Martin Marietta Materials, Inc. Announces First-Quarter Results
Stability in Aggregates Leads to Improved Operating Margin
Specialty Products Posts Record First-Quarter Results
NOTABLE ITEMS FOR THE QUARTER (ALL COMPARISONS ARE VERSUS THE PRIOR-YEAR QUARTER)
-
Net sales increased to
$306.2 million compared with$295.6 million -
Loss per diluted share of
$0.39 compared with loss per diluted share of$0.54 -
Increased diesel costs negatively affected earnings by
$0.05 per diluted share - Heritage aggregates product line pricing up 0.4%
- Heritage aggregates product line volume down 1.2%
-
Specialty Products record first-quarter earnings from operations of
$15.1 million - Selling, general and administrative (SG&A) expenses down 190 basis points as a percentage of net sales
MANAGEMENT COMMENTARY
Nye continued, "Since heavy-construction activity slows during the winter months, our first-quarter results seldom reflect annual performance. That said, milder weather in some of our markets early in the quarter led to monthly aggregates shipment growth over the prior-year periods. In contrast to 2010, weather patterns deteriorated in the critical last two weeks of March, slowing momentum gained early in the quarter. We believe these weather-related delays in shipments were a primary factor leading to an overall quarterly decrease of 1% in our heritage aggregates volume. However, despite a volume decrease for the quarter and the negative impact of rising diesel prices, we achieved an incremental operating margin (excluding freight and delivery revenues) for our Aggregates business, in line with our expectations.
"Infrastructure as our largest end-use market, comprises approximately half of our quarterly aggregates shipments. Uncertainty stemming from the absence of a long-term federal highway bill has negatively affected the infrastructure construction market. For the quarter, infrastructure shipments declined 3% compared with the prior-year quarter.
"The residential end-use market volume grew 15% compared with the
prior-year quarter, reflecting increased multi-family construction
activity. Our ChemRock/Rail end-use market experienced a 2% volume
increase compared with the prior-year quarter. The commercial component
of the nonresidential end-use market, particularly in our
"Compared with the prior-year quarter, changes in aggregates pricing
varied by geographic region. In the first quarter of 2011, more of our
markets reported pricing increases than in the past two years. For
example, quarterly heritage aggregates pricing for the
"Our Specialty Products business benefitted from strong demand,
primarily in the magnesia chemicals product line, where volume records
were achieved for several product lines. The Specialty Products business
reported record quarterly net sales of
"Our continuous commitment to cost control is evident in our SG&A
expenses, down
"For the first quarter 2011, we reported a loss from operations of
"The overall effective tax rate for the quarter was 27% compared with
17% for the first quarter 2010. The 2010 effective tax rate includes the
effect of a
LIQUIDITY AND CAPITAL RESOURCES
"We continue the attentive management of our balance sheet, liquidity
and cash flow generation. Cash from operating activities for the first
quarter was
"During the first quarter, we invested
"On
2011 OUTLOOK
"A variety of factors make it difficult to form a complete perspective
for 2011. A noteworthy consideration will be the rate at which states
spend available Stimulus funds for infrastructure projects. We are
operating under a Congressional continuing resolution that extends the
Safe, Accountable, Flexible and Efficient Transportation Equity Act — A
Legacy for Users (SAFETEA-LU) through
"Given this uncertainty, our 2011 outlook assumes there will be additional continuing resolutions that maintain current federal funding levels. We also expect that state spending on infrastructure should remain relatively constant and 30% of ARRA infrastructure funds will be spent this year. We expect the infrastructure end-use market to be flat to slightly down; we anticipate a modest volume recovery in the commercial component of our nonresidential end-use market. Considering the notable aggregates shipments to the energy sector in 2010, we expect the rate of growth in the heavy industrial component of our nonresidential end-use market to moderate in 2011. Natural gas prices and the timing of lease commitments for oil and natural gas companies will be significant factors for energy-sector activity. Additionally, given current oil prices, there is a possibility of increased wind farm construction activity. Overall, we expect nonresidential end-use shipments in 2011 to increase in the mid-single digit range. We have noticed early signs of potential recovery in the multi-family component of the residential construction market and we expect the rate of improvement in this end-use market to increase over 2010. Finally, our ChemRock/Rail shipments should be stable compared with 2010 shipments. Cumulatively, we expect flat to a 3% improvement in overall aggregates volume in 2011.
"Stability in our aggregates shipments will likely lead to sustainable price increases. However, such increases may not be uniform throughout our enterprise. Overall, we expect full-year 2011 aggregates pricing will range from flat to a 2% increase. Additionally, rising energy costs may provide an impetus for certain mid-year price increases.
"Aggregates production cost per ton in 2011 is expected to range from
flat to a slight decrease compared with 2010, despite rising energy
costs. The Specialty Products segment should contribute
"Selling, general and administrative expenses should be lower in 2011,
primarily due to lower pension expense. Interest expense should be
approximately
RISKS TO OUTLOOK
The 2011 estimated outlook includes management's assessment of the
likelihood of certain risk factors that will affect performance. The
most significant risk to 2011 performance will be, as previously noted,
Other risks related to the Corporation's future performance include, but
are not limited to: both price and volume and include a recurrence of
widespread decline in aggregates pricing; a greater-than-expected
decline in infrastructure construction as a result of continued delays
in traditional federal, ARRA, state and/or local infrastructure projects
and continued lack of clarity regarding the timing and amount of the
federal highway bill; a decline in nonresidential construction; a
slowdown in the residential construction recovery; or some combination
thereof. Further, increased highway construction funding pressures
resulting from either federal or state issues can affect profitability.
Currently, nearly all states are experiencing some funding-level
pressures driven by lower tax revenues. If these pressures reduce
transportation budgets more than in the past, construction spending
could be negatively affected.
The Corporation's principal business serves customers in construction aggregates-related markets. This concentration could increase the risk of potential losses on customer receivables; however, payment bonds normally posted on public projects, together with lien rights on private projects, help to mitigate the risk of uncollectible receivables. The level of aggregates demand in the Corporation's end-use markets, production levels and the management of production costs will affect the operating leverage of the Aggregates business and, therefore, profitability. Production costs in the Aggregates business are also sensitive to energy prices, both directly and indirectly. Diesel and other fuels change production costs directly through consumption or indirectly in the increased cost of energy-related consumables, such as, steel, explosives, tires and conveyor belts. Fluctuating diesel pricing also affects transportation costs, primarily through fuel surcharges in the Corporation's long-haul distribution network.
Transportation in the Corporation's long-haul network, particularly
barge availability on the
Risks to the 2011 outlook include shipment declines as a result of economic events beyond the Corporation's control. In addition to the impact on nonresidential and residential construction, the Corporation is exposed to risk in its estimated outlook from credit markets and the availability of and interest cost related to its debt.
CONSOLIDATED FINANCIAL HIGHLIGHTS
Net sales for the quarter were
BUSINESS FINANCIAL HIGHLIGHTS
Net sales for the Aggregates business during the first quarter of 2011
were
Specialty Products' first-quarter net sales of
CONFERENCE CALL INFORMATION
The Company will host an online web simulcast of its fourth quarter 2011
earnings conference call later today (
For those investors without online web access, the conference call may also be accessed by calling (970) 315-0423, confirmation number 61456607.
If you are interested in
Investors are cautioned that all statements in this press release that relate to the future involve risks and uncertainties, and are based on assumptions that the Corporation believes in good faith are reasonable but which may be materially different from actual results. Forward-looking statements give the investor our expectations or forecasts of future events. You can identify these statements by the fact that they do not relate only historical or current facts. They may use words such as "anticipate," "expect," "should be," "believe," and other words of similar meaning in connection with future events or future operating or financial performance. Any or all of our forward-looking statements here and in other publications may turn out to be wrong.
Factors that the Corporation currently believes could cause actual
results to differ materially from the forward-looking statements in this
press release include, but are not limited to, the performance of
MARTIN MARIETTA MATERIALS, INC. | ||||||||
Unaudited Statements of Earnings | ||||||||
(In millions, except per share amounts) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net sales | $ | 306.2 | $ | 295.6 | ||||
Freight and delivery revenues | 50.3 | 45.3 | ||||||
Total revenues | 356.5 | 340.9 | ||||||
Cost of sales | 285.1 | 276.0 | ||||||
Freight and delivery costs | 50.3 | 45.3 | ||||||
Total cost of revenues | 335.4 | 321.3 | ||||||
Gross profit | 21.1 | 19.6 | ||||||
Selling, general and administrative expenses | 29.2 | 33.6 | ||||||
Other operating (income) and expenses, net | (2.0 | ) | (1.1 | ) | ||||
Loss from operations | (6.1 | ) | (12.9 | ) | ||||
Interest expense | 18.2 | 17.6 | ||||||
Other nonoperating (income) and expenses, net | (0.3 | ) | (0.6 | ) | ||||
Loss from continuing operations before taxes on income | (24.0 | ) | (29.9 | ) | ||||
Income tax benefit | (6.3 | ) | (5.0 | ) | ||||
Loss from continuing operations | (17.7 | ) | (24.9 | ) | ||||
Gain on discontinued operations, net of related tax expense of $0.0 and $0.0, respectively |
- | 0.1 | ||||||
Consolidated net loss | (17.7 | ) | (24.8 | ) | ||||
Less: Net loss attributable to noncontrolling interests | (0.3 | ) | (0.6 | ) | ||||
Net loss attributable to Martin Marietta Materials, Inc. | $ | (17.4 | ) | $ | (24.2 | ) | ||
Net loss per common share: | ||||||||
Basic from continuing operations attributable to common shareholders | $ | (0.39 | ) | $ | (0.54 | ) | ||
Discontinued operations attributable to common shareholders | - | - | ||||||
$ | (0.39 | ) | $ | (0.54 | ) | |||
Diluted from continuing operations attributable to common shareholders | $ | (0.39 | ) | $ | (0.54 | ) | ||
Discontinued operations attributable to common shareholders | - | - | ||||||
$ | (0.39 | ) | $ | (0.54 | ) | |||
Dividends per common share | $ | 0.40 | $ | 0.40 | ||||
Average number of common shares outstanding: | ||||||||
Basic | 45.6 | 45.4 | ||||||
Diluted | 45.6 | 45.4 | ||||||
MARTIN MARIETTA MATERIALS, INC. | ||||||||
Unaudited Financial Highlights | ||||||||
(In millions) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net sales: | ||||||||
Aggregates Business: | ||||||||
Mideast Group | $ | 85.4 | $ | 83.3 | ||||
Southeast Group | 66.0 | 68.1 | ||||||
West Group | 105.7 | 102.4 | ||||||
Total Aggregates Business | 257.1 | 253.8 | ||||||
Specialty Products | 49.1 | 41.8 | ||||||
Total | $ | 306.2 | $ | 295.6 | ||||
Gross profit: | ||||||||
Aggregates Business: | ||||||||
Mideast Group | $ | 13.2 | $ | 11.9 | ||||
Southeast Group | (5.0 | ) | (2.9 | ) | ||||
West Group | (2.4 | ) | (3.0 | ) | ||||
Total Aggregates Business | 5.8 | 6.0 | ||||||
Specialty Products | 17.6 | 14.1 | ||||||
Corporate | (2.3 | ) | (0.5 | ) | ||||
Total | $ | 21.1 | $ | 19.6 | ||||
Selling, general and administrative expenses: | ||||||||
Aggregates Business: | ||||||||
Mideast Group | $ | 10.4 | $ | 10.4 | ||||
Southeast Group | 6.1 | 6.4 | ||||||
West Group | 10.6 | 10.7 | ||||||
Total Aggregates Business | 27.1 | 27.5 | ||||||
Specialty Products | 2.5 | 2.9 | ||||||
Corporate | (0.4 | ) | 3.2 | |||||
Total | $ | 29.2 | $ | 33.6 | ||||
Earnings (Loss) from operations: | ||||||||
Aggregates Business: | ||||||||
Mideast Group | $ | 5.7 | $ | 2.1 | ||||
Southeast Group | (9.7 | ) | (9.1 | ) | ||||
West Group | (12.5 | ) | (12.3 | ) | ||||
Total Aggregates Business | (16.5 | ) | (19.3 | ) | ||||
Specialty Products | 15.1 | 11.2 | ||||||
Corporate | (4.7 | ) | (4.8 | ) | ||||
Total | $ | (6.1 | ) | $ | (12.9 | ) | ||
Depreciation | $ | 42.0 | $ | 43.5 | ||||
Depletion | 0.5 | 0.6 | ||||||
Amortization | 0.8 | 0.9 | ||||||
$ | 43.3 | $ | 45.0 | |||||
MARTIN MARIETTA MATERIALS, INC. | |||||||||
Balance Sheet Data | |||||||||
(In millions) | |||||||||
March 31, | December 31, | March 31, | |||||||
2011 | 2010 | 2010 | |||||||
(Unaudited) | (Audited) | (Unaudited) | |||||||
ASSETS | |||||||||
Cash and cash equivalents | $ | 176.8 | $ | 70.3 | $ | 221.0 | |||
Accounts receivable, net | 203.2 | 183.4 | 202.1 | ||||||
Inventories, net | 331.7 | 331.9 | 322.0 | ||||||
Other current assets | 128.7 | 110.6 | 109.6 | ||||||
Property, plant and equipment, net | 1,676.3 | 1,687.8 | 1,695.0 | ||||||
Intangible assets, net | 643.7 | 644.1 | 643.1 | ||||||
Other noncurrent assets | 48.2 | 46.6 | 52.1 | ||||||
Total assets | $ | 3,208.6 | $ | 3,074.7 | $ | 3,244.9 | |||
LIABILITIES AND EQUITY | |||||||||
Current maturities of long-term debt and short-term facilities | $ | 7.1 | $ | 248.7 | $ | 219.6 | |||
Other current liabilities | 151.7 | 136.8 | 175.7 | ||||||
Long-term debt (excluding current maturities) | 1,161.5 | 782.0 | 1,029.6 | ||||||
Other noncurrent liabilities | 453.6 | 438.9 | 447.1 | ||||||
Total equity | 1,434.7 | 1,468.3 | 1,372.9 | ||||||
Total liabilities and equity | $ | 3,208.6 | $ | 3,074.7 | $ | 3,244.9 | |||
MARTIN MARIETTA MATERIALS, INC. | ||||||||
Unaudited Statements of Cash Flows | ||||||||
(In millions) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Operating activities: | ||||||||
Consolidated net loss | $ | (17.7 | ) | $ | (24.8 | ) | ||
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: | ||||||||
Depreciation, depletion and amortization | 43.3 | 45.0 | ||||||
Stock-based compensation expense | 2.8 | 3.9 | ||||||
Excess tax benefits from stock-based compensation transactions | (0.3 | ) | (0.1 | ) | ||||
Gains on divestitures and sales of assets | (3.0 | ) | (1.1 | ) | ||||
Deferred income taxes | 3.3 | 0.9 | ||||||
Other items, net |
0.6 | 0.3 | ||||||
Changes in operating assets and liabilities, net of effects of acquisitions and divestitures: |
||||||||
Accounts receivable, net | (19.3 | ) | (39.3 | ) | ||||
Inventories, net | 0.2 | 10.7 | ||||||
Accounts payable | 14.5 | 15.1 | ||||||
Other assets and liabilities, net | (3.1 | ) | 16.5 | |||||
Net cash provided by operating activities | 21.3 | 27.1 | ||||||
Investing activities: | ||||||||
Additions to property, plant and equipment | (30.7 | ) | (25.0 | ) | ||||
Acquisitions, net | - | (28.0 | ) | |||||
Proceeds from divestitures and sales of assets | 2.2 | 1.5 | ||||||
Net cash used for investing activities | (28.5 | ) | (51.5 | ) | ||||
Financing activities: | ||||||||
Borrowings of long-term debt | 300.0 | 50.0 | ||||||
Repayments of long-term debt and payments on capital lease obligations | (162.2 | ) | (50.5 | ) | ||||
Change in bank overdraft | (2.1 | ) | 0.5 | |||||
Dividends paid | (18.4 | ) | (18.4 | ) | ||||
Debt issue costs | (3.2 | ) | (0.1 | ) | ||||
Issuances of common stock | 0.3 | 0.2 | ||||||
Excess tax benefits from stock-based compensation transactions | 0.3 | 0.1 | ||||||
Distributions to owners of noncontrolling interests | (1.0 | ) | - | |||||
Net cash provided by (used for) financing activities | 113.7 | (18.2 | ) | |||||
Net increase (decrease) in cash and cash equivalents | 106.5 | (42.6 | ) | |||||
Cash and cash equivalents, beginning of period | 70.3 | 263.6 | ||||||
Cash and cash equivalents, end of period | $ | 176.8 | $ | 221.0 | ||||
MARTIN MARIETTA MATERIALS, INC. | ||||||
Unaudited Operational Highlights | ||||||
Three Months Ended | ||||||
March 31, 2011 | ||||||
Volume | Pricing | |||||
Volume/Pricing Variance (1) | ||||||
Heritage Aggregates Product Line: (2) | ||||||
Mideast Group | 0.1 | % | 0.8 | % | ||
Southeast Group | (9.7 | %) | 5.8 | % | ||
West Group | 2.9 | % | (2.4 | %) | ||
Heritage Aggregates Operations | (1.2 | %) | 0.4 | % | ||
Aggregates Product Line (3) | (0.9 | %) | 0.3 | % | ||
Three Months Ended | ||||||
March 31, | ||||||
Shipments (tons in thousands) | 2011 | 2010 | ||||
Heritage Aggregates Product Line: (2) | ||||||
Mideast Group | 6,913 | 6,905 | ||||
Southeast Group | 5,528 | 6,122 | ||||
West Group | 10,751 | 10,446 | ||||
Heritage Aggregates Operations | 23,192 | 23,473 | ||||
Acquisitions | 74 | - | ||||
Divestitures (4) | 1 | 3 | ||||
Aggregates Product Line (3) | 23,267 | 23,476 | ||||
(1) Volume/pricing variances reflect the percentage increase (decrease) from the comparable period in the prior year. | ||||||
(2) Heritage Aggregates product line excludes volume and pricing data for acquisitions that have not been included in prior-year operations for the comparable period and divestitures. |
||||||
(3) Aggregates product line includes all acquisitions from the date of acquisition and divestitures through the date of disposal. | ||||||
(4) Divestitures include the tons related to divested aggregates product line operations up to the date of divestiture. | ||||||
MARTIN MARIETTA MATERIALS, INC. | ||||||||
Non-GAAP Financial Measures | ||||||||
(Dollars in millions) | ||||||||
Gross margin as a percentage of net sales and operating margin as a percentage of net sales represent non-GAAP measures. The Corporation presents these ratios calculated based on net sales as it is consistent with the basis by which management reviews the Corporation's operating results. Further, management believes it is consistent with the basis by which investors analyze the Corporation's operating results given that freight and delivery revenues and costs represent pass-throughs and have no profit mark-up. Gross margin and operating margin calculated as percentages of total revenues represent the most directly comparable financial measures calculated in accordance with generally accepted accounting principles ("GAAP"). The following tables present the calculations of gross margin and operating margin for the three months ended March 31, 2011 and 2010 in accordance with GAAP and reconciliations of the ratios as percentages of total revenues to percentages of net sales: |
||||||||
Three Months Ended | ||||||||
|
March 31, | |||||||
Gross Margin in Accordance with Generally Accepted Accounting Principles |
2011 | 2010 | ||||||
Gross profit | $ | 21.1 | $ | 19.6 | ||||
Total revenues | $ | 356.5 | $ | 340.9 | ||||
Gross margin | 5.9 | % | 5.8 | % | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
Gross Margin Excluding Freight and Delivery Revenues | 2011 | 2010 | ||||||
Gross profit | $ | 21.1 | $ | 19.6 | ||||
Total revenues | $ | 356.5 | $ | 340.9 | ||||
Less: Freight and delivery revenues | (50.3 | ) | (45.3 | ) | ||||
Net sales | $ | 306.2 | $ | 295.6 | ||||
Gross margin excluding freight and delivery revenues | 6.9 | % | 6.6 | % | ||||
Three Months Ended | ||||||||
|
March 31, | |||||||
Operating Margin in Accordance with Generally Accepted Accounting Principles |
2011 | 2010 | ||||||
Loss from operations | $ | (6.1 | ) | $ | (12.9 | ) | ||
Total revenues | $ | 356.5 | $ | 340.9 | ||||
Operating margin | (1.7 | %) | (3.8 | %) | ||||
Three Months Ended | ||||||||
March 31, | ||||||||
Operating Margin Excluding Freight and Delivery Revenues | 2011 | 2010 | ||||||
Loss from operations | $ | (6.1 | ) | $ | (12.9 | ) | ||
Total revenues | $ | 356.5 | $ | 340.9 | ||||
Less: Freight and delivery revenues | (50.3 | ) | (45.3 | ) | ||||
Net sales | $ | 306.2 | $ | 295.6 | ||||
Operating margin excluding freight and delivery revenues | (2.0 | %) | (4.4 | %) | ||||
MARTIN MARIETTA MATERIALS, INC. | ||||||||
Non-GAAP Financial Measures (continued) | ||||||||
(Dollars in millions) | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Earnings Before Interest, Income Taxes, Depreciation, Depletion and Amortization (EBITDA) (1) |
$ | 37.3 | $ | 33.0 | ||||
(1) EBITDA is a widely accepted financial indicator of a company's ability to service and/or incur indebtedness. EBITDA is not defined by generally accepted accounting principles and, as such, should not be construed as an alternative to net earnings or operating cash flow. For further information on EBITDA, refer to the Corporation's website at www.martinmarietta.com. |
||||||||
A reconciliation of Net Loss Attributable to Martin Marietta Materials, Inc. to EBITDA is as follows: | ||||||||
Three Months Ended | ||||||||
March 31, | ||||||||
2011 | 2010 | |||||||
Net Loss Attributable to Martin Marietta Materials, Inc. | $ | (17.4 | ) | $ | (24.2 | ) | ||
Add back: | ||||||||
Interest Expense | 18.2 | 17.6 | ||||||
Income Tax Benefit for Controlling Interests | (6.4 | ) | (4.9 | ) | ||||
Depreciation, Depletion and Amortization Expense | 42.9 | 44.5 | ||||||
EBITDA | $ | 37.3 | $ | 33.0 | ||||
The ratio of Consolidated Debt-to-Consolidated EBITDA, as defined, for the trailing twelve months is a covenant under the Corporation's revolving credit facility, term loan facility and accounts receivable securitization facility. Under the terms of these agreements, the Corporation's ratio of consolidated debt-to-consolidated EBITDA, as defined, for the trailing twelve months can not exceed 3.5 times as of March 31, 2011, with certain exceptions related to qualifying acquisitions, as defined. |
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The following presents the calculation of Consolidated Debt-to-Consolidated EBITDA, as defined, for the trailing-twelve months at March 31, 2011. For supporting calculations, refer to Corporation's website at www.martinmarietta.com. |
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|
Twelve-Month Period |
|||||||
April 1, 2010 to |
||||||||
March 31, 2011 |
||||||||
Earnings from continuing operations attributable to Martin Marietta Materials, Inc. | $ | 103.8 | ||||||
Add back: | ||||||||
Interest expense | 69.0 | |||||||
Income tax expense | 27.8 | |||||||
Depreciation, depletion and amortization expense | 175.1 | |||||||
Stock-based compensation expense | 13.5 | |||||||
Deduct: | ||||||||
Interest income | (1.0 | ) | ||||||
Consolidated EBITDA, as defined | $ | 388.2 | ||||||
Consolidated Debt, including debt guaranteed by the Corporation, at March 31, 2011 | $ | 1,186.0 | ||||||
Less: Unrestricted cash and cash equivalents in excess of $50 at March 31, 2011 | (126.7 | ) | ||||||
Consolidated Net Debt, as defined, at March 31, 2011 | $ | 1,059.3 | ||||||
Consolidated Debt-to-Consolidated EBITDA, as defined, at March 31, 2011 for the trailing twelve-month EBITDA |
2.73 times | |||||||
MLM-E
Executive
Vice President, Chief Financial Officer and Treasurer
www.martinmarietta.com
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