EXHIBIT 99.1
MENTOR REPORTS SECOND QUARTER
FISCAL YEAR 2009 FINANCIAL RESULTS AND COMPLETION OF
ENROLLMENT IN POST-APPROVAL STUDY
• Net Sales were $84.5 Million in the Second Quarter of Fiscal Year 2009, a decrease of 1% from $85.4
Million in the Second Quarter of Fiscal Year 2008.
• Diluted Earnings per Share from Continuing Operations were $0.28 in the Second Quarter of Fiscal
Year 2009, Compared to $0.27 in the Second Quarter of Fiscal Year 2008.
• Patient Enrollment Completed for the MemoryGelTM Post-Approval Study.
SANTA BARBARA, California, November 5, 2008 - Mentor Corporation (NYSE:MNT), a leading supplier of medical products for the global aesthetic market, today announced financial results for the second quarter ended September 26, 2008.
"We continue to manage the elements of our business that we can control in this challenging economic environment. Although net sales were generally flat, we continued to grow share and increased the mix of our MemoryGelTM breast implants being used in the domestic market. This has offset declining domestic unit trends for the cosmetic segment of the business. Additionally, we saw strong demand for reconstruction products and stable international sales growth. Finally, we are pleased that we have met our commitment to complete patient enrollment in the MemoryGel Post-Approval Study well in advance of the FDA mandated deadline," said Joshua H. Levine, President and Chief Executive Officer of Mentor Corporation.
Total Net Sales
Total net sales were $84.5 million in the second quarter of fiscal year 2009, a decrease of 1% from net sales of $85.4 million in the second quarter of fiscal year 2008. The decrease in net sales is primarily attributable to a decline in domestic breast implant sales. This decrease was partly offset by growth in international sales and growth of the Company's reconstruction products across all markets. Reconstruction products include tissue expanders sold worldwide and NeoFormTM dermis tissue sold domestically. Total net sales for the second quarter of fiscal year 2009 included foreign exchange benefits of $1.0 million.
Gross Profit and Gross Margin
Gross profit for the second quarter of fiscal year 2009 was $58.9 million, or 69.7% of net sales, compared to $59.9 million, or 70.2% of net sales, in the second quarter of fiscal year 2008. The second quarter of last year included a $1.4 million charge for the "step-up" valuation of inventory associated with the Perouse acquisition. Excluding this charge, gross margin on a non-GAAP basis was 71.8% for the second quarter last year. The current year gross margin percentage has been negatively impacted by lower production volumes, manufacturing support costs and inventory reserves.
Selling, General and Administrative Expenses
Selling, general and administrative expenses (SG&A) in the second quarter of fiscal year 2009 were $38.0 million, or 45.0% of sales, compared to $33.4 million, or 39.1% of sales, in the second quarter of fiscal year 2008. The increase over last year primarily relates to higher costs associated with domestic and international marketing infrastructure and programs, partly offset by lower incentive compensation. The second quarter of fiscal year 2009 includes approximately $1.5 million in expenses related to the evaluation of a potential strategic opportunity. Excluding this $1.5 million, SG&A would have been 43.2% of sales in the second quarter of fiscal year 2009.
Research and Development Expenses
Research and development expenses in the second quarter of fiscal year 2009 were $10.9 million, a decrease of $1.3 million, or 11%, from the second quarter of fiscal year 2008. Spending reductions were primarily associated with MemoryGel post-approval enrollment and dermal filler development costs.
• Dermal Fillers
Mentor anticipates approval for Prevelle® Shape (formerly Puragen™ Plus) in the fourth quarter of fiscal year 2009. The clinical study for Prevelle® Volume (formerly DGE) is complete, with anticipated FDA submission in the fourth quarter of fiscal year 2009 and anticipated approval in the second quarter of fiscal year 2010.
• Botulinum Toxin Type A Program
All studies to support the cosmetic indication for glabellar rhytides, or frown lines, have been completed or are in the follow-up phase. Data analysis is now complete for the first of the three cosmetic pivotal trials and the study report has been submitted to the FDA. The results are encouraging with all study endpoints achieving high statistical significance.
With the Phase I study now complete for cervical dystonia/spasmodic torticollis indication, next phase clinical trials are now in the design and planning stage.
• MemoryGel™ silicone gel-filled breast implants Post-Approval Study (PAS)
As of October 30, 2008, Mentor has completed patient enrollment in the PAS. The Company has exceeded the target of 42,900 patients required by the PMA post-approval conditions.
Net Interest Income (Expense) and Other Income (Expense)
Net interest income (expense) was $(0.8) million and $(0.1) million in the second quarter of fiscal year 2009 and 2008, respectively. The decrease in interest income was due to lower cash and marketable securities balances as a result of repurchases of shares of the Company's common stock during fiscal 2008. The increase in Other Income (Expense) over the prior year mainly relates to favorable currency gains associated with the strengthening of the US Dollar.
Effective Tax Rate
Mentor's effective tax rate for continuing operations in the second quarter of fiscal year 2009 was 5.2% compared to 26.0% in the second quarter of fiscal year 2008. This decrease was primarily due to a $2.3 million tax benefit related to a restructuring of the Company's foreign operations.
Earnings Per Share
Excluding the results of discontinued operations, Mentor reported diluted earnings per share from continuing operations of $0.28 in the second quarter of fiscal year 2009, compared to $0.27 reported in the second quarter of fiscal year 2008. Excluding the impact of the $1.5 million in expenses related to the evaluation of a strategic opportunity and the $2.3 million tax benefit noted above, non-GAAP diluted earnings per share from continuing operations were $0.24 for the second quarter of fiscal year 2009. Excluding the $1.4 million charge for the "step-up" valuation of inventory associated with the Perouse acquisition, diluted earnings per share from continuing operations on a non-GAAP basis were $0.29 in the second quarter of fiscal 2008.
Balance Sheet (comparison to prior year-end)
Mentor ended the second quarter of fiscal year 2009 with $97.8 million in cash and marketable securities, compared to $109.9 million at the end of fiscal year 2008.
Fiscal Year 2009 Guidance
Mentor is updating its full fiscal year 2009 guidance as follows:
Net sales in the range of $355 million to $370 million; and
Diluted GAAP earnings per share in the range of $1.10 to $1.20.
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Conference Call
Mentor Corporation has scheduled a conference call today regarding this announcement. Those interested in listening to a recording of the call may dial (800) 839-3011 at 6:00 p.m. ET today until Midnight ET, Wednesday, November 12, 2008. You may also listen to the live web cast at 5:00 p.m. ET today or the archived call at www.mentorcorp.com under Investor Relations and "Audio Archives."
Safe Harbor Statement
This release contains forward-looking statements including, but not limited to, statements relating to Mentor's current and anticipated product development activity and expenses, and market acceptance of those products; the approval with conditions by the FDA of the Company's MemoryGel silicone gel breast implants premarket approval application (PMA); the continuation of clinical studies with respect to the Company's botulinum toxin Type A program; the development program for a portfolio of hyaluronic acid-based dermal fillers; domestic and international marketing programs; and fiscal year 2009 guidance with respect to net sales and diluted earnings per share. These forward-looking statements and the assumptions about the factors that influence them are based on the limited information available to Mentor at this time.
A number of factors could cause actual results to differ from the forward-looking statements including, but not limited to, U.S. market acceptance and adoption of MemoryGel breast implants; patient follow-up in the FDA-mandated post-approval study for MemoryGel breast implants; the amount and timing of expenses to be incurred with respect to the MemoryGel breast implants post-approval study; the ability of the Company to move forward in a timely and cost-effective manner with the PMAs for its hyaluronic acid-based dermal fillers; the timing and outcome of the PMAs submitted to the FDA; results and expenses of clinical development programs; the timing and outcome of various clinical trials undertaken by the Company; the impact on revenue and expenses of delays in FDA approval and other governmental agencies for the approval and sale of any of the Company's products; seasonal and economic factors (U.S. and internationally) which affect demand for aesthetic products and procedures; the ability of the Company to identify and implement other product opportunities in the global aesthetics marketplace; competitive pressures and other factors such as the introduction or regulatory approval of new products by competitors and pricing of competing products and the resulting effects on sales and pricing of the Company's products; disruptions or other problems with sources of supply; significant product liability or other claims arising from the sales or uses of products; negative publicity concerning the safety of the Company's products; difficulties with new product development, introduction and market acceptance; changes in the mix of the Company's products sold; patent and intellectual property conflicts; product recalls; FDA or other governmental agency rejection of new or existing products; changes in Medicare, Medicaid or third-party reimbursement policies; changes in government regulation; use of hazardous or environmentally sensitive materials; and other events.
Important factors that may cause such a difference for Mentor include, but are not limited to, those factors described in the Company's Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, recent Current Reports on Form 8‑K and other Securities and Exchange Commission filings. These filings discuss the foregoing risks as well as other important risk factors that could contribute to such differences or otherwise affect the Company's business, results of operations and financial condition. The Company undertakes no obligation to revise or update publicly any forward-looking statement for any reason.
Note Regarding Use of Non-GAAP Financial Measures
The financial measures of non-GAAP gross margin, non-GAAP SG&A expense, and diluted non-GAAP earnings per share from continuing operations included in this press release are different from those otherwise presented under GAAP as these non-GAAP measures exclude certain items. In the second quarter of fiscal year 2009, these items included $1.5 million in expenses related to the evaluation of a potential strategic opportunity and a $2.3 million tax benefit related to a restructuring of the Company's foreign operations. Neither of these items were recorded in the second quarter of fiscal 2008. The second quarter of fiscal year 2008 included expense recorded as cost of sales as a result of the "step-up" valuation of inventory related to the Perouse acquisition. This item was not recorded in the second quarter of fiscal 2009. Mentor has provided these measures in addition to GAAP financial results because management believes these non-GAAP measures provide a consistent basis for comparison between quarters and of profitability rates that are not influenced by these charges and therefore are helpful in understanding
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Mentor's underlying operating results. These non-GAAP measures are some of the primary measures Mentor's management uses for planning and forecasting. These measures are not in accordance with, or an alternative to, GAAP and these non-GAAP measures may not be comparable to information provided by other companies. Reconciliations of GAAP to non-GAAP results are presented at the end of this press release.
About Mentor
Mentor is a leading supplier of medical products for the global aesthetic market. The Company develops, manufactures, and markets innovative, science-based products for surgical and non-surgical medical procedures that allow patients to retain a more youthful appearance and improve their quality of life. The Company's website is www.mentorcorp.com.
Contact:
Mentor Corporation
Michael O'Neill
Vice President and Chief Financial Officer
(805) 879-6082
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MENTOR CORPORATION |
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CONSOLIDATED STATEMENTS OF INCOME |
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(unaudited, in thousands, except per share data) |
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| Three Months Ended | Six Months Ended | ||||||||
September 26, | September 28, | Percent | September 26, | September 28, | Percent | |||||
2008 | 2007 | Change | 2008 | 2007 | Change | |||||
Net sales | $ | 84,488 | $ | 85,390 | (1)% | $ | 190,024 | $ | 180,954 | 5% |
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Cost of sales | 25,615 | 25,480 | (1)% | 55,010 | 46,704 | (18)% | ||||
Gross profit | 58,873 | 59,910 | (2)% | 135,014 | 134,250 | 1% | ||||
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Selling, general and administrative | 38,033 | 33,397 | (14)% | 81,000 | 69,442 | (17)% | ||||
Research and development | 10,871 | 12,203 | 11% | 21,853 | 22,517 | 3% | ||||
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48,904 | 45,600 | (7)% | 102,853 | 91,959 | (12)% | |||||
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Operating income from continuing operations | 9,969 | 14,310 | (30)% | 32,161 | 42,291 | (24)% | ||||
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Interest expense | (1,327) | (1,447) | 8% | (2,797) | (2,911) | 4% | ||||
Interest income | 513 | 1,373 | (63)% | 1,107 | 6,147 | (82)% | ||||
Other income (expense), net | 1,539 | (675) | 328% | 1,573 | (969) | 262% | ||||
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Income before income taxes | 10,694 | 13,561 | (21)% | 32,044 | 44,558 | (28)% | ||||
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Income taxes | 554 | 3,532 | 84% | 6,802 | 12,785 | 47% | ||||
Net income from continuing operations | 10,140 | 10,029 | 1% | 25,242 | 31,773 | (21)% | ||||
Loss from discontinued operations (net of | (334) | (111) | (201)% | (719) | (117) | (515)% | ||||
Net income | $ | 9,806 | $ | 9,918 | (1)% | $ | 24,523 | $ | 31,656 | (23)% |
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Basic earnings (loss) per share: |
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Earnings per share from continuing operations | $ | 0.30 | $ | 0.29 | 3% | $ | 0.75 | $ | 0.85 | (12)% |
Loss per share from discontinued operations | (0.01) | - | - | (0.02) | - | - | ||||
Basic earnings per share | $ | 0.29 | $ | 0.29 | 0% | $ | 0.73 | $ | 0.85 | (14)% |
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Diluted earnings (loss) per share: |
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Earnings per share from continuing operations | $ | 0.28 | $ | 0.27 | 4% | $ | 0.68 | $ | 0.76 | (11)% |
Loss per share from discontinued operations | (0.01) | - | - | (0.02) | - | - | ||||
Diluted earnings per share | $ | 0.27 | $ | 0.26 | 4% | $ | 0.66 | $ | 0.76 | (13)% |
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Dividends per share | $ | 0.20 | $ | 0.20 | 0% | $ | 0.40 | $ | 0.40 | 0% |
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Weighted average shares outstanding |
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Basic | 33,520 | 34,044 | 2% | 33,496 | 37,237 | 10% | ||||
Diluted | 39,311 | 40,683 | 3% | 39,294 | 43,803 | 10% |
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MENTOR CORPORATION | |||||||||||||
CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
(unaudited, in thousands, except per share data) | |||||||||||||
Three Months Ended | Three Months Ended | ||||||||||||
September 26, 2008 |
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| Non-GAAP |
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GAAP | Adjustments | Adjusted | GAAP | Adjustments | Adjusted | ||||||||
Net sales | $ | 84,488 | $ | 84,488 | $ | 85,390 | $ | 85,390 | |||||
Cost of sales | 25,615 | 25,615 | 25,480 | (1,375) | 24,105 | ||||||||
Gross profit | 58,873 | - | 58,873 | 59,910 | 1,375 | 61,285 | |||||||
Selling, general and administrative | 38,033 | (1,526) | 36,507 | 33,397 | 33,397 | ||||||||
Research and development | 10,871 | 10,871 | 12,203 | 12,203 | |||||||||
48,904 | (1,526) | 47,378 | 45,600 | - | 45,600 | ||||||||
Operating income from continuing operations | 9,969 | 1,526 | 11,495 | 14,310 | 1,375 | 15,685 | |||||||
Interest expense | (1,327) | (1,327) | (1,447) | (1,447) | |||||||||
Interest income | 513 | 513 | 1,373 | 1,373 | |||||||||
Other income (expense), net | 1,539 | 1,539 | (675) | (675) | |||||||||
Income before income taxes | 10,694 | 1,526 | 12,220 | 13,561 | 1,375 | 14,936 | |||||||
Income taxes | 554 | 2,909 | 3,463 | 3,532 | 454 | 3,986 | |||||||
Net income from continuing operations | 10,140 | (1,383) | 8,757 | 10,029 | 921 | 10,950 | |||||||
Loss from discontinued operations | (334) | (334) | (111) | (111) | |||||||||
Net income | $ | 9,806 | $ | (1,383) | $ | 8,423 | $ | 9,918 | $ | 921 | $ | 10,839 | |
Basic earnings (loss) per share | |||||||||||||
Earnings per share from continuing operations | $ | 0.30 | $ | (0.04) | $ | 0.26 | $ | 0.29 | $ | 0.03 | $ | 0.32 | |
Loss per share from discontinued operations | (0.01) | - | (0.01) | - | - | - | |||||||
Basic earnings per share | $ | 0.29 | $ | (0.04) | $ | 0.25 | $ | 0.29 | $ | 0.03 | $ | 0.32 | |
Diluted earnings (loss) per share | |||||||||||||
Earnings per share from continuing operations | $ | 0.28 | $ | (0.04) | $ | 0.24 | $ | 0.27 | $ | 0.02 | $ | 0.29 | |
Loss per share from discontinued operations | (0.01) | - | (0.01) | - | - | - | |||||||
Diluted earnings per share | $ | 0.27 | $ | (0.04) | $ | 0.23 | $ | 0.26 | $ | 0.02 | $ | 0.29 | |
Dividends per share | $ | 0.20 | - | $ | 0.20 | $ | 0.20 | - | $ | 0.20 | |||
Weighted average shares outstanding | |||||||||||||
Basic | 33,520 | 33,520 | 33,520 | 34,044 | 34,044 | 34,044 | |||||||
Diluted | 39,311 | 39,311 | 39,311 | 40,683 | 40,683 | 40,683 |
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MENTOR CORPORATION | ||||||||||
SALES BY PRINCIPAL PRODUCT LINE | ||||||||||
(unaudited, in thousands) | ||||||||||
| Three Months Ended | Six Months Ended | ||||||||
September 26, | September 28, | Percent | September 26, | September 28, | Percent | |||||
2008 | 2007 | Change | 2008 | 2007 | Change | |||||
Breast aesthetics | $ | 74,411 | $ | 75,674 | (2)% | $ | 168,343 | $ | 160,933 | 5% |
Body contouring | 3,389 | 3,661 | (7)% | 7,134 | 7,690 | (7)% | ||||
Other aesthetics, including facial | 6,688 | 6,055 | 10% | 14,547 | 12,331 | 18% | ||||
Net sales | $ | 84,488 | $ | 85,390 | (1)% | $ | 190,024 | $ | 180,954 | 5% |
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MENTOR CORPORATION | ||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||
(unaudited, in thousands) |
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Assets | September 26, 2008 | March 31, 2008 | ||
Current assets: |
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Cash and marketable securities | $ | 97,812 | $ | 109,915 |
Accounts receivable, net | 77,111 | 82,060 | ||
Inventories | 52,011 | 49,940 | ||
Deferred income taxes | 29,389 | 29,040 | ||
Prepaid expenses and other | 26,895 | 19,307 | ||
Total current assets | 283,218 | 290,262 | ||
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Property, plant and equipment, net | 68,804 | 58,252 | ||
Intangible assets, net | 36,430 | 36,336 | ||
Goodwill, net | 47,099 | 49,707 | ||
Other assets | 6,670 | 6,022 | ||
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Total assets | $ | 442,221 | $ | 440,579 |
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Liabilities and shareholders' equity |
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Current liabilities | $ | 114,112 | $ | 118,389 |
Long-term liabilities | 28,371 | 29,156 | ||
Convertible subordinated notes | 150,000 | 150,000 | ||
Shareholders' equity | 149,738 | 143,034 | ||
Total liabilities and shareholders' equity | $ | 442,221 | $ | 440,579 |
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MENTOR CORPORATION | |||||||||||||||||
CALCULATION OF DILUTED EARNINGS PER SHARE | |||||||||||||||||
(Unaudited, in thousands, except per share data) | |||||||||||||||||
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Fiscal Year 2008 | Fiscal Year 2009 | ||||||||||||||||
| Q1 | Q2 | Q3 | Q4 | FY | Q1 | Q2 | FY | |||||||||
Net income as reported from continuing | $ | 21,744 | $ | 10,029 | $ | 12,112 | $ | 11,066 | $ | 54,951 | $ | 15,102 | $ | 10,140 | $ | 25,242 | |
Add back after tax interest expense on | 802 | 802 | 802 | 802 | 3,208 | 802 | 802 | 1,604 | |||||||||
Numerator for diluted EPS calculation | $ | 22,546 | $ | 10,831 | $ | 12,914 | $ | 11,868 | $ | 58,159 | $ | 15,904 | $ | 10,942 | $ | 26,846 | |
Numerator for diluted EPS calculation | $ | (6) | $ | (111) | $ | (170) | $ | 8,751 | $ | 8,464 | $ | (385) | $ | (334) | $ | (719) | |
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Weighted average shares outstanding | 40,465 | 34,044 | 33,602 | 33,443 | 35,375 | 33,472 | 33,520 | 33,496 | |||||||||
Shares issuable through exercise of | 678 | 659 | 502 | 312 | 538 | 271 | 222 | 247 | |||||||||
Shares issuable through conversion of | 5,165 | 5,170 | 5,177 | 5,187 | 5,175 | 5,196 | 5,207 | 5,201 | |||||||||
Additional dilution for unvested | 285 | 292 | 308 | 299 | 296 | 338 | 362 | 350 | |||||||||
Shares issuable through exercise of | 357 | 518 | 259 | - | 65 | - | - | - | |||||||||
Denominator for diluted EPS from | 46,950 | 40,683 | 39,848 | 39,241 | 41,449 | 39,277 | 39,311 | 39,294 | |||||||||
Denominator for diluted EPS from | 40,465 | 34,044 | 33,602 | 39,241 | 41,449 | 33,472 | 33,520 | 33,496 | |||||||||
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Diluted earnings per share from | $ | 0.48 | $ | 0.27 | $ | 0.32 | $ | 0.30 | $ | 1.40 | $ | 0.40 | $ | 0.28 | $ | 0.68 | |
Diluted earnings (loss) per share from | $ | - | $ | - | $ | (0.01) | $ | 0.22 | $ | 0.20 | $ | (0.01) | $ | (0.01) | $ | (0.02) |
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