Agilent Technologies Reports Second-Quarter 2013 Results, Increases Stock Repurchase Program to $1 Billion Highlights: *GAAP net income of $166 million, or $0.48 per share *Non-GAAP net income of $269 million, or $0.77 per share^(1) *Orders of $1.69 billion and revenues of $1.73 billion *Third-quarter fiscal year 2013 revenue guidance of $1.63 billion to $1.66 billion and non-GAAP earnings guidance of $0.60 to $0.64 per share^(2) *Fiscal year 2013 revenue guidance of $6.75 billion to $6.85 billion. Non-GAAP earnings guidance at $2.70 to $2.85 per share^(2) *Increased stock repurchase program by $500 million to $1 billion Business Wire SANTA CLARA, Calif. -- May 14, 2013 Agilent Technologies Inc. (NYSE:A) today reported orders of $1.69 billion, down 8 percent compared with one year ago, and revenues of $1.73 billion for the second fiscal quarter ended April 30, 2013, flat with one year ago. Second-quarter GAAP net income was $166 million, or $0.48 per share. Last year’s second-quarter GAAP net income was $255 million, or $0.72 per share. During the second quarter, Agilent had restructuring costs of $55 million, intangible amortization of $51 million, and acquisition, integration and transformation costs of $9 million. The company also recognized a tax benefit of $18 million. Excluding these items and $6 million of other net charges, Agilent reported second-quarter adjusted net income of $269 million, or $0.77 per share^(1). Agilent CEO Bill Sullivan said, “We were pleased to have exceeded EPS guidance for the quarter, reflecting our focus on cost control and profitability in the face of the worldwide economic slowdown and the impact of U.S. sequestration. We expect the macroeconomic environment to remain challenging throughout the second half of 2013 and are taking additional actions to strengthen our operating performance.” Electronic Measurement second-quarter revenues were down 13 percent compared with the prior year, with particular weakness in wireless manufacturing. Operating margins were 21 percent. Chemical Analysis revenues were up 3 percent compared with a year ago, led by growth in food markets. Operating margins were 22 percent. Life Sciences revenues were up 2 percent over a year ago, with continued strength in pharmaceutical markets. Operating margins were 15 percent. Diagnostics and Genomics revenues grew 124 percent, down 3 percent excluding the effects of the Dako acquisition. Operating margins were 17 percent. Agilent generated $315 million of cash from operations in the quarter. Second-quarter ROIC was 17 percent^(3). Third-quarter 2013 revenues are expected to be in the range of $1.63 billion to $1.66 billion. Third-quarter non-GAAP earnings are expected to be in the range of $0.60 to $0.64 per share^(2). For the full fiscal year 2013, Agilent now expects revenue of $6.75 billion to $6.85 billion and non-GAAP earnings of $2.70 to $2.85 per share^(2). Stock Repurchase Program Agilent announced today that its board of directors has authorized an increase of $500 million to its existing stock repurchase program. Under the increased program, the company is authorized to repurchase up to $1 billion of its common stock, inclusive of amounts repurchased since Nov. 1, 2012. Agilent expects the program to be completed by the end of calendar year 2013. During the first quarter of 2013, Agilent purchased 2 million shares of common stock, and in the second quarter, 3.3 million shares were purchased. Under the increased program, approximately $781 million of stock remains to be repurchased. Targeted Restructuring Program Agilent also announced today that it has initiated a targeted restructuring program that is expected to reduce Agilent’s total headcount by approximately 450 regular employees, representing approximately 2 percent of its global workforce. The timing and scope of workforce reductions will vary based on local legal requirements. When completed, the restructuring program is expected to result in an approximately $50 million reduction in annual operating expenses. About Agilent Technologies Agilent Technologies, Inc. (NYSE: A) is the world’s premier measurement company and a technology leader in chemical analysis, life sciences, diagnostics, electronics and communications. The company’s 20,500 employees serve customers in more than 100 countries. Agilent had revenues of $6.9 billion in fiscal 2012. Information about Agilent is available at www.agilent.com. Agilent’s management will present more details about its second-quarter FY2013 financial results on a conference call with investors today at 1:30 p.m. PDT. This event will be webcast live in listen-only mode. Listeners may log on at www.investor.agilent.com and select “Q2 2013 Agilent Technologies Inc. Earnings Conference Call” in the “News & Events Calendar of Events” section. The webcast will remain available on the company’s website for 90 days. Additional information regarding financial results can be found at www.investor.agilent.com by selecting “Financial Results” in the “Financial Information” section. A telephone replay of the conference call will be available at 3:30 p.m. (Pacific Time) after the call through May 21. The replay number is: (888) 286-8010, or for international, dial (617) 801-6888; enter passcode 37487808. Forward-Looking Statements This news release contains forward-looking statements as defined in the Securities Exchange Act of 1934 and is subject to the safe harbors created therein. The forward-looking statements contained herein include, but are not limited to, information regarding Agilent’s future revenues, earnings and profitability; the future demand for the company’s products and services; customer expectations; Agilent’s plans regarding its stock repurchase program; and revenue and non-GAAP earnings guidance for the third quarter and full fiscal year 2013. These forward-looking statements involve risks and uncertainties that could cause Agilent’s results to differ materially from management’s current expectations. Such risks and uncertainties include, but are not limited to, unforeseen changes in the strength of our customers’ businesses; unforeseen changes in the demand for current and new products, technologies, and services; customer purchasing decisions and timing; the risk that we are not able to realize the savings expected from integration and restructuring activities; and stock price, economic and market conditions, and corporate and regulatory requirements, which could cause the actual amount of shares repurchased to be less than currently anticipated. In addition, other risks that Agilent faces in running its operations include the ability to execute successfully through business cycles; the ability to meet and achieve the benefits of its cost-reduction goals and otherwise successfully adapt its cost structures to continuing changes in business conditions; ongoing competitive, pricing and gross-margin pressures; the risk that our cost-cutting initiatives will impair our ability to develop products and remain competitive and to operate effectively; the impact of geopolitical uncertainties and global economic conditions on our operations, our markets and our ability to conduct business; the ability to improve asset performance to adapt to changes in demand; the ability of our supply chain to adapt to changes in demand; the ability to successfully introduce new products at the right time, price and mix; the ability of Agilent to successfully integrate recent acquisitions; and other risks detailed in Agilent’s filings with the Securities and Exchange Commission, including our Quarterly Report on Form 10-Q for the quarter ended January 31, 2013. Forward-looking statements are based on the beliefs and assumptions of Agilent’s management and on currently available information. Agilent undertakes no responsibility to publicly update or revise any forward-looking statement. ^(1) Non-GAAP net income and non-GAAP net income per share exclude primarily the impacts of acquisition and integration costs, acquisition fair value adjustments, transformation initiatives and restructuring costs, and non-cash intangibles amortization. We also exclude any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. A reconciliation between non-GAAP net income and GAAP net income is set forth on page 6 of the attached tables along with additional information regarding the use of this non-GAAP measure. ^(2) Non-GAAP earnings per share as projected for Q3FY13 and full fiscal year 2013 excludes primarily the impacts of acquisition and integration costs, future restructuring costs, asset impairment charges, and non-cash intangibles amortization. We also exclude any tax benefits that are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. Most of these excluded amounts pertain to events that have not yet occurred and are not currently possible to estimate with a reasonable degree of accuracy. Therefore, no reconciliation to GAAP amounts has been provided. Future amortization of intangibles is expected to be approximately $54 million per quarter. ^(3) Return on invested capital (ROIC) is a non-GAAP measure and is defined as income from operations less other (income) expense and taxes, annualized, divided by the average of the two most recent quarter-end balances of assets less net current liabilities. The reconciliation of ROIC can be found on page 8 of the attached tables, along with additional information regarding the use of this non-GAAP measure. NOTE TO EDITORS: Further technology, corporate citizenship and executive news is available on the Agilent news site at www.agilent.com/go/news. AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In millions, except per share amounts) (Unaudited) PRELIMINARY Three Months Ended April 30, Percent 2013 2012 Inc/(Dec) Orders $ 1,688 $ 1,841 (8 %) Net revenue $ 1,732 $ 1,733 — Costs and expenses: Cost of products and services 841 815 3 % Research and development 181 166 9 % Selling, general and administrative 497 452 10 % Total costs and expenses 1,519 1,433 6 % Income from operations 213 300 (29 %) Interest income 1 2 (50 %) Interest expense (25 ) (25 ) — Other income (expense), net 9 16 (44 %) Income before taxes 198 293 (32 %) Provision for income taxes 32 38 (16 %) Net income $ 166 $ 255 (35 %) Net income per share: Basic $ 0.48 $ 0.73 Diluted $ 0.48 $ 0.72 Weighted average shares used in computing net income per share: Basic 345 348 Diluted 349 354 Cash dividends declared per common share $ - $ - The preliminary income statement is estimated based on our current information. Page 1 AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (In millions, except per share amounts) (Unaudited) PRELIMINARY Six Months Ended April 30, Percent 2013 2012 Inc/(Dec) Orders $ 3,398 $ 3,464 (2 %) Net revenue $ 3,412 $ 3,368 1 % Costs and expenses: Cost of products and services 1,641 1,576 4 % Research and development 360 328 10 % Selling, general and administrative 981 893 10 % Total costs and expenses 2,982 2,797 7 % Income from operations 430 571 (25 %) Interest income 3 5 (40 %) Interest expense (50 ) (51 ) (2 %) Other income (expense), net 10 24 (58 %) Income before taxes 393 549 (28 %) Provision for income taxes 48 64 (25 %) Net income $ 345 $ 485 (29 %) Net income per share: Basic $ 1.00 $ 1.39 Diluted $ 0.98 $ 1.37 Weighted average shares used in computing net income per share: Basic 346 348 Diluted 351 353 Cash dividends declared per common share $ 0.22 $ 0.10 The preliminary income statement is estimated based on our current information. Page 2 AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (In millions) (Unaudited) PRELIMINARY Three Months Ended Six Months Ended April 30, April 30, 2013 2012 2013 2012 Net Income $ 166 $ 255 $ 345 $ 485 Other comprehensive income (loss), net of tax: Change in unrealized gain on (2 ) — 1 6 investments Change in unrealized gain on 5 — 11 5 derivative instruments Amounts reclassified into earnings (4 ) (3 ) (5 ) (5 ) related to derivative instruments Foreign currency translation (111 ) (19 ) (55 ) (58 ) Net defined benefit pension cost and post retirement plan costs: Change in actuarial net loss 16 16 30 28 Change in net prior service benefit (8 ) (13 ) (16 ) (24 ) Other comprehensive loss (104 ) (19 ) (34 ) (48 ) Total comprehensive income $ 62 $ 236 $ 311 $ 437 The preliminary statement of comprehensive income is estimated based on our current information. Page 3 AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED BALANCE SHEET (In millions, except par value and share amounts) (Unaudited) PRELIMINARY April 30, October 31, 2013 2012 ASSETS Current assets: Cash and cash equivalents $ 2,519 $ 2,351 Accounts receivable, net 916 923 Inventory 1,042 1,014 Other current assets 341 341 Total current assets 4,818 4,629 Property, plant and equipment, net 1,147 1,164 Goodwill 3,006 3,025 Other intangible assets, net 995 1,086 Long-term investments 120 109 Other assets 501 523 Total assets $ 10,587 $ 10,536 LIABILITIES AND EQUITY Current liabilities: Accounts payable $ 448 $ 461 Employee compensation and benefits 384 387 Deferred revenue 459 420 Short-term debt 250 250 Other accrued liabilities 367 375 Total current liabilities 1,908 1,893 Long-term debt 2,106 2,112 Retirement and post-retirement benefits 478 554 Other long-term liabilities 787 792 Total liabilities 5,279 5,351 Total Equity: Stockholders’ equity: Preferred stock; $0.01 par value; 125 million — — shares authorized; none issued and outstanding Common stock; $0.01 par value; 2 billion shares authorized; 599 million shares at April 30, 2013 6 6 and 595 million shares at October 31, 2012, issued Treasury stock at cost; 254 million shares at April (8,926 ) (8,707 ) 30, 2013 and 249 million shares at October 31, 2012 Additional paid-in-capital 8,596 8,489 Retained earnings 5,774 5,505 Accumulated other comprehensive loss (145 ) (111 ) Total stockholders' equity 5,305 5,182 Non-controlling interest 3 3 Total equity 5,308 5,185 Total liabilities and equity $ 10,587 $ 10,536 The preliminary balance sheet is estimated based on our current information. Page 4 AGILENT TECHNOLOGIES, INC. CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (In millions) (Unaudited) PRELIMINARY Three Months Six Months Ended Ended April 30, April 30, 2013 2013 Cash flows from operating activities: Net income $ 166 $ 345 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 92 186 Share-based compensation 18 49 Excess tax benefit from share-based plans — (2 ) Excess and obsolete inventory and inventory 12 22 related charges Other non-cash expenses, net 3 5 Changes in assets and liabilities: Accounts receivable (56 ) (3 ) Inventory (19 ) (53 ) Accounts payable — (7 ) Employee compensation and benefits 69 (1 ) Other assets and liabilities 30 19 Net cash provided by operating activities ^(a) 315 560 Cash flows from investing activities: Investments in property, plant and equipment (51 ) (110 ) Proceeds from sale of property, plant and 1 2 equipment Payment to acquire equity method investment (21 ) (21 ) Purchase of other investments — (15 ) Proceeds from sale of investment securities — 11 Acquisition of businesses and intangible assets, — (10 ) net of cash acquired Net cash used in investing activities (71 ) (143 ) Cash flows from financing activities: Issuance of common stock under employee stock 16 68 plans Payment of dividends (41 ) (76 ) Payments to prior non-controlling interest — (3 ) Excess tax benefit from share-based plans — 2 Treasury stock repurchases (140 ) (219 ) Net cash used in financing activities (165 ) (228 ) Effect of exchange rate movements (10 ) (21 ) Net increase in cash and cash equivalents 69 168 Cash and cash equivalents at beginning of period 2,450 2,351 Cash and cash equivalents at end of period $ 2,519 $ 2,519 ^(a) Cash payments included in operating activities: Restructuring payments 3 11 Income tax payments, net 11 54 The preliminary cash flow is estimated based on our current information. Page 5 AGILENT TECHNOLOGIES, INC. NON-GAAP NET INCOME AND DILUTED EPS RECONCILIATIONS (In millions, except per share amounts) (Unaudited) PRELIMINARY Three Months Ended Six Months Ended April 30, April 30, Diluted Diluted Diluted Diluted 2013 EPS 2012 EPS 2013 EPS 2012 EPS GAAP Net income $ 166 $ 0.48 $ 255 $ 0.72 $ 345 $ 0.98 $ 485 $ 1.37 Non-GAAP adjustments: Restructuring and other 55 0.16 — — 55 0.16 — — related costs Asset 1 — — — 2 0.01 — — impairments Intangible 51 0.15 26 0.07 103 0.29 53 0.15 amortization Transformational 3 0.01 8 0.02 6 0.02 16 0.05 initiatives Acquisition and integration 6 0.02 6 0.02 16 0.05 13 0.04 costs Other 5 0.01 (9 ) (0.02 ) 9 0.03 (13 ) (0.04 ) Adjustment for (18 ) (0.06 ) (11 ) (0.03 ) (45 ) (0.14 ) (35 ) (0.10 ) taxes ^ (a) Non-GAAP Net $ 269 $ 0.77 $ 275 $ 0.78 $ 491 $ 1.40 $ 519 $ 1.47 Income (a) The adjustment for taxes excludes tax benefits that management believes are not directly related to ongoing operations and which are either isolated or cannot be expected to occur again with any regularity or predictability. For the three and six months ended April 30, 2013, management uses a non-GAAP effective tax rate of 16%, respectively, that we believe to be indicative of on-going operations. Historical amounts are reclassified to conform with current period presentation. We provide non-GAAP net income and non-GAAP net income per share amounts in order to provide meaningful supplemental information regarding our operational performance and our prospects for the future. These supplemental measures exclude, among other things, charges related to the amortization of intangibles, the impact of restructuring charges and acquisition and integration costs. Some of the exclusions, such as impairments, may be beyond the control of management. Further, some may be less predictable than revenue derived from our core businesses (the day to day business of selling our products and services). These reasons provide the basis for management's belief that the measures are useful. Our management uses non-GAAP measures to evaluate the performance of our core businesses, to estimate future core performance and to compensate employees. Since management finds this measure to be useful, we believe that our investors benefit from seeing our results “through the eyes” of management in addition to seeing our GAAP results. This information facilitates our management’s internal comparisons to our historical operating results as well as to the operating results of our competitors. Our management recognizes that items such as amortization of intangibles and restructuring charges can have a material impact on our cash flows and/or our net income. Our GAAP financial statements including our statement of cash flows portray those effects. Although we believe it is useful for investors to see core performance free of special items, investors should understand that the excluded items are actual expenses that may impact the cash available to us for other uses. To gain a complete picture of all effects on the company’s profit and loss from any and all events, management does (and investors should) rely upon the GAAP income statement. The non-GAAP numbers focus instead upon the core business of the company, which is only a subset, albeit a critical one, of the company’s performance. Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies. The preliminary non-GAAP net income and diluted EPS reconciliation is estimated based on our current information. Page 6 AGILENT TECHNOLOGIES, INC. SEGMENT INFORMATION (In millions, except where noted) (Unaudited) PRELIMINARY Life Sciences Q2'13 Q2'12 Q1'13 Orders $ 416 $ 410 $ 397 Revenues $ 405 $ 395 $ 401 Gross Margin, % 51 % 49 % 52 % Income from $ 61 $ 44 $ 61 Operations Segment Assets $ 1,402 $ 1,449 $ 1,392 Return On Invested Capital 20 % 14 % 18 % ^(a) , % Chemical Analysis Q2'13 Q2'12 Q1'13 Orders $ 408 $ 408 $ 399 Revenues $ 401 $ 388 $ 394 Gross Margin, % 51 % 51 % 51 % Income from $ 89 $ 73 $ 81 Operations Segment Assets $ 1,739 $ 1,727 $ 1,721 Return On Invested Capital 20 % 17 % 18 % ^(a) , % Electronic Measurement Q2'13 Q2'12 Q1'13 Orders $ 701 $ 957 $ 749 Revenues $ 760 $ 876 $ 722 Gross Margin, % 57 % 57 % 57 % Income from $ 156 $ 205 $ 125 Operations Segment Assets $ 2,019 $ 2,149 $ 1,962 Return On Invested Capital 38 % 48 % 28 % ^(a) , % Diagnostics and Genomics Q2'13 Q2'12 Q1'13 Orders $ 163 $ 66 $ 165 Revenues $ 166 $ 74 $ 163 Gross Margin, % 63 % 65 % 60 % Income from $ 28 $ 15 $ 21 Operations Segment Assets $ 2,854 $ 377 $ 2,841 Return On Invested Capital 3 % 15 % 3 % ^(a) , % Income from operations reflect the results of our reportable segments under Agilent's management reporting system which are not necessarily in conformity with GAAP financial measures. Income from operations of our reporting segments exclude, among other things, charges related to the amortization of intangibles, the impact of restructuring charges, acquisition and integration costs. In general, recorded orders represent firm purchase commitments from our customers with established terms and conditions for products and services that will be delivered within six months. ^(a) Return On Invested Capital is a non-GAAP measure and is defined as income from operations less other (income) expense and taxes, annualized, divided by the average of the two most recent quarter-end balances of assets less net current liabilities. The reconciliation of ROIC can be found on page 8 of these tables, along with additional information regarding the use of this non-GAAP measure. Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies. The preliminary segment information is estimated based on our current information. Page 7 AGILENT TECHNOLOGIES, INC. RECONCILIATION OF ROIC (In millions) (Unaudited) PRELIMINARY LSG CAG EMG DGG Agilent LSG CAG EMG DGG Agilent LSG CAG EMG DGG Numerator: Q2'13 Q2'13 Q2'13 Q2'13 Q2'13 Q2'12 Q2'12 Q2'12 Q2'12 Q2'12 Q1'13 Q1'13 Q1'13 Q1'13 Non-GAAP income $ 61 $ 89 $ 156 $ 28 $ 334 $ 44 $ 73 $ 205 $ 15 $ 337 $ 61 $ 81 $ 125 $ 21 from operations Less: Taxes and Other 8 13 22 4 47 5 10 26 2 44 9 13 20 4 (income)/expense Segment return 53 76 134 24 287 ^(a) 39 63 179 13 293 ^(a) 52 68 105 17 Segment return $ 212 $ 304 $ 536 $ 96 $ 1,148 $ 156 $ 252 $ 716 $ 52 $ 1,172 $ 208 $ 272 $ 420 $ 68 annualized Denominator: Segment assets $ 1,402 $ 1,739 $ 2,019 $ 2,854 $ 8,015 $ 1,449 $ 1,727 $ 2,149 $ 377 $ 5,705 $ 1,392 $ 1,721 $ 1,962 $ 2,841 ^(b) Less: Net current 329 253 572 96 1,250 314 255 623 44 1,236 303 238 550 93 liabilities ^(c) Invested capital $ 1,073 $ 1,486 $ 1,447 $ 2,758 $ 6,765 $ 1,135 $ 1,472 $ 1,526 $ 333 $ 4,469 $ 1,089 $ 1,483 $ 1,412 $ 2,748 Average invested $ 1,081 $ 1,484 $ 1,430 $ 2,753 $ 6,752 $ 1,145 $ 1,481 $ 1,503 $ 337 $ 4,469 $ 1,127 $ 1,502 $ 1,493 $ 2,626 capital ROIC 20 % 20 % 38 % 3 % 17 % 14 % 17 % 48 % 15 % 26 % 18 % 18 % 28 % 3 % ROIC calculation:(annualized current quarter segment return)/(average of the two most recent quarter-end balances of Segment Invested Capital) ^(a) Agilent return is equal to non-GAAP net income of $269 million plus net interest expense after tax of $18 million for Q2'13, and $275 million plus net interest expense after tax of $18 million for Q2'12. Please see "Non-GAAP Net Income and Diluted EPS Reconciliations" for a reconciliation of non-GAAP net income to GAAP net income. ^(b) Segment assets consist of inventory, accounts receivable, property plant and equipment, gross goodwill and other intangibles, deferred taxes and allocated corporate assets. ^(c) Includes accounts payable, employee compensation and benefits, deferred revenue, certain other accrued liabilities and allocated corporate liabilities. Return on Invested Capital (ROIC) is a non-GAAP measure that management believes provides useful supplemental information for management and the investor. ROIC is a tool by which we track how much value we are creating for our shareholders. Management uses ROIC as a performance measure for our businesses, and our senior managers' compensation is linked to ROIC improvements as well as other performance criteria. We believe that ROIC provides our management with a means to analyze and improve their business, measuring segment profitability in relation to net asset investments. We acknowledge that ROIC may not be calculated the same way by every company. When we complete major acquisitions, we may adjust invested capital for the relevant segment in the quarter when the acquisition occurred. We compensate for this limitation by monitoring and providing to the reader a full GAAP income statement and balance sheet. Readers are reminded that non-GAAP numbers are merely a supplement to, and not a replacement for, GAAP financial measures. They should be read in conjunction with the GAAP financial measures. It should be noted as well that our non-GAAP information may be different from the non-GAAP information provided by other companies. The preliminary reconciliation of ROIC is estimated based on our current information. Page 8 Contact: Agilent Technologies Inc. Amy Flores, +1-408-345-8194 (editorial) firstname.lastname@example.org Alicia Rodriguez, +1-408-345-8948 (investors) email@example.com
Agilent Technologies Reports Second-Quarter 2013 Results, Increases Stock Repurchase Program to $1 Billion
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