Uni-Select Inc.
TSX : UNS

Uni-Select Inc.

October 28, 2015 18:12 ET

Uni-Select Announces Strong Q3 2015 Financial Results

- $276.2 million in sales, up 4.0% organically;

- EBITDA margin reaches 9.4%;

- Net earnings up 6.1% to $15.7 million, while EPS reaches $0.73, up 4.3%;

- Adjusted EPS, once converted to Canadian dollars, is up 18.8%;

- First full-quarter completed without the assets of Uni-Select USA, Inc. and Beck/Arnley Worldparts, Inc. since the closing of the sale transaction on June 1, 2015.

BOUCHERVILLE, QUÉBEC--(Marketwired - Oct. 28, 2015) -

Unless otherwise indicated in this press release, all amounts are expressed in US dollars.

Uni-Select Inc. (TSX:UNS), a leading distributor of automotive products in Canada and parent of FinishMaster, Inc., a leading distributor of paint and related products in the United States, today reported solid financial results with increased profitability for the third quarter ended September 30, 2015.

"I am very pleased with the performance displayed by our automotive and paint and related products businesses in the third quarter and particularly delighted that both sectors are delivering healthy organic growth, said Henry Buckley, President and Chief Executive Officer of Uni-Select." We now turn to the fourth quarter with confidence that our continued focus on growth initiatives, accretive acquisitions and our commitment to the continued expansion of a network of corporate stores will all contribute to our successes in the months ahead."

The 2015 results in dollars vary compared to last year's figures, since the 2015 nine-month period includes five months of operations from the net assets of Uni-Select USA, Inc. and Beck/Arnley Worldparts, Inc., sold on June 1, 2015.

(in thousands of US dollars, except per share amounts and percentages) THIRD QUARTER NINE-MONTH PERIOD
2015 2014 2015 2014
Sales 276,229 465,408 1,096,213 1,357,175
EBITDA 25,938 29,906 (77,292 ) 78,189
Adjusted EBITDA 26,038 31,434 76,580 83,576
Adjusted EBITDA margin 9.4% 6.8% 7.0% 6.2%
Net earnings (loss) 15,747 14,842 (54,162 ) 38,762
Adjusted earnings 15,808 15,755 45,795 41,948
Earnings (loss) per share 0.73 0.70 (2.53 ) 1.82
Adjusted earnings per share 0.73 0.74 2.14 1.97

THIRD QUARTER RESULTS

(All percentage increases and decreases represent year-over-year changes for the third quarter of 2015 compared to the third quarter of 2014, unless otherwise noted.)

Consolidated sales for the third quarter reached $276.2 million, a 40.6% decrease mainly due to the sale of the net assets of Uni‐Select USA, Inc. and Beck/Arnley Worldparts, Inc. and to a weaker Canadian dollar. The decline was partly compensated by additional sales from recent acquisitions and organic growth. On an organic basis, consolidated sales grew 4.0%, fuelled namely by the recruitment of new customers in the paint and related products segment and by the success of the Corporation's fill rate commitment to its customers in the automotive products segment.

The Corporation generated an EBITDA of $25.9 million (including restructuring and other charges of $0.1 million resulting from the relocation of certain stores), compared to $29.9 million last year, while adjusted EBITDA reached $26.0 million from $31.4 million last year. The EBITDA margin and adjusted EBITDA margin grew to a solid 9.4%, fuelled by a combination of organic growth across both segments as well as by the recent accretive acquisitions.

Net earnings grew by 6.1% to $15.7 million from $14.8 million last year, while adjusted earnings grew slightly by 0.4%. EPS and adjusted EPS are $0.73 ($0.70 and $0.74 respectively in 2014).

As indicated above, the Corporation's results are presented in US dollars. Once converted to Canadian dollars, adjusted earnings per share reached C$0.95 for the third quarter of 2015, up 18.8% compared to C$0.80 for the same quarter in 2014.

Segmented Results

Sales for the automotive products segment declined to $114.2 million, from $316.5 million in the prior year. Excluding the impact of the net assets sold and the weaker Canadian dollar, this alone accounted for 17.5% of the decrease, sales decreased by 9.3% compared to 2014, partly offset by organic growth and sales from recent acquisitions. Segment organic sales grew 4.4% in the third quarter, driven by an increased focus on customer needs through enhanced product offering and pricing increases. EBITDA for the automotive products segment decreased to $9.1 million in the third quarter, from $15.8 million last year, while adjusted EBITDA decreased to $9.1 million from $17.3 million in 2014. The EBITDA margin and adjusted EBITDA margin both reached 8.0%, up 3.0 and 3.5 points from 5.0% and 5.5% respectively in 2014.

The paint and related products segment recorded sales of $162.0 million, up 8.8% from 2014, or 3.8% organically as a result of the recruitment of new customers. Segment EBITDA reached $18.3 million, up 15.1% from $15.9 million last year, while adjusted EBITDA grew 15.7% to $18.4 million from $15.9 million last year. The segment EBITDA margin and adjusted EBITDA margin reached 11.3% and 11.4% respectively, up 0.6 and 0.7 point from last year. This performance is namely attributable to enhanced gross margins resulting from purchases made in advance of pricing increases (partially offset by an unfavorable customer mix due to the growth of large national accounts with different buying conditions), improved fixed expenses coverage in relation to organic growth, as well as accretive business acquisitions.

NINE-MONTH PERIOD RESULTS

(All percentage increases and decreases represent year-over-year changes for the nine-month period of 2015 compared to the nine-month period of 2014, unless otherwise noted. The 2015 nine‐month period results include five months of operations from the net assets sold.)

Consolidated sales for the first nine months of 2015 decreased by 19.2% to $1,096.2 million, representing an increase of 0.2% when excluding the impact of the sales from the net assets sold, a performance explained by the same factors as for the third quarter. On an organic basis, sales grew 3.2% in the first nine months of the year.

The Corporation recorded a negative EBITDA of $77.3 million for the first nine months of 2015, compared to an EBITDA of $78.2 million last year. This is explained by non recurring charges of $150.8 million consisting of impairment and transaction charges in connection with the sale of the net assets of the US automotive products distribution business activities and restructuring charges to rightsize the corporate operations recorded over the course of the first semester. Adjusted EBITDA for the first nine months of the year decreased by 8.4%, while the adjusted EBITDA margin increased by 0.8 points, from 6.2% to 7.0%.

The Corporation recorded a net loss of $54.2 million in the first nine months of the year while adjusted earnings grew 9.2% to $45.8 million ($2.14 on a per share basis) from $41.9 million ($1.97 on a per share basis) for the corresponding period last year.

As indicated above, the Corporation's results are presented in US dollars. Once converted to Canadian dollars, adjusted earnings per share for the nine-month period amount to C$2.71 compared to C$2.16 in 2014, up 25.5%.

Segmented Results

Prior to their disposal on June 1, 2015, the net assets sold over the course of the first half of the year were included in the automotive products group for segmented reporting. Accordingly, sales of the automotive products segment were down 31.8% for the first nine months of 2015 to $631.0 million, or down 8.9% excluding the impact of net assets sold, mainly related to the impact of the weaker Canadian dollar and partially compensated by the organic growth and sales from recent acquisitions. On an organic basis, sales grew 1.6% in the first nine months of the year. A negative segment EBITDA of $116.9 million was recorded in the first nine months of the year, down from $39.4 million last year, a decline explained by impairment and transaction charges. Adjusted EBITDA decreased to $29.8 million, a performance mainly attributable to the inclusion of five months of lower productivity of the net assets sold on June 1, 2015.

The paint and related products segment recorded sales of $465.3 million in the first nine months of the year, up 7.8%. Segment sales grew 4.6% organically, driven mainly by the recruitment of new customers. Segment EBITDA reached $53.6 million, up 18.7% from 2014, while adjusted EBITDA reached $54.1 million, up 19.7%, mainly attributable to the sales leverage and accretive business acquisitions. Segment EBITDA margin and adjusted EBITDA margin reached 11.5% and 11.6% respectively, up from 10.5% for the corresponding period last year.

DIVIDEND

The Uni-Select Board of Directors declared a dividend of C$0.16 per share payable on January 19, 2016 to shareholders of record on December 31, 2015. This dividend is an eligible dividend for tax purposes.

CONFERENCE CALL

Uni-Select will host a conference call to discuss its third quarter results for 2015 on October 29, 2015 at 3 PM (EDT). To join the conference, dial 1 866 696-5910 followed by 2686549.

A replay of the conference call will be available from 5 PM (EDT) until 11:59 PM (EST) on November 9, 2015. To access the replay, dial 1 800 408-3053 followed by 7308519.

ABOUT UNI-SELECT

Uni-Select is a leader in the Canadian distribution of automotive products and its FinishMaster, Inc. subsidiary is a leading independent automotive paint distributor in the United States. Over 2,400 employees spread across 13 distribution centres and over 198 corporate stores are dedicated to offering advanced solutions and first-rate service to customers in order for them to benefit from a positively superior experience. Uni-Select's strong network and proficient programs contribute to the success of countless auto service shops and collision centres as well as more than 1,155 independent wholesalers in North America. Its Canadian banner programs made up of Auto Parts Plus®, Auto-Plus®, Bumper to Bumper®, Auto Select®, Uni-Pro®, SAX and Carrossier ProColor® regroup over 3,900 shops and stores. Uni-Select is headquartered in Boucherville and its shares are traded on the Toronto Stock Exchange (TSX) under the symbol UNS.

FORWARD-LOOKING INFORMATION

The information provided in this press release may include some forward-looking information, which could include certain risks and uncertainties which may cause the final results to be significantly different from those listed or implied within this news release. Such risks and uncertainties may include, for example, the impact of the transaction on the business of Uni-Select and certain strategic benefits expected to result from the transaction. For additional information with respect to risks and uncertainties, refer to the Annual Report filed by Uni-Select with the Canadian securities commissions. The forward-looking information contained herein is made as of the date of this press release, and Uni-Select does not undertake to publicly update such forward-looking information to reflect new information, subsequent or otherwise, unless required by applicable securities laws.

ADDITIONAL INFORMATION

The Management Report, the unaudited interim financial statements and the accompanying notes for the Third Quarter of 2015 are available in the "Investors" section on the Corporation's website at uniselect.com as well as on SEDAR at sedar.com. The Corporation's Annual Report may also be found on these websites as well as other information related to Uni-Select, including its Annual Information Form.

NON-IFRS FINANCIAL MEASURES

The information included in this press release contains certain measures that are consistent with IFRS. Non-IFRS financial measures do not have any standardized meaning prescribed by IFRS and are, therefore, unlikely to be comparable to similar measures presented by other entities.

Organic growth - This measure consists of quantifying the increase in pro forma consolidated sales between two given periods, excluding the impact of acquisitions, sales and disposals of stores, net assets sold, exchange‐rate fluctuations and when necessary, the variance in the number of billing days. Determining the rate of organic growth, based on findings that Management regards as reasonable, may differ from the actual rate of organic growth.

EBITDA - This measure represents net earnings excluding finance costs, depreciation and amortization, equity income and income taxes. This measure is a financial indicator of a corporation's ability to service and incur debt. It should not be considered by an investor as an alternative to sales or net earnings, as an indicator of operating performance or cash flows, or as a measure of liquidity, but as additional information.

Adjusted EBITDA, adjusted earnings and adjusted earnings per share - Management uses adjusted EBITDA, adjusted earnings and adjusted earnings per share to assess EBITDA, net earnings and net earnings per share from operating activities, excluding certain adjustments, net of income taxes (for adjusted earnings and adjusted earnings per share), which may affect the comparability of the Corporation's financial results. Management considers that these measures are more representative of the Corporation's operational performance and more appropriate in providing additional information. These adjustments include, among other things, restructuring and other charges, impairment and transaction charges related to the sale of net assets, the non‐capitalizable costs related to the development and implementation of the ERP system and costs related to the closure and disposal of stores. The exclusion of these items does not indicate that they are non‐recurring.

Adjusted EBITDA margin - The adjusted EBITDA margin is a percentage corresponding to the ratio of adjusted EBITDA to sales.

Free cash flows - This measure corresponds to the cash flows from operating activities according to the consolidated statements of cash flows adjusted for the following items: changes in working capital items, equity income, acquisitions of property and equipment and difference between amounts paid for post‐employment benefits and current year expenses. Uni‐Select considers the free cash flows to be a good indicator of financial strength and of operating performance because it shows the amount of funds available to manage growth in working capital, pay dividends, repay debt, reinvest in the Corporation and capitalize on various market opportunities that arise. The free cash flows exclude certain variations in working capital items (such as trade and other receivables, inventory and trade and other payables) and other funds generated and used according to the statement of cash flows. Therefore, it should not be considered as an alternative to the consolidated statement of cash flows, or as a measure of liquidity, but as additional information.

Total net debt - This measure consists of long‐term debt, including the portion due within a year, net of cash.

RECONCILIATION OF NON-IFRS MEASURES

The following table presents a reconciliation of EBITDA and adjusted EBITDA.

Third quarter Nine-month period
2015 2014 % 2015 2014 %
Net earnings (loss) 15,747 14,842 (54,162 ) 38,762
Income tax expense (recovery) 6,703 4,482 (38,027 ) 8,529
Equity loss (income) 14 (433 ) (96 ) (1,729 )
Depreciation and amortization 2,979 7,983 9,840 23,330
Finance costs, net 495 3,032 5,153 9,297
EBITDA 25,938 29,906 (77,292 ) 78,189
Restructuring and other charges 100 - 3,396 -
Impairment and transaction charges related to the sale of net assets - - 147,546 -
Expenses related to the development and deployment of the enterprise resource planning system (ERP) (1) - - - 414
Expenses related to the network optimization and to the closure and disposal of stores (2) - 1,528 2,930 4,973
Adjusted EBITDA 26,038 31,434 (17.2 ) 76,580 83,576 (8.4 )
Adjusted EBITDA margin 9.4 % 6.8 % 7.0 % 6.2 %
(1) Include costs mainly related to data conversion, employee training and deployment to various sites.
(2) Consist primarily of handling and freight expenses required to relocate inventory.

The following table presents a reconciliation of adjusted earnings and adjusted earnings per share.

Third quarter Nine-month period
2015 2014 % 2015 2014 %
Net earnings (loss) attributable to shareholders, as reported 15,747 14,842 (54,162 ) 38,762
Restructuring and other charges, net of taxes 61 - 2,620 -
Impairment and transaction charges related to the sale of net assets, net of taxes - - 95,587 -
Expenses related to the development and deployment of the ERP system, net of taxes - - - 247
Expenses related to the network optimization and to the closure and disposal of stores, net of taxes - 913 1,750 2,939
Adjusted net earnings 15,808 15,755 0.4 45,795 41,948 9.2
Net earnings (loss) per share attributable to shareholders, as reported 0.73 0.70 (2.53 ) 1.82
Restructuring and other charges, net of taxes - - 0.12 -
Impairment and transaction charges related to the sale of net assets, net of taxes - - 4.47 -
Expenses related to the development and deployment of the ERP system, net of taxes - - - 0.01
Expenses related to the network optimization and to the closure and disposal of stores, net of taxes - 0.04 0.08 0.14
Adjusted earnings per share 0.73 0.74 (1.4 ) 2.14 1.97 8.6

The effect of the declining Canadian dollar was $0.04 on earnings per share for the quarter compared to the same period of 2014, while the effect for the nine-month period was $0.08 compared to the same period last year.

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF EARNINGS

(In thousands of US dollars, except per share amounts, unaudited) Quarter
ended Sept. 30,
Nine-month period
ended Sept. 30,
2015 2014 2015 2014
Sales 276,229 465,408 1,096,213 1,357,175
Purchases, net of changes in inventories 197,746 328,743 771,128 955,353
Gross margin 78,483 136,665 325,085 401,822
Employee benefits 38,656 70,293 171,394 212,395
Other operating expenses 13,789 36,466 80,041 111,238
Restructuring and other charges 100 - 3,396 -
Impairment and transaction charges related to the sale of net assets - - 147,546 -
Earnings (loss) before finance costs, depreciation and amortization, equity income and income taxes 25,938 29,906 (77,292 ) 78,189
Finance costs, net 495 3,032 5,153 9,297
Depreciation and amortization 2,979 7,983 9,840 23,330
Earnings (loss) before equity income and income taxes 22,464 18,891 (92,285 ) 45,562
Equity income (loss) (14 ) 433 96 1,729
Earnings (loss) before income taxes 22,450 19,324 (92,189 ) 47,291
Income tax expense (recovery)
Current 1,490 1,686 (599 ) 9,889
Deferred 5,213 2,796 (37,428 ) (1,360 )
6,703 4,482 (38,027 ) 8,529
Net earnings (loss) attributable to shareholders 15,747 14,842 (54,162 ) 38,762
Earnings (loss) per share
Basic 0.73 0.70 (2.53 ) 1.82
Diluted 0.73 0.69 (2.53 ) 1.81
Weighted average number of common shares outstanding (in thousands)
Basic 21,570 21,258 21,373 21,262
Diluted 21,720 22,544 21,373 22,557

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands of US dollars, unaudited) Quarter
ended Sept. 30,
Nine-month period
ended Sept. 30,
2015 2014 2015 2014
Net earnings (loss) 15,747 14,842 (54,162 ) 38,762
Other comprehensive income (loss)
Items that will subsequently be reclassified to net earnings (loss):
Effective portion of changes in the fair value of cash flow hedges (net of income tax of nil and $29 for the quarter and nine-month period ($3 and $56 in 2014)) - 8 (78 ) (150 )
Net change in the fair value of derivative financial instruments designated as cash flow hedges transferred to earnings (net of income tax of nil and $167 for the quarter and nine-month period ($46 and $134 in 2014)) - 124 452 362
Unrealized exchange gains (losses) on the translation of financial statements to the presentation currency (14,717 ) 6,371 (12,962 ) 6,334
Unrealized exchange losses on the translation of debt designated as a hedge of net investments in foreign operations - (11,728 ) (10,257 ) (11,428 )
(14,717 ) (5,225 ) (22,845 ) (4,882 )
Items that will not subsequently be reclassified to net earnings (loss):
Remeasurements of long-term employee benefit obligations (net of income tax of $256 and $343 for the quarter and nine-month period ($39 and $1,232 in 2014)) (691 ) (107 ) 926 (3,329 )
Total other comprehensive loss (15,408 ) (5,332 ) (21,919 ) (8,211 )
Comprehensive income (loss) attributable to shareholders 339 9,510 (76,081 ) 30,551

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

Attributable to shareholders
(In thousands of US dollars, unaudited) Share
capital
Contri-
buted
surplus
Equity
com-
ponent
of the
con-
vertible
deben-
tures
Retained
earnings
Accu-
mulated
other
compre-
hensive
income
(loss)
Total
equity
Balance, December 31, 2013 87,271 1,332 1,687 394,716 3,749 488,755
Net earnings - - - 38,762 - 38,762
Other comprehensive loss - - - (3,329 ) (4,882 ) (8,211 )
Comprehensive income (loss) - - - 35,433 (4,882 ) 30,551
Contributions by and distributions to shareholders:
Share repurchases (33 ) - - (159 ) - (192 )
Dividends - - - (8,332 ) - (8,332 )
Stock-based compensation - 883 - - - 883
(33 ) 883 - (8,491 ) - (7,641 )
Balance, September 30, 2014 87,238 2,215 1,687 421,658 (1,133 ) 511,665
Balance, December 31, 2014 87,238 2,424 1,687 428,497 (6,850 ) 512,996
Net loss - - - (54,162 ) - (54,162 )
Other comprehensive income (loss) - - - 926 (22,845 ) (21,919 )
Comprehensive loss - - - (53,236 ) (22,845 ) (76,081 )
Contributions by and distributions to shareholders:
Shares repurchases (674 ) - - (6,921 ) - (7,595 )
Issuance of shares 8,546 - - - - 8,546
Convertible debentures redemption - - (1,687 ) 1,687 - -
Dividends - - - (8,006 ) - (8,006 )
Stock-based compensation - 792 - - - 792
7,872 792 (1,687 ) (13,240 ) - (6,263 )
Balance, September 30, 2015 95,110 3,216 - 362,021 (29,695 ) 430,652

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands of US dollars, unaudited) Quarter
ended Sept. 30,
Nine-month period
ended Sept. 30,
2015 2014 2015 2014
OPERATING ACTIVITIES
Net earnings (loss) 15,747 14,842 (54,162 ) 38,762
Non-cash items:
Restructuring and other charges 100 - 3,396 -
Impairment and transaction charges related to the sale of net assets - - 147,546 -
Finance costs, net 495 3,032 5,153 9,297
Depreciation and amortization 2,979 7,983 9,840 23,330
Income tax expense (recovery) 6,703 4,482 (38,027 ) 8,529
Amortization of incentives granted to customers 3,356 3,363 9,113 8,406
Other non-cash items 1,164 432 5,221 680
Changes in working capital items (12,452 ) 19,836 (38,477 ) 32,126
Interest paid (227 ) (2,899 ) (4,771 ) (8,186 )
Income taxes paid (3,111 ) (1,572 ) (10,185 ) (9,280 )
Cash flows from operating activities 14,754 49,499 34,647 103,664
INVESTING ACTIVITIES
Net business acquisitions (15,369 ) (40 ) (26,097 ) (17,617 )
Net cash proceeds from sale of net assets 1,898 - 325,502 -
Net balance of purchase price (5,293 ) (19 ) (5,575 ) 17
Advances to merchant members and incentives granted to customers (4,168 ) (1,854 ) (10,622 ) (12,350 )
Reimbursement of advances to merchant members 1,256 1,856 3,365 5,850
Dividends received from equity investments 263 - 664 -
Net acquisitions of property and equipment (4,612 ) (5,237 ) (13,942 ) (8,340 )
Net acquisitions and development of intangible assets (1,116 ) (1,305 ) (4,074 ) (5,548 )
Cash flows from (used in) investing activities (27,141 ) (6,599 ) 269,221 (37,988 )
FINANCING ACTIVITIES
Increase in long-term debt 13,466 14,825 109,891 58,859
Repayment of long-term debt (14,427 ) (54,618 ) (309,880 ) (116,332 )
Convertible debenture redemption - - (41,713 ) -
Net increase (decrease) in merchant members' deposits in the guarantee fund (6 ) (135 ) 42 (40 )
Share repurchases (7,595 ) (44 ) (7,595 ) (192 )
Issuance of shares - - 8,546 -
Dividends paid (2,664 ) (2,954 ) (7,931 ) (7,998 )
Cash flows used in financing activities (11,226 ) (42,926 ) (248,640 ) (65,703 )
Effects of fluctuations in exchange rates on cash (5,014 ) (1 ) (5,435 ) (1 )
Net increase (decrease) in cash (28,627 ) (27 ) 49,793 (28 )
Cash, beginning of period 78,527 56 107 57
Cash, end of period 49,900 29 49,900 29

UNI-SELECT INC.

CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

(In thousands of US dollars, unaudited) Sept. 30, Dec. 31,
2015 2014
ASSETS
Current assets:
Cash 49,900 107
Trade and other receivables 133,333 224,910
Income taxes receivable 17,787 10,663
Inventory 243,550 529,575
Prepaid expenses 11,149 11,829
Total current assets 455,719 777,084
Equity investments, other investments and advances to merchant members 16,799 21,743
Property and equipment 29,029 51,924
Intangible assets 66,435 133,556
Goodwill 146,786 192,496
Deferred tax assets 50,141 13,502
TOTAL ASSETS 764,909 1,190,305
LIABILITIES
Current liabilities:
Trade and other payables 289,359 373,690
Provision for restructuring and other charges 3,157 6,724
Dividends payable 2,557 2,743
Current portion of long-term debt, convertible debentures and merchant members' deposits in the guarantee fund 2,723 49,993
Total current liabilities 297,796 433,150
Long-term employee benefit obligations 25,150 25,233
Long-term debt 5,424 210,462
Merchant members' deposits in the guarantee fund 5,592 6,388
Derivative financial instruments - 511
Deferred tax liabilities 295 1,565
TOTAL LIABILITIES 334,257 677,309
EQUITY
Share capital 95,110 87,238
Contributed surplus 3,216 2,424
Equity component of the convertible debentures - 1,687
Retained earnings 362,021 428,497
Accumulated other comprehensive loss (29,695 ) (6,850 )
TOTAL EQUITY 430,652 512,996
TOTAL LIABILITIES AND EQUITY 764,909 1,190,305

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