July 25, 2018 - 5:30 PM EDT
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Apergy Reports Second Quarter 2018 Results
  • Revenue of $306 million in Q2-18, up 19% year-over-year
  • Net income of $22 million & adjusted net income of $29 million in Q2-18
  • Diluted EPS of $0.29 & adjusted diluted EPS of $0.38 in Q2-18
  • Adjusted EBITDA of $77 million in Q2-18, up 33% year-over-year with margins improving 260 bps to 25%
  • Cash from operating activities of $52 million in Q2-18
  • Solid growth year-over-year across both segments, plus continued strong operational execution

THE WOODLANDS, Texas, July 25, 2018 (GLOBE NEWSWIRE) -- Apergy Corporation (“Apergy”) (NYSE:APY) today reported net income in the second quarter of 2018 of $22.2 million, compared to net income of $18.8 million in the second quarter of 2017. Diluted earnings per share in the second quarter of 2018 was $0.29 and include total after-tax charges of $7.2 million, or $0.09 per diluted share, related to spin-off and other restructuring activities. Adjusted diluted earnings per share in the second quarter of 2018 was $0.38.

Revenue was $305.9 million in the second quarter of 2018, an increase of $49.8 million, or 19%, compared to $256.2 million in the second quarter of 2017, and an increase of $22.0 million, or 8%, compared to $283.9 million in the first quarter of 2018. 

Adjusted EBITDA was $76.5 million in the second quarter of 2018, an increase of $19.1 million, or 33%, compared to $57.4 million for the second quarter of 2017, and an increase of $12.1 million, or 19%, compared to $64.5 million in the first quarter of 2018. Adjusted EBITDA margins were 25.0%, an increase of 260 bps year-over-year.

  Three Months Ended Variance 
(dollars in thousands, except per share amounts) June 30, 2018 March 31, 2018 June 30, 2017 SequentialYear-over-year 
Revenue $305,928  $283,922  $256,161   8% 19% 
                     
Net income attributable to Apergy $22,183  $24,543  $18,754   (10)% 18% 
Diluted earnings per share attributable to Apergy $0.29  $0.32  $0.24   (9)% 21% 
                     
Adjusted net income attributable to Apergy $29,392  $26,647  $20,567   10% 43% 
Adjusted diluted earnings per share attributable to Apergy $0.38  $0.34  $0.26   12% 46% 
                     
Adjusted EBITDA $76,548  $64,456  $57,409   19% 33% 
Adjusted EBITDA margin  25.0%  22.7%  22.4%  230 bps  260 bps  
                     
Net cash provided by operating activities $51,553  $7,347  $6,215  $44,206 $45,338  
Capital expenditures $17,518  $13,683  $9,685  $3,835 $7,833  

“We are excited to begin our journey as Apergy. Our team did an exceptional job of successfully completing our separation from Dover, while maintaining continued focus on our customers and generating strong results. I want to thank all of our employees and customers for their support through this transition,” said Sivasankaran "Soma" Somasundaram, President and Chief Executive Officer. “As a stand-alone publicly traded company, we are focused on delivering differentiated performance by being relentless advocates for our customers, developing and deploying leading technology with proven impact, and driving continuous improvement across our organization.

“I am pleased with our second quarter results. We executed well and both of our segments delivered sound operational results. Apergy’s strong performance was driven by solid U.S. onshore activity, improving international activity, and our continued execution in the marketplace. On a year-over-year basis, all of our major products, including polycrystalline diamond cutters and bearings, artificial lift, and digital products and services, posted strong revenue growth. Artificial lift as well as digital products and services posted particularly strong growth in the quarter. In addition to revenue growth, margins expanded due to operating leverage driven by our continued focus on execution, productivity improvements, and cost discipline. 

“We expect oil and gas prices for the second half of 2018 will remain constructive for market activity, continued E&P investments, and further improvement in international market activity. Accordingly, we believe our business is well positioned to take advantage of these market factors. With respect to the recent Permian take-away capacity issues, we remain in continuing conversations with our customers as their plans evolve. If there is some pull-back in the Permian, then we believe producers will direct capital to other basins in which we are well positioned to serve their needs,” concluded Somasundaram.

  Three Months Ended Variance 
(dollars in thousands) June 30, 2018 March 31, 2018 June 30, 2017 Sequential Year-over-year 
Production & Automation Technologies           
  Segment revenue $240,686  $214,691  $198,175  12% 21% 
  Segment operating profit $23,349  $10,351  $9,967  126% 134% 
  Segment operating profit margin  9.7%  4.8%  5.0% 490 bps  470 bps  
  Adjusted segment EBITDA $54,322  $39,868  $36,759  36% 48% 
  Adjusted segment EBITDA margin  22.6%  18.6%  18.5% 400 bps  410 bps  
                    
Drilling Technologies                   
  Segment revenue $65,242  $69,231  $57,986  (6)% 13% 
  Segment operating profit $21,340  $24,189  $19,927  (12)% 7% 
  Segment operating profit margin  32.7%  34.9%  34.4% (220) bps  (170) bps  
  Adjusted segment EBITDA $24,135  $27,056  $22,915  (11)% 5% 
  Adjusted segment EBITDA margin  37.0%  39.1%  39.5% (210) bps  (250) bps  

Production & Automation Technologies

Production and Automation Technologies revenue increased $42.5 million, or 21%, year-over-year driven by strong growth in artificial lift, digital products, and improving international activity. We experienced robust growth in our ESP product line driven by continued penetration in U.S. onshore ESP markets. Segment operating profit increased $13.4 million, or 134%, year-over-year. Adjusted segment EBITDA increased $17.6 million, or 48%, year-over-year primarily driven by revenue growth and related operating leverage, with margins expanding to 22.6% from 18.5% in the prior year period.

On a sequential basis, revenue increased $26.0 million, or 12%. Segment operating profit increased $13.0 million, or 126% as a result of the higher volume. Adjusted segment EBITDA increased $14.5 million, or 36%, sequentially benefitting from operating leverage associated with the strong topline growth.

Revenue from digital products within Production and Automation Technologies was $29.9 million in the second quarter of 2018, an increase of $8.9 million, or 43%, compared to $20.9 million in the second quarter of 2017, and an increase of $5.5 million, or 23%, from $24.4 million in the first quarter of 2018. Revenue growth in digital products was driven by the launch of new products and strong market activity.

Drilling Technologies

Drilling Technologies revenue increased $7.3 million, or 13%, year-over-year as a result of increased worldwide rig count and footage drilled. Segment operating profit increased $1.4 million, or 7%, year-over-year driven by higher revenue, partially offset by increased spending to support diamond bearings growth. Adjusted Segment EBITDA increased by $1.2 million, or 5%, year-over-year driven by the increased volume.

On a sequential basis, revenue decreased by $4.0 million, or 6%, primarily due to the 14% sequential decline in North America average rig count, driven by the seasonally lower rig counts in Canada. As expected, during the quarter average Canadian rig counts declined by approximately 60% sequentially, which was only partially offset by the increase in U.S. average rig count. As we exited the second quarter, order rates have rebounded with the increasing Canadian rig count. Segment operating profit decreased $2.8 million, or 12%, sequentially. Adjusted segment EBITDA decreased by $2.9 million, or 11%, due to the lower sequential revenue.

Other Business Updates

  • Leading Permian operator increased spending on Apergy’s ESP offering by 350% in Q2-18.
  • Accelerated adoption of Apergy’s ESP SmartenTM Controller and Gen II LookoutTM Monitoring services.
  • Apergy received a 30 well commitment from an existing ESP customer and an 8 well commitment from competitor ESP customer for rod lift conversion.
  • Twenty-two U.S. Patents have been issued to Drilling Technologies year to date in 2018.
  • Apergy’s new Windrock Spotlight cloud based remote monitoring and predictive analysis platform received two large orders of 121 and 77 units from a large U.S. pipeline company and a large international oil company, respectively.

Conference Call Details

Apergy Corporation will host a conference call on Thursday, July 26, 2018, to discuss its second quarter 2018 financial results. The call will begin at 9:00 a.m. Eastern Time. Presentation materials that supplement the conference call are available on Apergy’s website at www.apergy.com.

To listen to the call via a live webcast, please visit Apergy’s website at www.apergy.com. The call will also be available by dialing 1-888-424-8151 in the United States and Canada or 1-847-585-4422 for international calls. Please call approximately 15 minutes prior to the scheduled start time and reference Apergy conference call number 6812 573.

A replay of the conference call will be available on Apergy’s website. Also, a replay may be accessed by dialing 1-888-843-7419 in the United States and Canada, or 1-630-652-3042 for international calls. The access code is 6812 573#.

About Non-GAAP Measures

This release presents information about Apergy’s adjusted EBITDA, adjusted EBITDA margin, adjusted segment EBITDA, adjusted segment EBITDA margin, adjusted net income attributable to Apergy, adjusted net income, adjusted diluted earnings per share and adjusted working capital, which are non-GAAP financial measures made available as a supplement, and not an alternative, to the results provided in accordance with generally accepted accounting principles in the United States of America (“GAAP”). See Reconciliations of GAAP to Non-GAAP Financial Measures included in the accompanying financial tables for the reconciliation of each non-GAAP financial measure to its most directly comparable financial measure.

Adjusted EBITDA and adjusted segment EBITDA are defined as, or as a result of, net income excluding income taxes, interest income and expense, depreciation and amortization expense, separation and supplemental benefit costs associated with the spinoff from Dover Corporation, royalty expense incurred only prior to the spinoff, and restructuring and other related charges. Adjusted EBITDA margin and adjusted segment EBITDA are defined as adjusted EBITDA and adjusted segment EBITDA, respectively, divided by revenue.

Adjusted net income and adjusted diluted earnings per share are defined as net income and earnings per share, respectively, excluding separation and supplemental benefit costs associated with the spinoff from Dover Corporation, royalty expense incurred only prior to the spinoff, and restructuring and other related charges.

Adjusted working capital is defined as accounts receivable, plus inventory, less accounts payable. We believe adjusted working capital provides a meaningful measure of our operational results by showing changes caused by revenue or our operational initiatives.

References to net income, diluted earnings per share, adjusted net income and adjusted diluted earnings per share are exclusive of noncontrolling interests.

These non-GAAP financial measures are included to help facilitate comparisons of Apergy’s operating performance across periods by excluding items that do not reflect the core operating results of our businesses. As such, Apergy’s management believes making available non-GAAP financial measures as a supplemental measurement to investors is useful because it allows investors to evaluate Apergy's performance using the same methodology and information used by Apergy management.

About Apergy

Apergy is a leading provider of highly engineered equipment and technologies that help companies drill for and produce oil and gas safely and efficiently around the world. Apergy's products provide efficient functioning throughout the lifecycle of a well - from drilling to completion to production. The company’s Production and Automation offerings consist of artificial lift equipment and solutions, including rod pumping systems, electric submersible pump systems, progressive cavity pumps and drive systems and plunger lifts, as well as a full automation and digital offering consisting of equipment and software for Industrial Internet of Things (“IIoT”) solutions for downhole monitoring, wellsite productivity enhancement, and asset integrity management. Apergy’s Drilling Technologies offering provides market leading polycrystalline diamond cutters and bearings that result in cost effective and efficient drilling. To learn more about Apergy, visit our website at http://www.apergy.com.

Forward-Looking Statements

This press release contains statements relating to future actions and results, which are "forward-looking statements" within the meaning of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995. Such statements relate to, among other things, Apergy's market position and growth opportunities. Forward-looking statements include, but are not limited to, statements related to Apergy’s expectations regarding the performance of the business, financial results, liquidity and capital resources of Apergy, the benefits resulting from Apergy’s separation from Dover Corporation, the effects of competition, and the effects of future legislation or regulations and other non-historical statements. Forward-looking statements are subject to inherent risks and uncertainties that could cause actual results to differ materially from current expectations, including, but not limited to, the risk that the anticipated benefits from our separation from Dover Corporation may not be fully realized or may take longer to realize than expected; tax and regulatory matters; and changes in economic, competitive, strategic, technological, regulatory or other factors that affect the operation of Apergy's businesses. You are encouraged to refer to the documents that Apergy files from time to time with the Securities and Exchange Commission (the “SEC”), including the “Risk “Factors” section of Apergy’s Registration Statement on Form 10, originally filed with the SEC on March 26, 2018, as amended and supplemented, and in Apergy’s other filings with the SEC, for a discussion of these and other risks and uncertainties. Readers are cautioned not to place undue reliance on Apergy’s forward-looking statements. Forward-looking statements speak only as of the day they are made and Apergy undertakes no obligation to update any forward-looking statement, except as required by applicable law.

Investor Contact: David Skipper
[email protected]
713-203-8031

Media Contact: John Breed
[email protected]
281-403-5751


APERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)

 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
(in thousands, except per share amounts)2018 2018 2017 2018 2017
Revenue$305,928  $283,922  $256,161  $589,850  $486,439 
Cost of goods and services202,210  189,661  171,531  391,871  326,449 
Gross profit103,718  94,261  84,630  197,979  159,990 
Selling, general and administrative expense65,807  59,739  54,892  125,546  107,531 
Interest expense, net6,062  167  70  6,229  120 
Other expense, net364  2,450  2,109  2,814  4,988 
Income before income taxes31,485  31,905  27,559  63,390  47,351 
Provision for income taxes9,381  7,220  8,526  16,601  14,732 
Net income22,104  24,685  19,033  46,789  32,619 
Net income (loss) attributable to noncontrolling interest(79) 142  279  63  596 
Net income attributable to Apergy$22,183  $24,543  $18,754  $46,726  $32,023 
          
Earnings per share attributable to Apergy:         
Basic$0.29  $0.32  $0.24  $0.60  $0.41 
Diluted$0.29  $0.32  $0.24  $0.60  $0.41 
          
Weighted-average shares outstanding:         
Basic77,340  77,340  77,340  77,340  77,340 
Diluted77,770  77,890  77,890  77,904  77,890 


APERGY CORPORATION
BUSINESS SEGMENT DATA
(UNAUDITED)

 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
(in thousands)2018 2018 2017 2018 2017
Segment revenue:         
Production & Automation Technologies$240,686  $214,691  $198,175  $455,377  $378,975 
Drilling Technologies65,242  69,231  57,986  134,473  107,464 
Total revenue$305,928  $283,922  $256,161  $589,850  $486,439 
          
Income before income taxes:        
Segment operating profit:         
Production & Automation Technologies$23,349  $10,351  $9,967  $33,700  $17,844 
Drilling Technologies21,340  24,189  19,927  45,529  34,647 
Total segment operating profit44,689  34,540  29,894  79,229  52,491 
Corporate expense and other (1)13,204  2,635  2,335  15,839  5,140 
Income before income taxes$31,485  $31,905  $27,559  $63,390  $47,351 
          
Bookings:         
Production & Automation Technologies$249,461  $216,934  $189,644  $466,395  $386,681 
Book-to-bill ratio (2)1.04  1.01  0.96  1.02  1.02 
Drilling Technologies$70,450  $69,184  $60,834  $139,634  $114,644 
Book-to-bill ratio (2)1.08  1.00  1.05  1.04  1.07 

_______________________

  1. Corporate expense and other includes costs not directly attributable to our reporting segments such as corporate executive management and other administrative functions, costs related to our separation from Dover Corporation, interest associated with debt and the results attributable to our noncontrolling interest.
  2. The book-to-bill ratio compares the dollar value of orders received (bookings) relative to revenues realized during the period.


APERGY CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)

(in thousands)June 30, 2018 December 31, 2017
Assets   
Cash and cash equivalents$30,833  $23,712 
Receivables, net254,342  202,024 
Inventories, net215,164  201,591 
Prepaid expenses and other current assets21,937  14,038 
Total current assets522,276  441,365 
    
Property, plant and equipment, net233,530  211,832 
Goodwill906,731  910,088 
Intangible assets, net310,308  338,510 
Other non-current assets7,421  2,980 
Total assets1,980,266  1,904,775 
    
Liabilities   
Accounts payable131,221  98,826 
Other current liabilities90,380  52,239 
Total current liabilities221,601  151,065 
    
Long-term debt707,337  3,742 
Other long-term liabilities115,800  109,934 
Equity   
Apergy Corporation stockholder’s equity933,475   
Net parent equity in Apergy  1,635,285 
Noncontrolling interest2,053  4,749 
Total liabilities and equity$1,980,266  $1,904,775 


APERGY CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

 Six Months Ended
June 30,
(in thousands)2018 2017
Cash provided (required) by operating activities:   
Net income$46,789  $32,619 
Depreciation35,128  26,904 
Amortization26,330  26,827 
Receivables, net(53,496) (44,684)
Inventories, net(14,837) (13,734)
Accounts payable31,361  25,950 
Other(12,375) (28,269)
Net cash provided by operating activities58,900  25,613 
    
Cash provided (required) by investing activities:   
Capital expenditures(31,201) (15,945)
Other115  2,301 
Net cash required by investing activities(31,086) (13,644)
    
Cash provided (required) by financing activities:   
Issuances of debt, net of debt issuance costs698,112   
Distributions to Dover Corporation(716,126) (15,090)
Other(2,720) (1,212)
Net cash required by financing activities(20,734) (16,302)
    
Effect of exchange rate changes on cash and cash equivalents41  1,037 
    
Net increase (decrease) in cash and cash equivalents7,121  (3,296)
Cash and cash equivalents at beginning of period23,712  26,026 
Cash and cash equivalents at end of period$30,833  $22,730 


APERGY CORPORATION
RECONCILIATIONS OF GAAP TO NON-GAAP FINANCIAL MEASURES
(UNAUDITED)

 Three Months Ended Six Months Ended
 June 30, March 31, June 30, June 30,
(in thousands)2018 2018 2017 2018 2017
Net income attributable to Apergy$22,183  $24,543  $18,754  $46,726  $32,023 
Pre-tax adjustments:         
Separation and supplemental benefit costs (1)5,137      5,137   
Royalty expense (2)  2,277  2,591  2,277  4,933 
Restructuring and other related charges2,030  482  7  2,512  13 
Tax impact of adjustments (3)42  (655) (785) (613) (1,494)
Adjusted net income attributable to Apergy$29,392  $26,647  $20,567  $56,039  $35,475 
Tax impact of adjustments (3)(42) 655  785  613  1,494 
Net income (loss) attributable to noncontrolling interest(79) 142  279  63  596 
Depreciation and amortization31,834  29,625  27,182  61,459  53,732 
Provision for income taxes9,381  7,220  8,526  16,601  14,732 
Interest expense, net6,062  167  70  6,229  120 
Adjusted EBITDA$76,548  $64,456  $57,409  $141,004  $106,149 
          
Earnings per share attributable to Apergy:         
Reported$0.29  $0.32  $0.24  $0.60  $0.41 
Adjusted$0.38  $0.34  $0.26  $0.72  $0.46 

_______________________

  1. Supplemental benefit costs relate to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.
  2. Patents and other intangible assets related to our business were conveyed by Dover Corporation to Apergy on April 1, 2018. No royalty charges were incurred after March 31, 2018.
  3. We generally tax effect adjustments using a combined federal and state statutory income tax rate of approximately 24 percent in 2018, and approximately 30 percent for periods prior to 2018. Includes tax expense of $1.7 million during the three and six months ended June 30, 2018, associated with capital gains related to certain reorganizations of our subsidiaries as part of the Separation from Dover Corporation.


 Three months ended
 June 30, 2018
(in thousands, except percentages)Production &
Automation
Technologies
 Drilling
Technologies
 Corporate
expense and
other
 Total
Revenue$240,686  $65,242  $  $305,928 
        
Operating profit (income before income taxes), as reported$23,349  $21,340  $(13,204) $31,485 
Depreciation and amortization28,943  2,795  96  31,834 
Separation and supplemental benefit costs (1)    5,137  5,137 
Restructuring and other charges2,030      2,030 
Interest expense, net    6,062  6,062 
Adjusted EBITDA$54,322  $24,135  $(1,909) $76,548 
        
Operating profit margin, as reported9.7% 32.7%   10.3%
Adjusted EBITDA margin22.6% 37.0%   25.0%

_______________________

  1. Supplemental benefit costs relate to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.


 Three months ended
 March 31, 2018
(in thousands, except percentages)Production &
Automation
Technologies
 Drilling
Technologies
 Corporate
expense and
other
 Total
Revenue$214,691  $69,231  $  $283,922 
        
Operating profit (income before income taxes), as reported$10,351  $24,189  $(2,635) $31,905 
Depreciation and amortization26,758  2,867    29,625 
Royalty expense (1)2,277      2,277 
Restructuring and other charges482      482 
Interest expense, net    167  167 
Adjusted EBITDA$39,868  $27,056  $(2,468) $64,456 
        
Operating profit margin, as reported4.8% 34.9%   11.2%
Adjusted EBITDA margin18.6% 39.1%   22.7%

_______________________

  1. Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.


 Three months ended
 June 30, 2017
(in thousands, except percentages)Production &
Automation
Technologies
 Drilling
Technologies
 Corporate
expense and
other
 Total
Revenue$198,175  $57,986  $  $256,161 
        
Operating profit (income before income taxes), as reported$9,967  $19,927  $(2,335) $27,559 
Depreciation and amortization24,194  2,988    27,182 
Royalty expense (1)2,591      2,591 
Restructuring and other charges7      7 
Interest expense, net    70  70 
Adjusted EBITDA$36,759  $22,915  $(2,265) $57,409 
        
Operating profit margin, as reported5.0% 34.4%   10.8%
Adjusted EBITDA margin18.5% 39.5%   22.4%

_______________________

  1. Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.


 Six months ended
 June 30, 2018
(in thousands, except percentages)Production &
Automation
Technologies
 Drilling
Technologies
 Corporate
expense and
other
 Total
Revenue$455,377  $134,473  $  $589,850 
        
Operating profit (income before income taxes), as reported$33,700  $45,529  $(15,839) $63,390 
Depreciation and amortization55,701  5,662  96  61,459 
Separation and supplemental benefit costs (1)    5,137  5,137 
Royalty expense (2)2,277      2,277 
Restructuring and other charges2,512      2,512 
Interest expense, net    6,229  6,229 
Adjusted EBITDA$94,190  $51,191  $(4,377) $141,004 
        
Operating profit margin, as reported7.4% 33.9%   10.7%
Adjusted EBITDA margin20.7% 38.1%   23.9%

_______________________

  1. Supplemental benefit costs related to enhanced or supplemental benefits provided to employees no longer participating in Dover Corporation benefit and compensation plans. These costs are expected to be incurred through the end of 2020.
  2. Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.


 Six months ended
 June 30, 2017
(in thousands, except percentages)Production &
Automation
Technologies
 Drilling
Technologies
 Corporate
expense and
other
 Total
Revenue$378,975  $107,464  $  $486,439 
        
Operating profit (income before income taxes), as reported$17,844  $34,647  $(5,140) $47,351 
Depreciation and amortization47,785  5,947    53,732 
Royalty expense (1)4,933      4,933 
Restructuring and other charges13      13 
Interest expense, net    120  120 
Adjusted EBITDA (2)$70,575  $40,594  $(5,020) $106,149 
        
Operating profit margin, as reported4.7% 32.2%   9.7%
Adjusted EBITDA margin18.6% 37.8%   21.8%

_______________________

  1. Royalty expense represents charges for the right to use of Dover Corporation patents and other intangible assets.


Adjusted Working Capital

(in thousands)June 30, 2018 December 31, 2017
Receivables, net of allowances$254,342  $202,024 
Inventories, net215,164  201,591 
Accounts payable(131,221) (98,826)
Adjusted working capital$338,285  $304,789 

 

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Source: GlobeNewswire (July 25, 2018 - 5:30 PM EDT)

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