EARNINGS RELEASE FOR THE QUARTER ENDED MARCH 31, 2003
Published on April 16, 2003
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
CONTACT: Media: Ben Deutsch
(404) 676-2683
Investors: Larry M. Mark
(404) 676-8054
THE COCA-COLA COMPANY ANNOUNCES
FIRST QUARTER 2003 RESULTS
* Chairman and CEO Doug Daft: "Throughout the quarter, we achieved share gains
as our system successfully responded to and managed worldwide challenges and
opportunities with flexibility, speed and professionalism."
* Worldwide unit case volume grew 4 percent in the first quarter.
* Reported earnings per share were $0.34 for the quarter, which included a net
negative $0.03 per share impact from a charge related to streamlining
initiatives and a gain from a litigation settlement.
* The Company expects strong cash flows to continue in the future. Cash from
operations for the quarter was $599 million, including the impact of a $145
million contribution to the Company's U.S. pension plan.
* The Company repurchased 8.3 million shares of its common stock for $319
million during the first quarter; and intends to repurchase approximately
$1.5 billion of its stock in 2003. Dividend increased 10 percent in 2003,
reflecting the 41st consecutive annual increase.
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ATLANTA, April 16, 2003 - The Coca-Cola Company reported first quarter
earnings per share of $0.34, compared to a net loss per share of $0.08 for the
year-ago quarter. First quarter reported results included a net reduction of
$0.03 per share related to the previously announced streamlining initiatives and
a gain related to a litigation settlement. The prior year loss resulted from the
adoption of SFAS No. 142 - "Goodwill and Other Intangible Assets," and other
charges/gains. Worldwide unit case volume increased 4 percent in the first
quarter, reflecting 3 percent volume growth in North America and 4 percent
internationally.
The beverage industry has not been immune to the weak global macroeconomic
environment that has impacted many business sectors. In addition to these
factors, the beverage industry, including the Company, was adversely affected by
short-term external factors, including a slowdown in "away from home"
consumption caused by the war in Iraq, a lengthy national strike in Venezuela, a
change in deposit laws in Germany, and a shift in the timing of the Easter
holiday.
Doug Daft, chairman and chief executive officer, said, "The results of The
Coca-Cola Company are always driven by the operational, financial and brand
strengths of our entire system in our markets. Given the current volatile
worldwide environment, our management team has continued to carefully monitor
worldwide events and respond rapidly and effectively. We have enhanced
productivity and cost efficiencies. We are also targeting our resources to the
markets of greatest opportunity and stability, while taking all necessary steps
to protect our business in more challenging markets.
"Throughout the quarter, we achieved share gains as our system successfully
responded to and managed worldwide challenges and opportunities with
flexibility, speed and professionalism. Looking ahead, we are confident our
results will improve during the year as we move beyond the short-term external
factors that impacted this quarter."
FINANCIAL HIGHLIGHTS
- --------------------
* First quarter 2003 reported results were $0.34 per share, which included a
net reduction of $0.03 per share related to the previously announced
streamlining initiatives and a gain related to a litigation settlement. Prior
year first quarter results
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reflected a net loss of $0.08 per share, which included the net reduction of
$0.42 per share reflecting the adoption of SFAS No. 142 - "Goodwill and Other
Intangible Assets," and other charges/gains. The individual impact of these
items on earnings per share is summarized as follows:
- --------------------------------------------------------------------------------
First Quarter First Quarter
2003 2002
---- ----
Income (Expense) Per Share
ITEMS IMPACTING RESULTS:
- -----------------------
Streamlining Initiatives ($ 0.04)
Gain on Litigation Settlement $ 0.01
Cumulative Effect of Adopting SFAS 142 -
Goodwill and Intangible Assets ($ 0.37)
Gain on Sale of Kaiser $ 0.01
Non-Cash Charge - Primarily Related to
Investments in Latin America ($ 0.06)
---------------------------------
($0.03) ($0.42)
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* Cash from operations for the quarter was $599 million, including the impact
of a $145 million contribution to the Company's U.S. pension plan. The
Company expects strong cash flows to continue in the future.
* The Company repurchased 8.3 million shares of its common stock for $319
million during the first quarter and intends to repurchase approximately $1.5
billion of its stock in 2003.
* The Company increased its dividend 10 percent in 2003, reflecting the 41st
consecutive annual increase.
OPERATIONAL HIGHLIGHTS
- ----------------------
North America
- -------------
* Unit case growth was 3 percent for the first quarter, driven by solid
performance in the Retail Division, offset by a decline in the Foodservice
and Hospitality Division.
* The overall industry growth was negatively impacted by the timing of the
Easter holiday, poor weather conditions, and weaker traffic in restaurants,
hotels and leisure channels. Despite these factors, the Coca-Cola system
remained focused
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on local execution, resulting in growth that outpaced the total nonalcoholic
ready-to-drink industry, including share position improvements in the major
beverage categories.
* Results during the quarter were fueled by over 2 percent growth in Trademark
Coca-Cola in the Retail Division, driven by innovation and strong performance
from Vanilla Coke, diet Vanilla Coke, diet Coke and the continued expansion
of the Fridge Pack.
* Noncarbonated beverages continued strong growth led by 22 percent growth in
Dasani, 16 percent growth in Powerade and continued strong double-digit
growth from Minute Maid Lemonades. Unit case volume also benefited from last
year's strategic transactions involving Evian and the Danone water brands.
Asia
- ----
* Unit case volume increased 8 percent for the quarter, cycling 9 percent
growth in the prior year first quarter.
* Strong performance was driven by double-digit growth in China, the
Philippines, India and Thailand. Trademark Coca-Cola and Fanta continued to
drive the growth in many key markets, along with strong performance of local
brands such as Thums Up, Qoo and Kinley.
* In China, 21 percent growth in unit case volume was led by double-digit
growth in Trademark Coca-Cola, Fanta and Sprite driven by highly successful
Chinese New Year activities and several packaging initiatives. In addition,
noncarbonated beverages continued to develop with the introduction of Nestea
and the continued expansion of Qoo.
* In Japan, unit case volume declined 2 percent in the quarter, cycling 6
percent growth in the prior year first quarter. Solid growth in both January
and February was offset by a sharp decline in industry trends during March.
Despite the challenging economic environment, the Company continued to
increase share during the quarter in the highly profitable tea, coffee and
carbonated soft drink categories.
Further, in Japan, the Company continues to drive industry leading
performance through initiatives surrounding its core brands and margin
enhancement
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opportunities throughpackage innovation and a strong focus on accelerating
growth in the profitable convenience store and vending channels. In addition,
during March, the Company and several of its bottling partners announced
plans to create a national supply chain management company to reduce costs
through efficiency in procurement, production and logistics, and develop a
flexible supply system that will respond to changes in consumer and customer
needs, as well as improve customer service.
Latin America
- -------------
* Unit case volume increased 5 percent in the first quarter, led by strong
growth in Mexico and improving trends in Argentina, partially offset by the
general strike in Venezuela.
* In Venezuela, the Company's operations were shut down during the general
strike that lasted throughout the month of January and most of February. As a
result, operating income and equity income were negatively affected by the
strike. Further, the situation reduced the Company's unit case growth rate
for all of Latin America by more than 1 point in the first quarter. Full
distribution was restored across all channels and outlets during the month of
March and should continue for the remainder of the year.
* Mexico unit case volume grew 14 percent in the quarter driven by strong
performance from Fanta and Lift, the continued expansion of the Company's
noncarbonated beverage business, the launch of the Real campaign, and the
introduction of several packaging initiatives to drive system profitability.
In the fast-growing water category, the Company is benefiting from national
marketing programs behind Ciel, the continued expansion of single-serve water
packages, and the inclusion of the Risco water brand.
* In Argentina, unit case volume grew 7 percent in the first quarter,
reflecting the Company's long-term strategy of investing in the country
during last year's economic crisis. Further, as a result of a strong emphasis
on refillable packages, brand Coca-Cola share of sales has increased 2 points
versus the prior year first quarter.
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Europe, Eurasia and Middle East
- -------------------------------
* Unit case volume in the first quarter declined 1 percent, cycling 8 percent
growth in the first quarter of the prior year. While the Company had solid
performance in many markets, first quarter results were negatively impacted
by the timing of the Easter holiday, severe winter weather conditions in
Eastern Europe, and declines in German volume resulting from the
implementation of a deposit law on non-returnable packages.
* Overall results for the Group benefited from successful new products such as
diet Coke with lemon, Vanilla Coke, and Sprite Ice Cube being introduced
during the quarter. In addition, the Group's financial performance benefited
from effective concentrate price and brand mix management as well as a
diligent focus on the management of operating expenses.
* Unit case volume declined 10 percent in Germany during the quarter as a
result of the short-term disruption caused by the implementation of a deposit
law on non-returnable packages for beer, carbonated soft drinks and water.
The unexpected change on January 1, 2003 resulted in major retailers
delisting non-returnable packages. Further, consumers have begun to shift
their consumption back to returnable packages and to other beverage
categories that were not impacted by the deposit law.
While this change in deposit laws is disruptive in the short-term, the
Coca-Cola system remains extremely well placed to take advantage of the move
by consumers back to returnable packaging. The Company is introducing several
new packages and initiatives in the second quarter that are expected to lead
to growth in Germany during the second half of the year.
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Africa
- ------
* Unit case volume growth of 3 percent in the quarter, cycling 11 percent
growth in the first quarter of 2002.
* The Southern and East Africa Division continues to generate solid growth
while parts of North and West Africa have been negatively impacted by the
challenging operating environment. Despite the environment across North
Africa, the Company has gained share across the region.
* The Coca-Cola Real campaign has been introduced in South Africa and Nigeria
and is currently being rolled out across the rest of Africa. As a result, in
South Africa, Trademark Coca-Cola grew 5 percent in the quarter. In addition,
the Company is continuing the introduction and expansion of juice and juice
drinks and water in key markets.
* Throughout Africa, the Company continues to invest and focus on business
fundamentals to drive profitable volume for the system. These initiatives
include new cold outlet creation, improvements in market execution and
availability and affordable packaging.
STREAMLINING INITIATIVES
- ------------------------
During the first quarter of 2003, the Company initiated steps to streamline
and simplify its operations, primarily in North America and Germany.
In North America, the Company is integrating the operations of its three
separate North American business units -- Coca-Cola North America, Minute Maid,
and Fountain. In Germany, Coca-Cola Erfrischungsgetraenke AG (CCEAG) is taking
steps to improve its efficiency in sales, distribution and manufacturing.
These initiatives are proceeding as planned and resulted in a first quarter
pre-tax charge of $159 million, or $0.04 per share after tax. As previously
announced, the streamlining initiatives are expected to result in a full-year
2003 charge to earnings of approximately $400 million on a pre-tax basis. The
remainder of the charge will be recorded throughout the rest of the year.
Separate from the streamlining charge, as a result of the above
initiatives, the Company's financial results are expected to benefit by at least
$50 million (pre-tax) in 2003 and at least $100 million (pre-tax) on an
annualized basis beginning in 2004.
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GAIN ON LITIGATION SETTLEMENT
- -----------------------------
During the course of the first quarter, the Company reached a settlement
with certain defendants in a vitamin antitrust litigation. In that litigation,
the Company alleged that certain vitamin manufacturers participated in a global
conspiracy to fix the price of vitamins used in the manufacturing of some of the
Company's products. During the first quarter, the Company received a settlement
relating to this litigation of approximately $52 million on a pre-tax basis, or
$0.01 per share on an after tax basis. The amount was recorded in the income
statement as a reduction of cost of goods sold in the first quarter.
CONFERENCE CALL
- ---------------
The Company will host a conference call with financial analysts to discuss
the first quarter 2003 results on April 16, 2003 at 9:00 a.m. (EDT). The Company
invites investors to listen to the live audiocast of the conference call at the
Company's website, www.coca-cola.com in the "investors" section. Further, the
"investors" section of the Company's website includes a disclosure and
reconciliation of non-GAAP financial measures that may be used periodically by
management when discussing the Company's financial results with investors and
analysts.
-- FINANCIAL SECTION FOLLOWS --
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THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Income
FIRST QUARTER
(UNAUDITED)
(In millions, except per share data)
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THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except share data)
ASSETS
March 31, 2003 December 31, 2002
-------------- -----------------
CURRENT ASSETS
Cash and cash equivalents $ 3,015 $ 2,126
Marketable securities 178 219
--------- ---------
3,193 2,345
Trade accounts receivable, less
allowances of $54 in 2003 and
$55 in 2002 2,088 2,097
Inventories 1,363 1,294
Prepaid expenses and other assets 1,759 1,616
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TOTAL CURRENT ASSETS 8,403 7,352
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INVESTMENTS AND OTHER ASSETS
Equity method investments
Coca-Cola Enterprises Inc. 959 972
Coca-Cola Hellenic Bottling
Company S.A. 947 872
Coca-Cola Amatil Limited 525 492
Other, principally bottling
companies 2,279 2,401
Cost method investments,
principally bottling companies 238 254
Other assets 2,993 2,694
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7,941 7,685
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PROPERTY, PLANT AND EQUIPMENT
Land 398 385
Building and improvements 2,426 2,332
Machinery and equipment 6,111 5,888
Containers 423 396
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9,358 9,001
Less allowances for depreciation 3,231 3,090
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6,127 5,911
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TRADEMARKS WITH INDEFINITE LIVES 1,816 1,724
GOODWILL AND OTHER INTANGIBLE ASSETS 2,035 1,829
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$ 26,322 $ 24,501
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THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(In millions, except share data)
LIABILITIES AND SHARE-OWNERS' EQUITY
March 31, 2003 December 31, 2002
-------------- -----------------
CURRENT LIABILITIES
Accounts Payable and accrued expenses $ 4,194 $ 3,692
Loans and notes payable 3,198 2,475
Current maturities of long-term debt 188 180
Accrued income taxes 1,071 994
--------- ---------
TOTAL CURRENT LIABILITIES 8,651 7,341
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LONG-TERM DEBT 2,760 2,701
--------- ---------
OTHER LIABILITIES 2,411 2,260
--------- ---------
DEFERRED INCOME TAXES 365 399
--------- ---------
SHARE-OWNERS' EQUITY
Common Stock, $.25 par value
Authorized: 5,600,000,000 shares
Issued: 3,491,653,401 shares in 2003; 873 873
3,490,818,627 shares in 2002
Capital surplus 3,987 3,857
Reinvested earnings 24,799 24,506
Accumulated other comprehensive income (2,811) (3,047)
--------- ----------
26,848 26,189
Less treasury stock, at cost
(1,028,360,984 shares in 2003;
1,019,839,490 shares in 2002) 14,713 14,389
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12,135 11,800
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$ 26,322 $ 24,501
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THE COCA-COLA COMPANY AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(In millions)
Three Months Ended
March 31,
-------------------------------
2003 2002
---- ----
OPERATING ACTIVITIES
Net income $ 835 $ (194)
Depreciation and amortization 198 195
Stock-based compensation expense 116 109
Deferred income taxes (103) (62)
Equity income or loss, net of dividends (35) (57)
Foreign currency adjustments (58) 56
Gains on sales of assets (18) (8)
Cumulative effect of accounting change -- 926
Other items 155 122
Net change in operating assets and liabilities (491) (126)
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Net cash provided by operating activities 599 961
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INVESTING ACTIVITIES
Acquisitions and investments,
principally trademarks and bottling
companies (130) (215)
Purchases of investments and other assets (20) (58)
Proceeds from disposals of investments and
other assets 130 74
Purchases of property, plant and equipment (195) (175)
Proceeds from disposals of property, plant and
equipment 7 22
Other investing activities 59 23
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Net cash used in investing activities (149) (329)
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FINANCING ACTIVITIES
Issuances of debt 1,026 536
Payments of debt (311) (602)
Issuances of stock 12 30
Purchases of stock for treasury (342) (183)
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Net cash provided by (used in) financing
activities 385 (219)
------- -------
EFFECT OF EXCHANGE RATE CHANGES ON
CASH AND CASH EQUIVALENTS 54 (11)
------- -------
CASH AND CASH EQUIVALENTS
Net increase during the period 889 402
Balance at beginning of period 2,126 1,866
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Balance at end of period $ 3,015 $ 2,268
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THE COCA-COLA COMPANY
FIRST QUARTER 2003
UNIT CASE VOLUME RESULTS
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First Quarter 2003
Unit Case Volume
2003 vs. 2002
% Change
------------------
WORLDWIDE 4
INTERNATIONAL OPERATIONS 4
Latin America 5
Europe, Eurasia and Middle East (1)
Africa 3
Asia 8
NORTH AMERICA OPERATIONS 3
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FINANCIAL REVIEW
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Operating Results -
Revenues for the first quarter increased 10 percent, reflecting a 7 percent
increase in gallon shipments, pricing of concentrate, the impact from structural
change and the inclusion of Evian and the Danone water transactions. The
following reflects first quarter net operating revenues from the Company's
operations:
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(in millions) 2003 2002
---- ----
Company Operations, Excluding Bottling $ 3,942 $ 3,655
Company-Owned Bottling Operations 556 424
-----------------------
Consolidated Net Operating Revenues $ 4,498 $ 4,079
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Cost of goods sold increased at a rate greater than revenues, resulting
from the consolidation of lower margin bottling operations and the inclusion of
Evian and the Danone water transactions, partially offset by the gain related to
a litigation settlement.
Selling, general and administrative expenses increased 9 percent during the
quarter primarily resulting from structural changes, the Evian and Danone water
transactions, and increased stock-based compensation expense.
Reported operating income declined 7 percent in the quarter, which included
the negative impact of the streamlining initiatives ($159 million pre-tax),
increased stock-based compensation expense on a year-over-year basis ($19
million pre-tax) and the positive effect of a litigation settlement ($52 million
pre-tax). Other factors that affected operating income included the weak results
in the Company's German bottling operations (resulting from the deposit law
change), softer than expected Foodservice and Hospitality trends in North
America, and the strike in Venezuela.
Currencies had a neutral impact on operating income in the quarter,
resulting from less attractive year-over-year hedge rates on the Japanese Yen
and weakness in Latin American currencies, offset by strength in the Euro.
Equity income for the quarter was below that of the prior year, primarily
due to a gain on the Kaiser sale in 2002 that benefited last year's equity
income by $28 million. Current year equity income demonstrates that current
business strategies are leading to overall improving health of the Coca-Cola
bottling system around the world.
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In the first quarter of 2002, the Company recorded a non-cash charge of
$157 million in "Other income (loss) - net" primarily related to investments in
Latin America caused by the currency devaluation and economic crisis in
Argentina. In addition, the first quarter results included a cash gain of
approximately $0.01 per share resulting from the sale of the Company's ownership
interest in Kaiser in Brazil. Approximately half the gain was recorded in "Other
income (loss) - net," with the remaining portion recorded in "Equity income."
The reported tax rate for the first quarter was 25.6 percent, reflecting a
26.5 percent effective tax rate on operations and the impact of higher tax rates
related to the streamlining initiatives and the litigation settlement. The
Company expects to maintain an effective tax rate on operations of 26.5 percent
for the foreseeable future, reflecting effective tax planning throughout the
world.
THE COCA-COLA COMPANY
- ---------------------
The Coca-Cola Company is the world's largest beverage company. Along with
Coca-Cola, recognized as the world's best-known brand, The Coca-Cola Company
markets four of the world's top five soft drink brands, including diet Coke,
Fanta and Sprite, and a wide range of other beverages, including diet and light
soft drinks, water, juices and juice drinks, teas, coffees and sports drinks.
Through the world's largest distribution system, consumers in more than 200
countries enjoy The Coca-Cola Company's products at a rate exceeding 1 billion
servings each day. For more information about The Coca-Cola Company, please
visit our website at www.coca-cola.com.
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FORWARD-LOOKING STATEMENTS
- --------------------------
This press release may contain statements, estimates or projections that
constitute "forward-looking statements" as defined under U.S. federal securities
laws. Generally, the words "believe," "expect," "intend," "estimate,"
"anticipate," "project," "will" and similar expressions identify forward-looking
statements, which generally are not historical in nature. Forward-looking
statements are subject to certain risks and uncertainties that could cause
actual results to differ materially from The Coca-Cola Company's historical
experience and our present expectations or projections. These risks include, but
are not limited to, changes in economic and political conditions; changes in the
non-alcoholic beverages business environment, including actions of competitors
and changes in consumer preferences; product boycotts; foreign currency and
interest rate fluctuations; adverse weather conditions; the effectiveness of our
advertising and marketing programs; fluctuations in the cost and availability of
raw materials; our ability to achieve earnings forecasts; regulatory and legal
changes; our ability to penetrate developing and emerging markets; litigation
uncertainties; and other risks discussed in our Company's filings with the
Securities and Exchange Commission (the "SEC"), including our Annual Report on
Form 10-K, which filings are available from the SEC. You should not place undue
reliance on forward-looking statements, which speak only as of the date they are
made. The Coca-Cola Company undertakes no obligation to publicly update or
revise any forward-looking statements.
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