SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Form 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from__________________to__________________
Commission file number 1-7160
COACHMEN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-1101097
(State or other jurisdiction of (I.R.S.Employer
incorporation or organization) Identification number)
601 EAST BEARDSLEY AVENUE, ELKHART, INDIANA 46514
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 219-262-0123
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date:
At July 31, 1997:
Common Shares, without par value 17,230,063 shares outstanding
with an equivalent number of common share purchase rights.
<PAGE>
COACHMEN INDUSTRIES, INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Financial Statements:
Condensed Consolidated Balance Sheets-
June 30, 1997 and December 31, 1996.....................3-4
Condensed Consolidated Statements of Income-
Three and Six Months Ended June 30, 1997 and 1996....... 5
Condensed Consolidated Statements of Cash Flows-
Six Months Ended June 30, 1997 and 1996................. 6
Notes to Condensed Consolidated Financial Statements....7-8
Management's Discussion and Analysis of Financial
Condition and Results of Operations........................9-13
PART II. OTHER INFORMATION.................................... 14
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES..................................................... 15
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31,
1997 1996
ASSETS
CURRENT ASSETS
Cash and temporary cash investments $ 81,334,653 $ 66,448,901
Certificate of deposit - 500,000
Trade receivables, less allowance for
doubtful receivables 1997 - $1,069,000
and 1996 - $919,000 24,786,655 20,575,048
Other receivables 1,976,953 2,103,168
Refundable income taxes 365,000 1,865,000
Inventories 64,579,745 68,311,038
Prepaid expenses and other 1,861,568 930,244
Deferred income taxes 3,180,000 3,180,000
Total current assets 178,084,574 163,913,399
PROPERTY AND EQUIPMENT, at cost
Land and improvements 8,557,144 6,640,920
Buildings and improvements 36,432,897 33,516,736
Machinery and equipment 15,890,644 14,563,955
Transportation equipment 10,245,975 9,619,667
Office furniture and fixtures 5,080,984 4,830,577
Total property and equipment, at cost 76,207,644 69,171,855
Less, Accumulated depreciation 32,101,810 29,314,413
Net property and equipment 44,105,834 39,857,442
OTHER ASSETS
Real estate held for sale 4,902,105 4,902,105
Rental properties 2,469,938 2,530,608
Intangibles, less accumulated amortization
1997 - $448,463 and 1996 - $380,363 4,995,813 5,063,913
Deferred income taxes 600,000 600,000
Other 10,728,098 10,580,105
Total other assets 23,695,954 23,676,731
TOTAL ASSETS $245,886,362 $227,447,572
The accompanying notes are part of the condensed consolidated
financial statements.
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<PAGE>
COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS (CONT'D)
JUNE 30, DECEMBER 31,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of long-term debt $ 2,267,161 $ 2,278,519
Accounts payable, trade 26,045,341 14,532,948
Accrued wages, salaries and commissions 3,885,868 4,410,925
Accrued dealer incentives 1,300,919 3,064,437
Accrued warranty expense 5,109,486 4,460,137
Accrued income taxes 167,551 628,051
Accrued insurance 4,885,984 3,697,709
Other accrued liabilities 5,762,637 5,449,270
Total current liabilities 49,424,947 38,521,996
LONG-TERM DEBT 13,261,271 14,841,262
OTHER 6,578,929 6,428,373
Total liabilities 69,265,147 59,791,631
SHAREHOLDERS' EQUITY
Common shares, without par value: authorized
60,000,000 shares; issued 1997 - 20,610,789
shares and 1996 - 20,527,644 shares 86,863,284 86,248,042
Additional paid-in capital 2,348,469 2,313,743
Retained earnings 103,795,678 94,670,593
193,007,431 183,232,378
Less, Cost of shares reacquired for the
treasury 1997 - 3,388,427 shares and
1996 - 3,340,996 shares 16,386,216 15,576,437
Total shareholders' equity 176,621,215 167,655,941
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $245,886,362 $227,447,572
The accompanying notes are part of the condensed consolidated
financial statements.
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
1997 1996 1997 1996
Net sales $169,368,233 $166,715,051 $327,474,044 $315,355,074
Cost of goods sold 146,128,835 141,753,074 283,899,275 271,241,577
Gross profit 23,239,398 24,961,977 43,574,769 44,113,497
Operating expenses:
Selling and delivery 7,680,881 6,412,132 16,011,760 13,973,320
General and administrative 6,522,400 5,664,130 12,530,299 11,263,756
Total operating expenses 14,203,281 12,076,262 28,542,059 25,237,076
Operating income 9,036,117 12,885,715 15,032,710 18,876,421
Nonoperating income (expense):
Interest expense (438,806) (400,946) (795,062) (841,035)
Interest income 1,148,209 370,628 2,140,673 604,942
Gain on sale of
properties, net 123,836 729,857 133,292 726,569
Other income, net 97,273 107,469 191,050 448,799
Total nonoperating income 930,512 807,008 1,669,953 939,275
Income before income taxes
and cumulative effect of
accounting change 9,966,629 13,692,723 16,702,663 19,815,696
Income taxes 3,537,000 5,007,000 5,854,000 7,173,000
Income before cumulative
effect of accounting
change 6,429,629 8,685,723 10,848,663 12,642,696
Cumulative effect of accounting
change for Company-owned life
insurance policies - - - 2,293,983
Net income $ 6,429,629 $ 8,685,723 $ 10,848,663 $ 14,936,679
Earnings per common share:
Income before cumulative
effect of accounting
change $ .37 $ .58 $ .63 $ .84
Net income $ .37 $ .58 $ .63 $ 1.00
Weighted average number of
common shares outstanding 17,242,047 15,035,436 17,222,144 15,007,966
Cash dividends per
common share $ .05 $ .05 $ .10 $ .085
The accompanying notes are part of the condensed consolidated
financial statements.
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COACHMEN INDUSTRIES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS
ENDED MARCH 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES
Net cash provided by operating
activities $ 24,255,801 $ 15,181,045
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Sale of property and equipment, real
estate held for sale and rental
properties 537,476 1,157,040
Certificate of deposit 500,000 -
Acquisitions of property and equipment (7,049,867) (7,222,704)
Proceeds from life insurance death benefit - 171,770
Other 169,527 680,056
Net cash (used in) investing
activities (5,842,864) (5,213,838)
CASH FLOWS FROM FINANCING ACTIVITIES
Payments of long-term debt (1,591,349) (1,591,134)
Proceeds from sale of common shares 615,242 708,054
Purchases of common shares for treasury (827,500) -
Cash dividends paid (1,723,578) (1,276,458)
Net cash (used in) financing activities (3,527,185) (2,159,538)
Increase in cash and temporary
cash investments 14,885,752 7,807,669
CASH AND TEMPORARY CASH INVESTMENTS
Beginning of period 66,448,901 17,020,744
End of period $ 81,334,653 $ 24,828,413
The accompanying notes are part of the condensed consolidated
financial statements.
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COACHMEN INDUSTRIES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated balance sheet data as of December 31, 1996 was derived
from audited financial statements, but does not include all disclosures
required by generally accepted accounting principles.
2. In the opinion of management, the information furnished herein includes
all adjustments of a normal and recurring nature necessary to
reflect a fair statement of the interim periods reported. The
results of operations for the three and six months ended June 30, 1997
are not necessarily indicative of the results to be expected for the
full year.
3. Inventories consist of the following:
June 30, December 31,
1997 1996
Raw material $ 23,639,036 $ 20,951,906
Work-in-process 8,155,490 6,467,066
Finished goods 32,785,219 40,892,066
Total $ 64,579,745 $ 68,311,038
4. Effective January 1, 1996, the Company changed its method of accounting
for its investment in life insurance contracts which were purchased to
fund liabilities under deferred compensation agreements with executives
and other key employees. Prior to January 1, 1996, the Company accounted
for its investments in life insurance contracts by capitalizing premiums
under the ratable charge method (a method of accounting which was
acceptable when the insurance contracts were originally acquired and
continued to be acceptable for contracts acquired prior to November 14,
1985). Effective January 1, 1996, the Company changed to the cash
surrender value method of accounting which is the preferred method under
generally accepted accounting principles, as this method more accurately
reflects the economic value of the contracts. On that date, the Company
recorded a $2.3 million noncash credit for the cumulative effect of the
accounting change.
5. On July 17, 1996, the Board of Directors declared a two-for-one stock
split of the Company's common shares, which was paid on August 28, 1996
to shareholders of record on August 7, 1996. All share and per share
data appearing in the condensed consolidated financial statements and
notes thereto have been retroactively restated to reflect this stock split.
6. The Company was contingently liable at June 30, 1997 to banks and other
financial institutions on repurchase agreements in connection with
financing provided by such institutions to most of the Company's
independent dealers in connection with their purchase of the Company's
recreational vehicle products. These agreements provide for the Company
to repurchase its products from the
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financing institution in the event that they have repossessed them upon a
dealer's default. The risk of loss resulting from these agreements is
spread over the Company's numerous dealers and is further reduced by the
resale value of the products repurchased. The Company is involved in
various legal proceedings which are ordinary litigations incidental to
the industry and which are covered in whole or in part by insurance.
Management believes that any liability which may result from these
proceedings will not be significant.
7. On May 1, 1997 the Board of Directors authorized the repurchase of up to
one million shares of the Company's outstanding common stock. Shares may
be purchased from time to time, depending on market conditions and other
factors, on the open market or through privately negotiated transactions
at the then prevailing market prices. During the second quarter, the
Company repurchased 50,000 shares of its common stock on the open market.
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COACHMEN INDUSTRIES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain significant
factors which have affected the Company's financial condition, results of
operations and cash flows during the periods included in the accompanying
condensed consolidated financial statements.
A summary of the changes in the principal items included in the condensed
consolidated statements of income is shown below.
Comparison of
Three Months Six Months
Ended June 30, 1997 and 1996
Increases (Decreases)
Net sales $ 2,653,182 1.6% $ 12,118,970 3.8%
Cost of goods sold 4,375,761 3.1 12,657,698 4.7
Selling and
delivery expenses 1,268,749 19.8 2,038,440 14.6
General and
administrative expenses 858,270 15.2 1,266,543 11.2
Interest expense 37,860 9.4 (45,973) (5.5)
Interest income 777,581 209.8 1,535,731 253.9
Gain on sale of
properties, net (606,021)(83.0) (593,277)(81.7)
Other income, net (10,196) (9.5) (257,749)(57.4)
Income before income taxes and
cumulative effect of
accounting change (3,726,094)(27.2) (3,113,033)(15.7)
Income taxes (1,470,000)(29.4) (1,319,000)(18.4)
Cumulative effect of accounting
change for Company-owned
life insurance policies - - (2,293,983) *
Net income (2,256,094)(26.0) (4,088,016)(27.4)
* Not meaningful
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NET SALES
Consolidated net sales for the quarter ended June 30, 1997 were $169,368,233
an increase of 1.6% over the $166,715,051 reported for the corresponding
quarter last year. Net sales for the six months were $327,474,044
representing an increase of 3.8% over the $315,355,074 reported for the same
period in 1996. The Company's vehicle segment, which includes the parts and
supply group of companies, experienced net sales decreases of 1.1% and .1%
for the quarter and six months, respectively. Recreational vehicle ("RV")
sales were hampered during both periods by difficult and sometimes severe
weather in several areas of the country. The Company's housing segment had a
net sales increase for the 1997 quarter of 16.6% and 29.5% for the six months
as a result of continued strong demand for the Company's modular housing
products and increased capacity. While the RV segment was down slightly in
the number of units sold and average sales price of units sold compared to
the first six months of 1996, the housing segment was significantly up in the
number of units sold and also up in the average sales price per unit.
COST OF GOODS SOLD
Cost of goods sold increased 3.1% or $4,375,761 for the three months and 4.7%
or $12,657,698 for the six months ended June 30, 1997. The increase for both
periods is higher than the increase in net sales. Gross margins were
negatively affected in the RV group by the additional capacity added
primarily for the production of larger travel trailers and fifth wheels.
This increase in capacity was not utilized to the extent anticipated as net
sales, although a record, were below planned levels. The housing segment
continued experiencing lower gross margins attributable to the expansion in
North Carolina and the costs associated with implementing a seven day work
week at the Indiana plant. Production volume is increasing in these two
plants and gross margins are expected to improve.
OPERATING EXPENSES
As a percentage of net sales, operating expenses, which include selling,
delivery, general and administrative expenses, were 8.4% and 7.2% for the
1997 and 1996 quarter, respectively and 8.7% and 8.0% for the comparable
six-month periods. Selling expenses, as a percentage of net sales, increased
by .6% for the quarter and .5% for the six months, primarily due to increased
dealer volume sales incentives attributable to significantly increased sales
in the housing group. As a percentage of net sales, delivery expenses
remained relatively unchanged. General and administrative expenses were 3.9%
of net sales for the second quarter compared to 3.4% for the 1996
corresponding quarter and 3.8% of net sales for the six-month period compared
to 3.6% for 1996.
INTEREST EXPENSE
Interest expense was $438,806 and $795,062 for the three and six-month
periods in 1997 compared to $400,946 and $841,035 in the same periods last
year. The six-month decrease was primarily the result of a larger
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increase in cash surrender value for the Company's investment in life
insurance contracts in 1997 than in 1996. These life insurance contracts
were purchased to fund obligations under deferred compensation agreements
with executives and other key employees. The interest costs associated with
deferred compensation obligations and with the borrowings against the cash
value of the insurance policies are partially offset by the increases in cash
surrender values.
INTEREST INCOME
Interest income increased $777,581 and $1,535,731 respectively, for the 1997
three and six-month periods. This is indicative of the amounts of cash and
temporary cash investments in 1997 in comparison to 1996. Increases in cash
and temporary cash investments were primarily generated from operating
activities throughout 1997 and the sale of 2,070,000 shares of common stock
in November 1996.
GAIN ON THE SALE OF PROPERTIES, NET
The net gain on the sale of properties for the second quarter of 1997 was
$606,021 lower and for the six months was $593,277 lower than in the same
periods in 1996. These variances are the result of the amount of gain
recognized upon the disposition of various small properties. Assets are
continually analyzed and every effort is made to sell or dispose of
properties that are determined to be unproductive.
OTHER INCOME, NET
Other income, net, represents income of $97,273 for the second quarter and
$191,050 for the six months compared to income of $107,469 and $448,799 for
the 1996 second quarter and six months, respectively. The most significant
variance for the six-months was due to the receipt of deferred compensation
related life insurance proceeds during the 1996 period.
INCOME TAXES
For the second quarter ended June 30, 1997, the effective tax rate was 35.5%
and a year-to-date rate of 35.0% compared with a 1996 second quarter and
year-to-date effective tax rate of 36.6% and 36.2%, respectively. The Company's
effective tax rate fluctuates based upon the states where sales incur, with
the level of export sales and also with the amount of nontaxable income
realized in each period.
CUMULATIVE EFFECT OF ACCOUNTING CHANGE FOR
COMPANY-OWNED LIFE INSURANCE POLICIES
See Note 4 of Notes to Condensed Consolidated Financial Statements
on page 7 herein.
FORWARD LOOKING STATEMENTS
Some matters set forth herein are forward looking statements that
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are dependent on certain risks and uncertainties including such factors,
among others, as the availability of gasoline, which can impact sales of
recreational vehicles; availability of chassis, which are used in the
production of many of the Company's recreational vehicle products; interest
rates, which affect the affordability of the Company's products; and also on
the state of the recreational vehicle and modular housing industries in the
United States. Other factors affecting forward looking statements include
competition in these industries and the Company's ability to maintain or
increase gross margins which are critical to profitability whether there are
or are not increased sales. At times, the Company's actual performance
differs materially from its projections and estimates regarding the economy,
the recreational vehicle and housing industries and other key performance
indicators. The Company's actual results could vary significantly from the
performance projected in the forward looking statements.
OTHER MATTERS
In February 1997, Statement of Financial Accounting Standards No., 128,
"Earnings Per Share" ("SFAS No. 128") was issued by the Financial Accounting
Standards Board. The Company is required to adopt this pronouncement in its
financial statements for the year ending December 31, 1997. SFAS No. 128
will require the Company to make a dual presentation of basic and diluted
earnings per share on the face of its consolidated statements of income. The
Company does not anticipate SFAS No. 128 will have a significant impact on
the Company's consolidated statements of income. In June 1997, the FASB
issued SFAS No. 130, "Reporting Comprehensive Income" and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" both of
which the Company will be required to adopt in its financial statements for
the year ending December 31, 1998. SFAS No. 130 will require the Company to
report comprehensive income in its financial statements. Comprehensive
income includes net income and certain transactions that are reported as a
separate component of shareholders' equity. SFAS No. 131 specifies revised
guidelines for determining operating segments and the type and level of
information to be disclosed. The Company has not yet determined what changes
in its disclosures, if any, will be required by SFAS No. 131.
LIQUIDITY AND CAPITAL RESOURCES
The Company generally relies on funds from operations as its primary source
of liquidity. In addition, the Company maintains an unsecured committed line
of credit, which totaled $30 million at June 30, 1997, to meet its seasonal
working capital needs. At June 30, 1997, there were no borrowings against
this line of credit. For the six months, the major source of cash was from
operating activities. The significant items in this category were net income,
depreciation and an increase in trade accounts payable. Increases in
receivables were substantially offset by decreases in inventories. Investing
activities reflected a net cash use of $5,842,864. The principal use of cash
in investing activities was the acquisition of property and equipment. This
investment included the acquisition of a new recreational vehicle
manufacturing facility in Indiana. The negative cash flow from financing
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activities was primarily for cash dividends and repayment of long-term debt.
At June 30, 1997, working capital increased to $128.7 million from $125.4
million at December 31, 1996. The $14.2 million increase in current assets
at June 30, 1997 versus December 31, 1996, was primarily due to increased
cash and receivables. The $10.9 million increase in current liabilities was
substantially due to increased trade accounts payable and accrued insurance.
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PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
a) The annual meeting of the shareholders of Coachmen Industries,
Inc. was held on May 1, 1997.
b) The following nominees were elected Directors for a one-year
term:
Thomas H. Corson
Keith D. Corson
Gary L. Groom
Claire C. Skinner
Philip C. Barker
R. James Harring
William P. Johnson
Philip G. Lux
William G. Milliken
c) The tabulation of votes for each Director nominee was as
follows:
For Withheld
Election of Directors:
Thomas H. Corson 15,184,995 283,538
Keith D. Corson 15,184,095 284,438
Gary L. Groom 15,190,095 278,438
Claire C. Skinner 15,184,545 283,988
Philip C. Barker 15,188,950 279,583
R. James Harring 15,187,050 281,433
William P. Johnson 15,189,895 278,638
Philip G. Lux 15,189,450 279,083
William G. Milliken 15,184,545 282,474
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
COACHMEN INDUSTRIES, INC.
(Registrant)
S/S: GARY L. GROOM
Date: August 11, 1997 _______________________________
Gary L. Groom, Executive Vice
President - Finance (Principal
Financial Officer)
S/S: WILLIAM M. ANGELO
Date: August 11, 1997 _______________________________
William M. Angelo, Corporate
Controller (Principal Accounting
Officer)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated statement of income and consolidated balance sheet and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000021212
<NAME> COACHMEN INDUSTRIES, INC.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 81,335
<SECURITIES> 0
<RECEIVABLES> 28,198
<ALLOWANCES> 1,069
<INVENTORY> 64,580
<CURRENT-ASSETS> 178,085
<PP&E> 76,208
<DEPRECIATION> 32,102
<TOTAL-ASSETS> 245,886
<CURRENT-LIABILITIES> 49,425
<BONDS> 13,261
<COMMON> 70,477
0
0
<OTHER-SE> 103,796
<TOTAL-LIABILITY-AND-EQUITY> 245,886
<SALES> 327,474
<TOTAL-REVENUES> 327,474
<CGS> 283,899
<TOTAL-COSTS> 312,441
<OTHER-EXPENSES> 1,670
<LOSS-PROVISION> 175
<INTEREST-EXPENSE> 795
<INCOME-PRETAX> 16,703
<INCOME-TAX> 5,854
<INCOME-CONTINUING> 10,849
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<NET-INCOME> 10,849
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
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