LEAR ip 2004_sholders_meet

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LEAR ip 2004_sholders_meet

  1. 1. R 2004 Annual Meeting of Shareholders May 13, 2004 fast forward world’s leading automotive interior supplier advance relentlessly
  2. 2. Agenda I. Introduction I. Introduction Bob Rossiter, Chairman & CEO Bob Rossiter, Chairman & CEO II. Americas Review II. Americas Review Don Stebbins, President & COO -- Americas Don Stebbins, President & COO Americas III. International Review III. International Review Doug DelGrosso, President & COO -- International Doug DelGrosso, President & COO International IV. Financial Review IV. Financial Review Dave Wajsgras, SVP & CFO Dave Wajsgras, SVP & CFO 2
  3. 3. Americas Review 3
  4. 4. Americas Business Summary Top 5 Customers 2003 Revenue $9.6 billion 2003 Revenue $9.6 billion General Motors Operations in 7 countries Ford Operations in 7 countries DaimlerChrysler 68K employees 68K employees BMW 169 facilities 169 facilities Toyota 4
  5. 5. Americas North America Market Share Rankings Product Rank Share Rank Share Seat Systems #1 47 % Seat Systems #1 47 % Door Panels #1 26 % Door Panels #1 26 % Floor & Acoustic Systems #2 37 % Floor & Acoustic Systems #2 37 % Headliners #2 20 % Headliners #2 20 % Electrical Distribution Systems # 3 14 % Electrical Distribution Systems # 3 14 % Instrument Panels #5 4% Instrument Panels #5 4% Total Interior #1 37% Total Interior #1 37% Source: Internal Market Share Study 5
  6. 6. Americas Sales by Segment Americas Total Sales of $9.6 Billion Car 31% Truck 69% Truck Car Mid Size 49 % SUV 56 % Compact 21 Pickup 36 Full Size 15 Van 7 Luxury 11 Medium/Heavy 1 Sports 4 Total 100 % Total 100 % 6
  7. 7. Americas Product On Top Selling Vehicles in North America 1 Ford - Total F-Series Pickup 11 DCX - Caravan 21 Ford - Econoline 2 GM - Total Silverado Pickup 12 GM - Cavalier 22 GM - Malibu 3 DCX - Ram Pickup 13 GM - TrailBlazer 23 Honda - Odyssey 4 Toyota - Camry 14 Ford - Focus 24 Ford - Escape 5 Honda - Accord 15 Ford – Ranger 25 Ford - Mustang 6 Ford - Explorer 26 DCX - Jeep Liberty 16 Nissan – Altima 7 Ford - Taurus 17 GM – Total GMC Sierra Pickup 27 Toyota - Tacoma 8 Honda - Civic 18 DCX – Jeep Grand Cherokee 28 GM - S-10 9 Toyota - Corolla/Matrix 19 GM – Tahoe 29 Honda - CRV 10 GM - Impala 20 Ford – Expedition 30 DCX - Chrysler Town & Country Source: Based on available industry data On 28 of 30 Top-Selling Vehicles in North America 7
  8. 8. Americas PPM’s Parts Per Million (PPM) Defective* 65% Imp rov em ent 2002 2003 2004 YTD * Based on internal and customer data 8
  9. 9. Americas J.D. Power Seat Survey - 4th Consecutive Year of Improvement Things Gone Wrong (TGW) Lear’s 2003 J.D. Power per 100 vehicles Results C ont i nuo u s Im prove ment 11% improvement in 2003 10.3 9.5 8.3 7.9 4th consecutive year of 7.0 improvement in TGW Highest quality seat manufacturer that supplies multiple OEMs 1999 2000 2001 2002 2003 Source: 2003 J.D. Power Seat Survey Independent J.D. Power Survey Shows Continuous Improvement in Lear’s TGW 9
  10. 10. Americas Recent Industry Awards & Recognition “Supplier of the Year” Four World Excellence Awards Interior Excellence Award Fortune Magazine Ranked Lear as America’s Most Admired Automotive Supplier for Second Consecutive Year 10
  11. 11. Americas Sales Backlog Sales Backlog (billions) $2.6 $1.6 2004 - 2008 2004 - 2006 11 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  12. 12. Americas GM Total Interior Integrator Program On Track Total Interior prototypes have been completed and shipped to GM Total Interior prototypes have been completed and shipped to GM Refining engineering designs with GM to harmonize total interior with Refining engineering designs with GM to harmonize total interior with overall vehicle aesthetics overall vehicle aesthetics Interiors feature several Lear innovations integrated as a vehicle Interiors feature several Lear innovations integrated as a vehicle system for the first time system for the first time Spray PUR TM seamless polyurethane coating on instrument panel Spray PUR TM seamless polyurethane coating on instrument panel R Sonotec lightweight acoustical products Sonotec lightweight acoustical products Flexible seating architecture Flexible seating architecture Ongoing studies confirm that consumer appeal remains on target Ongoing studies confirm that consumer appeal remains on target throughout the development process throughout the development process Lear Working in Close Partnership with GM to Deliver “World Class” Interiors for Next Generation Large and Luxury Vehicles 12
  13. 13. Americas Global Lear Program Management Process (LPMP) 30 + 17 + 289 + 34 + 1100 = “One LEAR” Programs Facilities Customers Acquisitions Countries Current Functionality: Current Functionality: Timing Plans Timing Plans Supplier Status Supplier Status Open Issues Open Issues Financial Status Financial Status Real Time Access on the Performance of Complete Portfolio of Business 13
  14. 14. Americas 2004 Plan Customer Service Customer Service Operational Excellence Operational Excellence Product Innovation & Growth Product Innovation & Growth Commercial Responsibility Commercial Responsibility Teamwork Teamwork Leverage Leadership Position in Total Interiors 14
  15. 15. International Review 15
  16. 16. International Europe & Asia Business Summary Represents approximately Top 5 Customers one-third of global sales Ford Group Operations in 27 countries GM Group Europe*: 35K employees BMW 94 facilities PSA Asia: 7K employees 26 facilities Fiat PPM: 36% improvement * Includes African operations 16
  17. 17. International Western Europe Market Share Rankings Product Rank Share •• Seat Systems #1 27% Seat Systems #1 27% •• Electrical Distribution Systems #3 14% Electrical Distribution Systems #3 14% •• Headliners #3 13% Headliners #3 13% •• Instrument Panels //Cockpits #4 8% Instrument Panels Cockpits #4 8% •• Door Panels #5 7% Door Panels #5 7% Source: Internal Market Share Study and 2004 estimates of outsourced IP/cockpit market. 17
  18. 18. International Product On Top Selling Vehicles in Western Europe 1 Peugeot - 206 11 Mercedes C-class 21 Opel - Zafira 2 VW - Golf 12 Audi - A4 22 Citroen - C3 Ford - Fiesta VW - Seat Ibiza 3 Ford - Focus 13 23 Peugeot - 307 Renault - Scenic 4 14 24 Opel - Vectra 5 BMW - 3 Series 15 Renault - Laguna 25 Citroen - Xsara 6 Opel - Astra 16 Ford - Mondeo 26 Fiat - Stilo VW - Polo 7 Opel - Corsa 17 27 BMW - 5 Series Renault - Clio 8 18 Mercedes E-class 28 BMW - Mini Citroen - Xsara Picasso 9 VW - Passat 19 29 Audi - A6 10 Fiat - Punto 20 Renault - Megane 30 Mercedes A-class Source: Based on available company and industry data On 23 of 30 Top-Selling Vehicles in Western Europe 18
  19. 19. International PPM’s Parts Per Million (PPM) Defective* 68% Im pr o ve m ent 2002 2003 2004 Target * Based on internal and customer data 19
  20. 20. International J.D. Power Seat Survey Shows Improvement for European Seats Things Gone Wrong (TGW) Lear’s 2003 J.D. Power per 100 vehicles Results for Lear Europe 21% Im prove ment 7.1 U.S. data for seats 5.6 supplied by Lear’s European plants 21% improvement from 2002 2002 2003 Source: 2003 J.D. Power Seat Survey Independent J.D. Power Survey Shows Solid Improvement in Lear’s European TGW 20
  21. 21. International Recent Industry Awards & Recognition Global Value Achievement Award “Supplier of the Year” 2003 Presidents Award Green Partner Award Quality Master Awards Fortune Magazine Ranked Lear as World’s Most Admired Automotive Supplier for Second Consecutive Year 21
  22. 22. International Sales Backlog Sales Backlog $1.8 (billions) $1.4 2004 - 2006 2004 - 2008 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 22
  23. 23. International Electrical/Electronics Market Electrical/Electronics Grote & Hartmann ** Global Market Opportunity* High quality producer $44 with technical expertise (in billions) Improves overall $28 competitiveness in $25 $18 electrical/electronics market Provides avenue for growth and customer diversification Wire Harness/ Add Body Add Safety Add Audio, Terminals & Electronics & Electronics Infotainment Connectors Mechatronics & Other Acquisition Consistent with our Electrical/Electronics Strategy * Based on internal Lear estimates 23 ** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  24. 24. International Lear China Overview Products Wuhan (2) Wuhan (2) - Seats - Door Panels - Citroen - Citroen - Renault/Nissan - Renault/Nissan - Wiring - Carpet/Acoustics ChangChun - Audi Customers Shiyan // Xiangfan Shiyan Xiangfan Shenyang -- Nissan Nissan - Jiangling (Ford) - ChangAn (Ford) - BMW Nanjing - SAIC (GM) - FAW (VW) - Fiat Fiat Chongqing Chongqing - - ChangAn, Suzuki, - ChangAn, Suzuki Shanghai (3) - Nanjing - Iveco (Fiat) - DFM (Nissan, PSA) Ford - Ford - SGM, SVW - China Brilliance (BMW) - Others Nanchang - Isuzu,, Suzuki, Ford Ford Isuzu Key Strategic Points - Follow customers’ footprint - Potential manufacturing for export Eleven joint ventures - Leverage partners’ resources for technology • Lower technology risk 4,000 employees - Controlled growth and investment 24
  25. 25. International Europe & Asia 2004 Plan Exceed Customer Requirements Exceed Customer Requirements Continue to Improve Quality and Continue to Improve Quality and Customer Satisfaction Customer Satisfaction Leverage Existing Infrastructure Leverage Existing Infrastructure Grow Market Share & Improve Business Grow Market Share & Improve Business Structure Structure Aggressively Grow Business with Asian OEMs Aggressively Grow Business with Asian OEMs Provide ‘World Class’ Value to Customers and Shareholders 25
  26. 26. Financial Review 26
  27. 27. Financial Review Financial Highlights - Full Year 2003 Record net sales of $15.75 billion, up 9% from 2002 Record net sales of $15.75 billion, up 9% from 2002 Net income of $5.55 per share, up 19% from 2002** Net income of $5.55 per share, up 19% from 2002 Return on invested capital** increased to 10.6% Return on invested capital** increased to 10.6% Strong free cash flow**of $509 million Strong free cash flow**of $509 million Net debt** to capital ratio improved to 45.8%, lowest Net debt** to capital ratio improved to 45.8%, lowest level in 10 years level in 10 years Leveraging our Total Interior Capabilities to Deliver Value to our Customers and Shareholders * Excluding the cumulative effect of a change in accounting for goodwill of $4.46 per share in 2002. ** Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. For further information on these measures, as well as return on invested capital, please see slides titled “Use of Non-GAAP Financial Information” at the end of this 27 presentation.
  28. 28. Financial Review Financial Priorities We are focused on: We are focused on: Profitable growth Profitable growth Improving ROIC Improving ROIC Generating cash Generating cash Financial discipline Financial discipline Meeting Our Commitments and Delivering Shareholder Value 28
  29. 29. Financial Review Focused Strategy has Supported Rapid Growth Net Sales ome (in billions) t I nc % $15.7 Ne 23 $16.0 $14.4 AGR $14.1 $13.6 C $14.0 $12.4 SALES $12.0 CAGR $9.1 $10.0 20% $7.3 $8.0 $6.2 $6.0 $4.7 $3.1 $4.0 $2.0 $0.0 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Net sales have steadily No strategic hole in Lear’s increased since IPO to about product line up $15.7 billion today Lear ranks 129 among the Fortune 500 and is the 23rd 17 major acquisitions during the 1990’s fastest growing company in the U.S. over the last ten years 60% acquisition growth 40% organic growth 29
  30. 30. Financial Review Growth Strategy Deliver record sales backlog Deliver record sales backlog Pursue strategic acquisitions Pursue strategic acquisitions Accelerate new product innovations Accelerate new product innovations Win new total interior integrator programs Win new total interior integrator programs Continue to form alliances and joint ventures Continue to form alliances and joint ventures Comprehensive Approach to Profitably Growing Our Business 30
  31. 31. Financial Review Record Backlog Supports Continued Growth Sales Backlog* Major New Business (in billions) $4.4 New cockpit and interior New cockpit and interior programs programs Growth in seating Growth in seating $3.0 systems with Korean systems with Korean automakers automakers Electrical distribution and Electrical distribution and electronics systems, electronics systems, including TPMS including TPMS Added content on Added content on Three-Year Five-Year replacement programs replacement programs Record Backlog Supports Continued Growth and Diversification of Sales 31 * Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information.
  32. 32. Financial Review Grote & Hartmann Acquisition Total transaction value: $220 million Total transaction value: $220 million Headquarters: Wuppertal, Germany; 1,900 employees Headquarters: Wuppertal, Germany; 1,900 employees Major products: terminals & connectors and junction boxes Major products: terminals & connectors and junction boxes ≈ $275 million in revenue, with about 75% in Europe ≈ $275 million in revenue, with about 75% in Europe Major customers: VW, BMW, Ford, Opel, DCX, Renault, MAN Major customers: VW, BMW, Ford, Opel, DCX, Renault, MAN and PSA group and PSA group Acquisition Expected to be Slightly Accretive in 2005 32
  33. 33. Financial Review Strategic Joint Ventures Position Lear for Growth Europe Asian JVs China 11 * 3 North India 1* Thailand 1* America Japan 2 ** Asia 11 15 Total 15 ---- * Manufacturing JVs ** Sales and Engineering JVs 29 Global Strategic Joint Ventures 12 Consolidated / 17 Non-consolidated 33
  34. 34. Financial Review Return on Invested Capital Improving Trailing Twelve Month ROIC* 11.0% 10.6% 10.5% 9.8% 10.0% 9.5% 9.0% 8.5% 8.5% 8.0% 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 2001 2001 2001 2001 2002 2002 2002 2002 2003 2003 2003 2003 * Return on Invested Capital (ROIC) represents income before restructuring charges, amortization, interest, other expense and income taxes times (1 - effective tax rate) divided by average invested capital. Average invested capital is the sum of total assets, sold accounts receivable and the present value of operating leases (assuming a discount rate of 10%) less the sum of accounts payable and drafts and accrued liabilities, based on the account values on the last day of the prior four quarters. Please see slides titled “Use of Non-GAAP 34 Financial Information” at the end of this presentation for further information.
  35. 35. Financial Review Continuing to Reduce Our Net Debt (in billions) 70% $4.0 65% Net Debt***/Capital 63% $3.4 $3.5 58% $3.0 $3.0 Net Debt $2.7 $2.5 $2.3 46% $1.9 $2.0 $1.5 1999* 2000 2001** 2002** 2003 Free Cash Flow*** $179M $410M $318M $395M $509M Flow*** * UTA acquisition 5/99 ** Includes ABS debt of $261 million in 2001 and $189 million in 2002 (implemented in 2001). *** Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. Net debt represents total debt plus utilization of our ABS facility, less cash and cash equivalents. Please see slides titled “Use of Non-GAAP Financial Information” at the end of this presentation for further information. 35
  36. 36. Financial Review How Investors View Our Performance GROWTH Eight consecutive quarters of higher year-over-year sales RETURNS Margins flat year over year, due to tough production/mix environment ROIC steadily improved from 2001 to 2003 RISK Deleveraging balance sheet – lowest leverage in 10 years Consistent results and “No Surprises” over past eight quarters Initiated dividend program INTANGIBLES Company is delivering on strategy Improving quality, validated by J.D. Power Survey Proactive manufacturing capacity/efficiency actions Company rated “Most Admired” auto supplier in Fortune survey 36
  37. 37. Financial Review 2004 Guidance - Net Income Per Share** $6.25 $5.55 $5.85 Full Year $4.65* $1.65 to $1.54 $1.55 Second Quarter $1.27 $1.30 First Quarter $0.70* $1.01 2002 2003 2004 Guidance Net Sales $14.4B $15.7B $16.6B Full Year EPS Guidance Remains Unchanged * Represents income per share before cumulative effect of a change in accounting principle, which excludes the impact of goodwill impairment of $298.5 million after-tax, or $4.50 per share in the first quarter of 2002 and $4.46 per share in the full year of 2002. ** Please see slide titled “Forward-Looking Statements” at the end of this presentation for further information. 37
  38. 38. R ADVANCE RELENTLESSLY™ LEA Listed www.lear.com NYSE
  39. 39. Use of Non-GAAP Financial Information In addition to the results reported in accordance with accounting principles generally accepted in the United States (“GAAP”) included throughout this presentation, the Company has provided information regarding certain non-GAAP financial measures. These measures include “free cash flow,” “ROIC” and “net debt.” Free cash flow represents net cash provided by operating activities before the net change in sold accounts receivable, less capital expenditures. The Company believes it is appropriate to exclude the net change in sold accounts receivable in the calculation of free cash flow since the sale of receivables may be viewed as a substitute for borrowing activity. ROIC represents income before restructuring charges, amortization, interest, other expense and income taxes times (1 - effective tax rate) divided by average invested capital. Average invested capital is the sum of total assets, sold accounts receivable and the present value of operating leases (assuming a discount rate of 10%) less the sum of accounts payable and drafts and accrued liabilities, based on the account values on the last day of the prior four quarters. Net debt represents total debt plus utilization under the Company’s ABS facility, less cash and cash equivalents. Management believes that the non-GAAP financial measures used in this presentation are useful to both management and investors in their analysis of the Company’s financial position and results of operations. In particular, management believes that free cash flow is useful in analyzing the Company’s ability to service and repay its debt. Management believes that ROIC is a commonly used measure that provides useful information regarding the efficiency with which the Company’s assets are deployed. Management believes that net debt provides useful information regarding a company’s financial condition. Further, management uses these non-GAAP measures for planning and forecasting in future periods. Neither free cash flow, ROIC nor net debt should be considered in isolation or as substitutes for net cash provided by operating activities, total debt or other balance sheet, income statement or cash flow statement data prepared in accordance with GAAP or as measures of profitability or liquidity. In addition, the calculation of free cash flow does not reflect cash used to service debt and thus, does not reflect funds available for investment or other discretionary uses. Also, these non-GAAP financial measures, as determined and presented by the Company, may not be comparable to related or similarly titled measures reported by other companies. Set forth on the following slides are reconciliations of these non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP. 39
  40. 40. Use of Non-GAAP Financial Information Free Cash Flow (in millions) Twelve Months 2003 2002 Free cash flow Net cash provided by operating activities $ 586.3 $ 545.1 Net change in sold accounts receivable 298.1 122.2 Net cash provided by operating activities before net change in sold accounts receivable 884.4 667.3 Capital expenditures ( 375.6 ) ( 272.6 ) Free cash flow $ 508.8 $ 394.7 40
  41. 41. Use of Non-GAAP Financial Information Free Cash Flow (in millions) Twelve Months 2001 2000 1999 Free cash flow Net cash provided by operating activities $ 829.8 $ 753.1 $ 560.3 Net change in sold accounts receivable ( 245.0 ) ( 21.2 ) 10.4 Net cash provided by operating activities before net change in sold accounts receivable 584.8 731.9 570.7 Capital expenditures ( 267.0 ) ( 322.3 ) ( 391.4 ) Free cash flow $ 317.8 $ 409.6 $ 179.3 41
  42. 42. Use of Non-GAAP Financial Information Return on Invested Capital Twelve Months (in millions) Q4 2003 Q4 2001 Q1 2001 Income before restructuring charges, amortization, interest, other expense and income taxes Income before income taxes $ 534.2 $ 89.9 $ 395.9 Restructuring charges - 159.3 4.2 Amortization - 90.2 90.1 Interest expense 186.6 254.7 313.9 Other expense, net 52.0 85.8 44.1 Income before restructuring charges, amortization, interest, other expense and income taxes $ 772.8 $ 679.9 $ 848.2 (return on invested capital earnings) Note: Income before restructuring charges, amortization, interest, other expense and income taxes is used to calculate return on invested capital. 42
  43. 43. Use of Non-GAAP Financial Information Net Debt (in millions) December 31, 2003 2002 2001 2000 1999 Net debt Short-term borrowings $ 17.1 $ 37.3 $ 63.2 $ 72.4 $ 103.6 Current portion of long-term debt 4.0 3.9 129.5 155.6 63.6 Long-term debt 2,057.2 2,132.8 2,293.9 2,852.1 3,324.8 Total debt 2,078.3 2,174.0 2,486.6 3,080.1 3,492.0 Cash and cash equivalents ( 169.3 ) ( 91.7 ) ( 87.6 ) ( 98.8 ) (106.9 ) Asset backed securitization - 189.0 260.7 - - Net debt $ 1,909.0 $ 2,271.3 $ 2,659.7 $ 2,981.3 $ 3,385.1 Note: Net debt to capital is defined as net debt divided by net debt plus stockholders’ equity. 43
  44. 44. Forward-Looking Statements This presentation contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, including statements regarding anticipated financial results. Actual results may differ materially from anticipated results as a result of certain risks and uncertainties, including but not limited to general economic conditions in the markets in which the Company operates, including changes in interest rates and fuel prices, fluctuations in the production of vehicles for which the Company is a supplier, labor disputes involving the Company or its significant customers or that otherwise affect the Company, the Company’s ability to achieve cost reductions that offset or exceed customer-mandated selling price reductions, the impact and timing of program launch costs, costs and timing of facility closures or similar actions, increases in warranty or product liability costs, risks associated with conducting business in foreign countries, fluctuations in foreign exchange rates, adverse changes in economic conditions or political instability in the jurisdictions in which the Company operates, competitive conditions impacting the Company’s key customers, raw material cost and availability, the outcome of legal or regulatory proceedings, unanticipated changes in cash flow and other risks detailed from time to time in the Company’s Securities and Exchange Commission filings. This presentation also contains information on the Company’s sales backlog. The Company’s incremental sales backlog reflects: (i) formally awarded new programs; (ii) targeted programs for which the Company believes there is a substantial likelihood of award; (iii) phased-out and cancelled programs; (iv) estimates regarding customer-mandated changes in selling prices; and (v) estimates of expected changes in vehicle content. Changes in any of these components may significantly impact the Company’s backlog. In addition, backlog may be impacted by various assumptions imbedded in the calculation, including vehicle production levels on new, replacement or targeted programs, foreign exchange rates and the timing of major program launches. For purposes of the backlog data included in this presentation, the Company has made the following assumptions: (1) North American vehicle production of 16.0 million units; (2) Western European vehicle production of 16.0 million units; (3) South American vehicle production of 1.9 million units; and (4) a Euro exchange rate of $1.20/Euro. Please refer to the Company’s Annual Report on Form 10-K for its fiscal year ended December 31, 2003 for further information on the Company’s calculation of backlog. Statements regarding the anticipated timing and impact of the Grote & Hartmann acquisition are also included. Actual events or results may differ materially from anticipated events or results as a result of certain risks and uncertainties, including, but not limited to, whether or not the conditions to the completion of the transaction are satisfied, the possibility that the transaction will not close, the timing of the closing of the transaction and Lear’s ability to successfully integrate Grote & Hartmann’s operations. In addition, the full year net income per share guidance is based on assumed 71.0 million shares outstanding and does not reflect the potential dilutive impact of the convertible senior notes. The forward-looking statements in this presentation are made as of the date hereof, and the Company does not assume any obligation to update them. 44

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