $ | 76.2 | |||||||
Total equity | $ | 2,614.4 | $ | 2,648.6 | |||||||
Ratio of Total Debt to Capital | 15.5 | % | 15.2 | % | |||||||
Ratio of Net Debt to Capital | 7.6 | % | 2.8 | % | |||||||
Reconciliations of Free Cash Flow and Free Cash Flow, After Adjustments, to GAAP Net Cash Provided (used) by Operating Activities: | |||||||||||
Management believes that free cash flow and free cash flow less discretionary pension contributions are useful to investors because they are meaningful indicators of cash generated from operating activities available for the execution of its business strategy. | |||||||||||
(Dollars in millions) (Unaudited) | |||||||||||
Three Months Ended March 31, | |||||||||||
2014 | 2013 | ||||||||||
Net cash provided (used) by operating activities | $ | 40.2 | $ | (37.8 | ) | ||||||
Less: capital expenditures | (53.8 | ) | (63.4 | ) | |||||||
Less: cash dividends paid to shareholders | (23.1 | ) | (22.1 | ) | |||||||
Free cash flow | (36.7 | ) | (123.3 | ) | |||||||
Plus: discretionary pension contributions, net of the tax benefit (1) | — | 66.3 | |||||||||
Free cash flow adjusted for discretionary pension contributions | $ | (36.7 | ) | $ | (57.0 | ) | |||||
(1) The discretionary pension contributions for the first quarter of 2013 were $105.0 million, net of a tax benefit of $38.7 million. | |||||||||||
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