• La-Z-Boy Incorporated Reports Solid First Quarter Results with Sales Up 3%; First Quarter Operating Cash Flow Doubles to $52 Million

    Source: Nasdaq GlobeNewswire / 20 Aug 2024 16:15:00   America/New_York

    Fiscal 2025 First Quarter Highlights:

    • Consolidated delivered sales of $496 million
      • Up 3% versus prior year
    • Wholesale segment sales increased 5% on growth to external customers
    • Delivered sales and Non-GAAP(1) operating margin in line with guidance
    • GAAP diluted EPS of $0.61
      • Non-GAAP(1) diluted EPS of $0.62
    • Generated $52 million in operating cash flow for the quarter

    MONROE, Mich., Aug. 20, 2024 (GLOBE NEWSWIRE) -- La-Z-Boy Incorporated (NYSE: LZB), a global leader in the retail and manufacture of residential furniture, today reported first quarter results for the period ended July 27, 2024. For the quarter, sales totaled $496 million, an increase of 3% against the prior year comparable period. Operating margin was 6.5% for the quarter on a GAAP basis and 6.6% on a Non-GAAP(1) basis. Diluted earnings per share totaled $0.61 on a GAAP basis and $0.62 on a Non-GAAP(1) basis. Operating cash flow was $52 million, twice as high as last year's first quarter.

    Written sales remained steady, with first quarter total written sales for the Retail segment (company-owned La-Z-Boy Furniture Galleries®) up 4% versus a year ago, and written same-store sales down 3% versus a year ago. Written same-store sales for the entire La-Z-Boy Furniture Galleries® network also decreased 3% versus the year ago period. Trends were strongest around the Memorial Day holiday and softened towards the end of the quarter. Written sales results outperformed the broader furniture and home furnishings industry for May and June, which was also down 3% for the quarter. Across the industry, the consumer continues to be challenged and to pull back spending outside of key holidays.

    Melinda D. Whittington, President and Chief Executive Officer of La-Z-Boy Incorporated, said, “We continue to deliver positive results amidst a challenging macroeconomic backdrop. We were pleased to return to delivered sales growth in the quarter, led by our Wholesale segment, which benefited from higher delivered volume supported by Century Vision's channel expansion strategy. While the Retail business currently continues to wrestle with depressed traffic trends experienced across our industry, we again delivered strong execution. Conversion rates and design average ticket sales both improved again year-over-year and our in-store teams remain laser focused on providing the highest level of customer service and showcasing our industry leading product assortment. Over the past five years, our Retail business has grown at an impressive 7% compound annual sales growth. Our high quality offering of comfortable, custom furniture with quick delivery is resonating in a challenging marketplace. And while we expect industry fundamentals to be volatile for the foreseeable future, we remain confident in our ability to outperform the market and gain share longer term.”

    Whittington added, “We remain committed to investing in our business for the long term, as we navigate the near-term headwinds in the furniture industry. As an iconic brand with a storied near 100-year history, we have the proven ability to adapt, with a strong balance sheet to support our strategy. Near-term market disruptions are likely to continue pressuring the fiscal year, but we are well positioned to disproportionately benefit when industry tailwinds re-emerge. With our Century Vision strategy, we are actively investing in growing our core Retail segment through strengthening in-store execution, opening new stores, and acquiring independent La-Z-Boy Furniture Galleries® stores when we are able, as we believe our vertically integrated model offers superior returns over the longer term. This will uniquely position us to continue to outperform the industry and grow share.”

    Second Quarter Outlook:
    Bob Lucian, Chief Financial Officer of La-Z-Boy Incorporated, said, “The overall macroeconomic and consumer spending environment remains challenging. Despite this, we delivered on our guidance and saw modest sales growth in line with our outlook. Looking forward, our industry will remain under pressure in the near term as the market contends with still high interest rates, muted housing turnover, and an uncertain economic and geopolitical environment. Considering these factors, we expect sales in the second quarter of fiscal 2025 to improve modestly versus the first quarter supported by seasonality. Further, we continue to invest in our Century Vision strategy and build the business for the long term. As such, we expect fiscal second quarter sales to be in the range of $495-515 million and Non-GAAP operating margin(2) to be in the range of 6-7%.”

    Key Results:

    (Unaudited, amounts in thousands, except per share data and percentages)
    		 Quarter Ended  
     7/27/2024 7/29/2023  Change
    Sales $495,532  $481,651  3%
           
    GAAP operating income  32,370   34,526  (6)%
    Non-GAAP operating income   32,764   33,751  (3)%
           
    GAAP operating margin  6.5%  7.2% (70) bps
    Non-GAAP operating margin  6.6%  7.0% (40) bps
           
    GAAP net income attributable to La-Z-Boy Incorporated  26,159   27,479  (5)%
    Non-GAAP net income attributable to La-Z-Boy Incorporated  26,453   26,945  (2)%
           
    Diluted weighted average common shares  42,564   43,333   
           
    GAAP diluted earnings per share $0.61  $0.63  (3)%
    Non-GAAP diluted earnings per share $0.62  $0.62  —%
                

    Liquidity Measures:

      Quarter Ended   Quarter Ended
    (Unaudited, amounts in thousands) 7/27/2024 7/29/2023 (Unaudited, amounts in thousands) 7/27/2024 7/29/2023
    Free Cash Flow     Cash Returns to Shareholders    
    Operating cash flow $52,318  $25,913  Share repurchases $33,673 $10,007
    Capital expenditures  (15,620)  (13,457) Dividends  8,371  7,852
    Free cash flow $36,698  $12,456  Cash returns to shareholders $42,044 $17,859


    (Unaudited, amounts in thousands) 7/27/2024 7/29/2023
    Cash and cash equivalents $342,270 $336,434
    Restricted cash  —  3,816
    Total cash, cash equivalents and restricted cash $342,270 $340,250
           

    Fiscal 2025 First Quarter Results versus Fiscal 2024 First Quarter:

    • Consolidated sales in the first quarter of Fiscal 2025 increased 3% to $496 million versus last year, primarily driven by higher delivered volume within our Wholesale segment
    • Consolidated GAAP operating margin was 6.5% versus 7.2%
      • Consolidated Non-GAAP(1) operating margin decreased 40 basis points to 6.6% versus 7.0%, due to reduced fixed cost leverage in Retail, partially offset by gross margin expansion
    • GAAP diluted EPS decreased to $0.61 from $0.63 and Non-GAAP(1) diluted EPS totaled $0.62 versus $0.62 last year in the comparable period

    Retail Segment:

    • Sales:
      • Written sales for the Retail segment (company-owned La-Z-Boy Furniture Galleries® stores) increased 4% with growth from acquired and new stores, more than offsetting lower same-store sales compared to the year ago period
        • Written same-store sales decreased 3%, driven by lower traffic and softer industry-wide demand, partially offset by strong execution that drove higher conversion rates
      • Delivered sales decreased 3% to $202 million versus last year, as the prior year benefited from the delivery of residual backlog related to component shortages
    • Operating Margin:
      • GAAP operating margin and GAAP operating income was 10.2% and $21 million, versus 14.1% and $29 million, respectively
        • Non-GAAP(1) operating margin and Non-GAAP(1) operating income were 10.3% and $21 million, down 380 basis points and 29%, respectively, driven by fixed cost deleverage on lower delivered sales and fixed cost increases supporting our long-term strategy of growing our Retail business through new and acquired stores

    Wholesale Segment:

    • Sales:
      • Sales increased 5% to $351 million, primarily due to higher delivered volume to our external customers, partially offset by lower intercompany sales to our Retail segment and lowered delivered volume in our casegoods business
    • Operating Margin:
      • GAAP operating margin was 6.8% versus 7.0%
        • Non-GAAP(1) operating margin increased to 6.9%, up 10 basis points from the year ago period driven by gross margin expansion primarily from lower input costs (reduced commodity prices, improved sourcing, and favorable duty expense) partially offset by channel mix related to higher non-La-Z-Boy Furniture Galleries® delivered sales

    Corporate & Other:

    • Joybird written sales increased 9% and delivered sales decreased 3% to $35 million
    • Joybird operating performance again made meaningful progress against the prior comparable period as the brand focuses on balancing sales growth and profitability

    Balance Sheet and Cash Flow, Fiscal 2025 First Quarter:

    • Ended the quarter with $342 million in cash(3) and no external debt
    • Generated $52 million in cash from operating activities versus $26 million in last year's first quarter
    • Invested $16 million in capital expenditures, primarily related to La-Z-Boy Furniture Galleries® (new stores and remodels), and upgrades at our manufacturing facilities and market showrooms
    • Returned approximately $42 million to shareholders, including $34 million in share repurchases and $8 million in dividends

    Dividend:
    On August 20, 2024, the Board of Directors declared a quarterly cash dividend of $0.20 per share on the common stock of the company. The dividend will be paid on September 16, 2024, to shareholders of record on September 5, 2024.

    Conference Call:
    La-Z-Boy will hold a conference call with the investment community on Wednesday, August 21, 2024, at 8:30 a.m. ET. The toll-free dial-in number is (888) 506-0062; international callers may use (973) 528-0011. Enter Participant Access Code: 598802.

    The call will be webcast live, with corresponding slides, and archived on the internet. It will be available at https://lazboy.gcs-web.com/. A telephone replay will be available for a week following the call. This replay will be accessible to callers from the U.S. and Canada at (877) 481-4010 and to international callers at (919) 882-2331. Enter Replay Passcode: 51039. The webcast replay will be available for one year.

    Investor Relations Contact:
    Mark Becks, CFA, (734) 457-9538
    mark.becks@la-z-boy.com

    About La-Z-Boy:
    La-Z-Boy Incorporated brings the transformational power of comfort to people, homes, and communities around the world - a mission that began when its founders invented the iconic recliner in 1927. Today, the company operates as a vertically integrated furniture retailer and manufacturer, committed to uncompromising quality and compassion for its consumers.

    The Retail segment consists of 188 company-owned La-Z-Boy Furniture Galleries® stores, and is part of a broader network of over 350 La-Z-Boy Furniture Galleries® that, with La-Z-Boy.com, serve customers nationwide. Joybird®, an e-commerce retailer and manufacturer of modern upholstered furniture, has 12 stores in the U.S. In the Wholesale segment, La-Z-Boy manufactures comfortable, custom furniture for its Furniture Galleries® and a variety of retail channels, England Furniture Co. offers custom upholstered furniture, and casegoods brands Kincaid®, American Drew®, and Hammary® provide pieces that make every room feel like home. To learn more, please visit: https://www.la-z-boy.com/.

    Notes:
    (1)Non-GAAP amounts for the first quarter of fiscal 2025 exclude:

    • purchase accounting charges related to acquisitions completed in prior periods totaling $0.4 million pre-tax, or $0.01 per diluted share, all included in operating income

    Non-GAAP amounts for the first quarter of fiscal 2024 exclude:

    • a $1.0 million pre-tax, or $0.02 per diluted share, gain related to the closure of the Torreón, MX facility, primarily reflecting the termination of the associated lease
    • purchase accounting charges related to acquisitions completed in prior periods totaling $0.3 million pre-tax, or $0.01 per diluted share, with $0.3 million included in operating income and a de minimis amount included in interest expense

    (2)This reference to Non-GAAP operating margin for a future period is a Non-GAAP financial measure. We have not provided a reconciliation of Non-GAAP operating margin for future periods in this press release because such reconciliation cannot be provided without unreasonable efforts.

    Please refer to the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” and “Reconciliation of GAAP to Non-GAAP Financial Measures: Segment Information” for detailed information on calculating the Non-GAAP financial measures used in this press release and a reconciliation to the most directly comparable GAAP measure.

    (3)Cash includes cash, cash equivalents and restricted cash.

    Cautionary Note Regarding Forward-Looking Statements:
    This news release contains “forward-looking” statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. Generally, forward-looking statements include information concerning expectations, projections or trends relating to our results of operations, financial results, financial condition, strategic initiatives and plans, expenses, dividends, share repurchases, liquidity, use of cash and cash requirements, borrowing capacity, investments, future economic performance, and our business and industry.

    The forward-looking statements in this press release are based on certain assumptions and currently available information and are subject to various risks and uncertainties, many of which are unforeseeable and beyond our control. Additional risks and uncertainties that we do not presently know about or that we currently consider to be immaterial may also affect our business operations and financial results. Our actual future results and trends may differ materially depending on a variety of factors, including, but not limited to, the risks and uncertainties discussed in our Fiscal 2024 Annual Report on Form 10-K and other factors identified in our reports filed with the Securities and Exchange Commission (the “SEC”), available on the SEC’s website at www.sec.gov. Given these risks and uncertainties, you should not rely on forward-looking statements as a prediction of actual results. We are including this cautionary note to make applicable and take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 for forward-looking statements. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or for any other reason.

    Non-GAAP Financial Measures:
    In addition to the financial measures prepared in accordance with accounting principles generally accepted in the United States (“GAAP”), this press release also includes Non-GAAP financial measures. Management uses these Non-GAAP financial measures when assessing our ongoing performance. This press release contains references to Non-GAAP operating income (on a consolidated basis and by segment), Non-GAAP operating margin (on a consolidated basis and by segment), and Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share, Non-GAAP diluted earnings per share (and components thereof, including Non-GAAP income before income taxes and Non-GAAP net income attributable to La-Z-Boy Incorporated), each of which may exclude, as applicable, supply chain optimization charges and purchase accounting charges. The supply chain optimization charges include a lease termination gain and costs related to the relocation of equipment and inventory resulting from the closure of our Torreón manufacturing facility (previously disclosed as Mexico optimization). The purchase accounting charges include the amortization of intangible assets, incremental expense upon the sale of inventory acquired at fair value, and fair value adjustments of future cash payments recorded as interest expense. These Non-GAAP financial measures are not meant to be considered superior to or a substitute for La-Z-Boy Incorporated’s results of operations prepared in accordance with GAAP and may not be comparable to similarly titled measures reported by other companies. Reconciliations of such Non-GAAP financial measures to the most directly comparable GAAP financial measures are set forth in the accompanying tables.

    Management believes that presenting certain Non-GAAP financial measures will help investors understand the long-term profitability trends of our business and compare our profitability to prior and future periods and to our peers. Management excludes purchase accounting charges because the amount and timing of such charges are significantly impacted by the timing, size, number and nature of the acquisitions consummated and the success with which we operate the businesses acquired. While the company has a history of acquisition activity, it does not acquire businesses on a predictable cycle, and the impact of purchase accounting charges is unique to each acquisition and can vary significantly from acquisition to acquisition. Similarly, supply chain optimization charges are dependent on the timing, size, number and nature of the operations being closed, consolidated or centralized, and the charges may not be incurred on a predictable cycle. Management believes that exclusion of these items facilitates more consistent comparisons of the company’s operating results over time. Where applicable, the accompanying “Reconciliation of GAAP to Non-GAAP Financial Measures” tables present the excluded items net of tax calculated using the effective tax rate from operations for the period in which the adjustment is presented.

     
    LA-Z-BOY INCORPORATED
    CONSOLIDATED STATEMENT OF INCOME
     
      Quarter Ended
    (Unaudited, amounts in thousands, except per share data) 7/27/2024 7/29/2023
    Sales $495,532  $481,651 
    Cost of sales  282,189   275,923 
    Gross profit  213,343   205,728 
    Selling, general and administrative expense  180,973   171,202 
    Operating income   32,370   34,526 
    Interest expense  (210)  (122)
    Interest income  4,424   3,056 
    Other income (expense), net  (618)  556 
    Income before income taxes  35,966   38,016 
    Income tax expense  9,162   10,090 
    Net income  26,804   27,926 
    Net (income) attributable to noncontrolling interests  (645)  (447)
    Net income attributable to La-Z-Boy Incorporated $26,159  $27,479 
         
    Basic weighted average common shares  42,052   43,239 
    Basic net income attributable to La-Z-Boy Incorporated per share $0.62  $0.64 
         
    Diluted weighted average common shares  42,564   43,333 
    Diluted net income attributable to La-Z-Boy Incorporated per share $0.61  $0.63 


     
    LA-Z-BOY INCORPORATED
    CONSOLIDATED BALANCE SHEET
     
    (Unaudited, amounts in thousands, except par value) 7/27/2024 4/27/2024
    Current assets    
    Cash and equivalents $342,270  $341,098 
    Receivables, net of allowance of $5,181 at 7/27/2024 and $5,076 at 4/27/2024  121,047   139,213 
    Inventories, net  271,790   263,237 
    Other current assets  99,268   93,260 
    Total current assets  834,375   836,808 
    Property, plant and equipment, net  298,781   298,224 
    Goodwill  220,109   214,453 
    Other intangible assets, net  48,684   47,251 
    Deferred income taxes – long-term  8,969   10,283 
    Right of use lease assets  448,834   446,466 
    Other long-term assets, net  57,863   59,957 
    Total assets $1,917,615  $1,913,442 
         
    Current liabilities    
    Accounts payable $94,165  $96,486 
    Lease liabilities, short-term  77,247   77,027 
    Accrued expenses and other current liabilities  268,530   263,768 
    Total current liabilities  439,942   437,281 
    Lease liabilities, long-term  407,009   404,724 
    Other long-term liabilities  60,188   58,077 
    Shareholders' equity    
    Preferred shares – 5,000 authorized; none issued  —   — 
    Common shares, $1.00 par value – 150,000 authorized; 42,015 outstanding at 7/27/2024 and 42,440 outstanding at 4/27/2024  42,015   42,440 
    Capital in excess of par value  371,421   368,485 
    Retained earnings  590,308   598,009 
    Accumulated other comprehensive loss  (4,535)  (5,870)
    Total La-Z-Boy Incorporated shareholders' equity  999,209   1,003,064 
    Noncontrolling interests  11,267   10,296 
    Total equity  1,010,476   1,013,360 
    Total liabilities and equity $1,917,615  $1,913,442 


     
    LA-Z-BOY INCORPORATED
    CONSOLIDATED STATEMENT OF CASH FLOWS
     
      Quarter Ended
    (Unaudited, amounts in thousands) 7/27/2024 7/29/2023
    Cash flows from operating activities    
    Net income $26,804  $27,926 
    Adjustments to reconcile net income to cash provided by operating activities    
    (Gain)/loss on disposal and impairment of assets  (117)  113 
    (Gain)/loss on sale of investments  (80)  307 
    Provision for doubtful accounts  91   (405)
    Depreciation and amortization  12,147   10,211 
    Amortization of right-of-use lease assets  22,722   17,265 
    Lease impairment/(settlement)  —   (1,175)
    Equity-based compensation expense  3,175   2,526 
    Change in deferred taxes  1,999   602 
    Change in receivables  17,783   14,769 
    Change in inventories  (6,912)  9,271 
    Change in other assets  (6,668)  (2,820)
    Change in payables  952   (8,565)
    Change in lease liabilities  (23,306)  (17,882)
    Change in other liabilities  3,728   (26,230)
    Net cash provided by operating activities  52,318   25,913 
         
    Cash flows from investing activities    
    Proceeds from disposals of assets  158   4,031 
    Capital expenditures  (15,620)  (13,457)
    Purchases of investments  (2,813)  (11,407)
    Proceeds from sales of investments  7,879   12,404 
    Acquisitions  (6,797)  (4,250)
    Net cash used for investing activities  (17,193)  (12,679)
         
    Cash flows from financing activities    
    Payments on finance lease liabilities  (145)  (67)
    Stock issued for stock and employee benefit plans, net of shares withheld for taxes  7,874   (1,978)
    Repurchases of common stock  (33,673)  (10,007)
    Dividends paid to shareholders  (8,371)  (7,852)
    Net cash used for financing activities  (34,315)  (19,904)
         
    Effect of exchange rate changes on cash and equivalents  362   242 
    Change in cash, cash equivalents and restricted cash  1,172   (6,428)
    Cash, cash equivalents and restricted cash at beginning of period  341,098   346,678 
    Cash, cash equivalents and restricted cash at end of period $342,270  $340,250 
         
    Supplemental disclosure of non-cash investing activities    
    Capital expenditures included in payables $2,583  $7,188 


     
    LA-Z-BOY INCORPORATED
    SEGMENT INFORMATION
     
      Quarter Ended
    (Unaudited, amounts in thousands) 7/27/2024 7/29/2023
    Sales    
    Wholesale segment:    
    Sales to external customers $256,020  $236,251 
    Intersegment sales  94,880   97,224 
    Wholesale segment sales  350,900   333,475 
         
    Retail segment sales  202,370   208,243 
         
    Corporate and Other:    
    Sales to external customers  37,142   37,157 
    Intersegment sales  1,566   2,904 
    Corporate and Other sales  38,708   40,061 
         
    Eliminations  (96,446)  (100,128)
    Consolidated sales $495,532  $481,651 
         
    Operating Income (Loss)    
    Wholesale segment $23,999  $23,503 
    Retail segment  20,649   29,264 
    Corporate and Other  (12,278)  (18,241)
    Consolidated operating income $32,370  $34,526 


     
    LA-Z-BOY INCORPORATED
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
     
      Quarter Ended
    (Amounts in thousands, except per share data) 7/27/2024 7/29/2023
    GAAP gross profit $213,343  $205,728 
    Purchase accounting charges (1)  140   — 
    Supply chain optimization charges (2)  —   146 
    Non-GAAP gross profit $213,483  $205,874 
         
    GAAP SG&A $180,973  $171,202 
    Purchase accounting charges (3)  (254)  (254)
    Supply chain optimization (charges)/gain (4)  —   1,175 
    Non-GAAP SG&A $180,719  $172,123 
         
    GAAP operating income $32,370  $34,526 
    Purchase accounting charges  394   254 
    Supply chain optimization charges  —   (1,029)
    Non-GAAP operating income $32,764  $33,751 
         
    GAAP income before income taxes $35,966  $38,016 
    Purchase accounting charges recorded as part of gross profit, SG&A, and interest expense  394   302 
    Supply chain optimization charges  —   (1,029)
    Non-GAAP income before income taxes $36,360  $37,289 
         
    GAAP net income attributable to La-Z-Boy Incorporated $26,159  $27,479 
    Purchase accounting charges recorded as part of gross profit, SG&A, and interest expense  394   302 
    Tax effect of purchase accounting  (100)  (80)
    Supply chain optimization charges  —   (1,029)
    Tax effect of supply chain optimization  —   273 
    Non-GAAP net income attributable to La-Z-Boy Incorporated $26,453  $26,945 
         
    GAAP net income attributable to La-Z-Boy Incorporated per diluted share ("Diluted EPS") $0.61  $0.63 
    Purchase accounting charges, net of tax, per share  0.01   0.01 
    Supply chain optimization charges, net of tax, per share  —   (0.02)
    Non-GAAP net income attributable to La-Z-Boy Incorporated per diluted share ("Diluted EPS") $0.62  $0.62 
     
    (1)   Includes incremental expense upon the sale of inventory acquired at fair value.
    (2)   Fiscal 2024 includes costs to relocate equipment and inventory related to the closure our manufacturing facility in Torreón, Mexico.
    (3)   Includes amortization of intangible assets.
    (4)   Fiscal 2024 includes a gain related to the settlement of the Torreón, Mexico lease obligation on previously impaired assets.


     
    LA-Z-BOY INCORPORATED
    RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
    SEGMENT INFORMATION
     
      Quarter Ended
    (Amounts in thousands) 7/27/2024 % of sales 7/29/2023 % of sales
    GAAP operating income (loss)        
    Wholesale segment $23,999  6.8% $23,503  7.0%
    Retail segment  20,649  10.2%  29,264  14.1%
    Corporate and Other  (12,278) N/M   (18,241) N/M 
    Consolidated GAAP operating income $32,370  6.5% $34,526  7.2%
             
    Non-GAAP items affecting operating income        
    Wholesale segment $55    $(974)  
    Retail segment  140     —   
    Corporate and Other  199     199   
    Consolidated Non-GAAP items affecting operating income $394    $(775)  
             
    Non-GAAP operating income (loss)        
    Wholesale segment $24,054  6.9% $22,529  6.8%
    Retail segment  20,789  10.3%  29,264  14.1%
    Corporate and Other  (12,079) N/M   (18,042) N/M 
    Consolidated Non-GAAP operating income $32,764  6.6% $33,751  7.0%
             
    N/M - Not Meaningful        

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