-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, URPQIebYurlouGfPgjsSGC92AMn+V23ZXe91uQsqrTCWygvc3X0QyAiiq3SRl2FG 2LNlJSmddTWPP6JKmiBOIw== 0000912057-97-018091.txt : 19970520 0000912057-97-018091.hdr.sgml : 19970520 ACCESSION NUMBER: 0000912057-97-018091 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CANTERBURY PARK HOLDING CORP CENTRAL INDEX KEY: 0000926761 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-RACING, INCLUDING TRACK OPERATION [7948] IRS NUMBER: 411775532 STATE OF INCORPORATION: MN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-24554 FILM NUMBER: 97609174 BUSINESS ADDRESS: STREET 1: 1100 CANTERBURY DR CITY: SHAKOPEE STATE: MN ZIP: 55379 BUSINESS PHONE: 6124457223 10QSB 1 10QSB U.S. SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) XXX QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - --- OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997. TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT - --- OF 1934 FOR THE TRANSITION PERIOD FROM ________ TO__________. Commission File Number 0-24554 Canterbury Park Holding Corporation --------------------------------------------------------------- (Exact name of business issuer as specified in its charter) Minnesota 41-1775532 - ------------------------------- ------------------------ (State or other jurisdiction of (IRS Employer incorporation or organization) Identification No.) 1100 Canterbury Road, Shakopee, Minnesota 55379 - ----------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (612) 445-7223 ----------------------------- (Issuer's Telephone Number) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such report), and (2) has been subject to such filing requirements for the past 90 days. YES X NO --- --- The Company had 2,972,382 shares of common stock, $.01 par value per share, outstanding as of May 9, 1997. Canterbury Park Holding Corporation INDEX Page ---- PART 1. FINANCIAL INFORMATION Item 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of March 31, 1997 and December 31, 1996................... 3 Consolidated Statements of Operations for the periods ended March 31, 1997 and 1996.......................... 4 Consolidated Statements of Cash Flows for the periods ended March 31, 1997 and 1996.......................... 5 Notes to Consolidated Financial Statements............. 6 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS................... 7 PART II. OTHER INFORMATION................................................ 11 Signatures....................................................... 11 Exhibit 1 EARNINGS PER SHARE SCHEDULE............................ 12 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS MARCH 31, 1997 AND DECEMBER 31, 1996 (UNAUDITED) - -------------------------------------------------------------------------------- MARCH 31, DECEMBER 31, 1997 1996 ASSETS CURRENT ASSETS Cash $ 292,356 $ 296,671 Accounts receivable, net of allowance for uncollectible accounts 326,026 186,834 Inventory 78,376 72,731 Deposits 31,553 20,000 Prepaid expenses 91,377 81,367 ---------- ---------- Total current assets 819,688 657,603 PROPERTY AND EQUIPMENT, net of accumulated depreciation of $2,178,870 and $1,981,468, respectively 8,456,540 8,631,754 INTANGIBLE ASSETS, net of accumulated amortization of $11,059 and $9,925, respectively 11,641 12,775 ---------- ---------- $9,287,869 $9,302,132 ---------- ---------- ---------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Accounts payable $ 708,958 $ 623,930 Accrued wages and payroll taxes 135,723 161,272 Accrued interest 110,204 149,387 Advance from shareholder (Note 2) 839,071 1,609,754 Accrued property taxes 467,547 370,916 Payable to horsepersons 673,515 560,555 ---------- ---------- Total current liabilities 2,935,018 3,475,814 COMMITMENTS AND CONTINGENCIES (Note 3) STOCKHOLDERS' EQUITY Common stock, $.01 par value, 10,000,000 shares authorized, 2,967,382 and 2,961,382, respectively, shares issued and outstanding 29,674 29,614 Additional paid-in capital 7,890,304 7,879,551 Accumulated deficit (1,567,127) (2,082,847) ---------- ---------- Total stockholders' equity 6,352,851 5,826,318 ---------- ---------- $9,287,869 $9,302,132 ---------- ---------- ---------- ---------- See notes to consolidated financial statements. 3 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF OPERATIONS PERIODS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) - ------------------------------------------------------------------------------- THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 1997 MARCH 31, 1996 OPERATING REVENUES: Pari-mutuel $ 2,746,646 $ 2,634,991 Concessions 401,650 380,568 Admissions and parking 59,301 65,639 Programs and racing forms 131,089 138,105 Other operating revenue 61,881 71,430 ------------ ------------ 3,400,567 3,290,733 OPERATING EXPENSES: Pari-mutuel expenses Statutory purses 250,467 183,402 Host track fees 457,735 459,932 Pari-mutuel taxes 11,736 158,184 Minnesota breeders' fund 142,566 140,270 Salaries and benefits 709,467 594,847 Cost of concession sales 118,127 92,526 Cost of publication sales 152,794 165,200 Depreciation and amortization 208,060 196,366 Utilities 157,893 148,569 Repairs, maintenance and supplies 98,170 52,384 Property taxes 96,631 95,985 Advertising and marketing 94,641 87,484 Other operating expenses 345,247 331,470 ------------ ------------ 2,843,534 2,706,619 NONOPERATING (EXPENSES) REVENUES: Interest expense (41,316) (62,253) Other, net 3 920 ------------ ------------ (41,313) (61,333) ------------ ------------ INCOME BEFORE INCOME TAX EXPENSE 515,720 522,781 INCOME TAX EXPENSE (Note 1) ------------ ------------ NET INCOME $ 515,720 $ 522,781 ------------ ------------ ------------ ------------ NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE (Note 1) $ .13 $ .15 ------------ ------------ ------------ ------------ WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 5,076,975 4,733,796 ------------ ------------ ------------ ------------ See notes to consolidated financial statements. 4 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY CONSOLIDATED STATEMENTS OF CASH FLOWS PERIODS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) - ------------------------------------------------------------------------------- THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, 1997 MARCH 31, 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 515,720 $ 522,781 Adjustments to reconcile net income to net cash provided by operations: Depreciation and amortization 208,060 196,366 (Increase) decrease in accounts receivable (139,192) 108,161 (Increase) decrease in other current assets (27,208) 15,535 Increase in accounts payable and accrued expenses 59,479 6,410 (Decrease) increase in accrued interest (39,183) 51,960 Increase in accrued property taxes 96,631 95,985 Increase (decrease) in payable to horsepersons 112,960 (83,845) ---------- ---------- Net cash provided by operations 787,267 913,353 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment (62,903) (13,222) Proceeds from sale of property and equipment, net 31,191 22,500 ---------- ---------- Net cash (used in) provided by investing activities (31,712) 9,278 CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuance of common stock 10,813 Payment on advance from shareholder, net (770,683) (828,007) ---------- ---------- Net cash used in financing activities (759,870) (828,007) NET INCREASE (DECREASE) IN CASH (4,315) 94,624 CASH AT BEGINNING OF PERIOD 296,671 388,571 ---------- ---------- CASH AT END OF PERIOD $ 292,356 $ 483,195 ---------- ---------- ---------- ---------- See notes to consolidated financial statements. 5 CANTERBURY PARK HOLDING CORPORATION AND SUBSIDIARY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS PERIODS ENDED MARCH 31, 1997 AND 1996 (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The summary of significant accounting policies is included in the notes to consolidated financial statements in the 1996 Annual Report on Form 10-KSB. INCOME TAXES - Income tax expense is computed by applying the estimated annual effective tax rate to the year-to-date income. For the periods ending March 31,1997 and 1996, income tax expense of approximately $220,000 and $224,000, respectively, is offset by a reduction in the valuation allowance recorded on the deferred tax asset related to the Company's net operating loss carryforward. EARNINGS PER SHARE - Earnings per share for the three months ended March 31, 1997 and 1996 are calculated using the modified treasury stock method. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128 (SFAS 128) "Earnings Per Share," which is effective for periods ending after December 15, 1997. SFAS 128 revises the standards for computing and presenting earnings per share (EPS). The Company will continue to apply APB Opinion No. 15 to compute the EPS through the effective date. EPS for the first quarter of 1997 computed under SFAS 128 would have resulted in basic and diluted earnings per share of $0.17. UNAUDITED FINANCIAL STATEMENTS - The consolidated balance sheet as of March 31, 1997, the consolidated statements of operations for the three months ended March 31, 1997 and 1996, the consolidated statements of cash flows for the three months ended March 31, 1997 and 1996, and the related information contained in these notes have been prepared by management without audit. In the opinion of management, all accruals (consisting of normal recurring accruals) which are necessary for a fair presentation of financial position and results of operations for such periods have been made. Results for an interim period should not be considered as indicative of results for a full year. 2. RELATED-PARTY TRANSACTIONS At March 31, 1997, the Company had a $3,000,000 line of credit arrangement with the Company's majority shareholder, of which $839,071 was outstanding. The interest rate for borrowings under the line of credit was prime plus 2%. The line of credit may be canceled on 90 days notice. Management believes that funds available under this line of credit, or any other line of credit which replaces it, along with funds generated from simulcast operations, will be sufficient to satisfy its liquidity and capital resource requirements during 1997. If the line of credit is not replaced, the Company's majority shareholder has agreed not to terminate the line of credit prior to March 31, 1998. 3. CONTINGENCIES In accordance with an Earn Out Note, given to the prior owner of the racetrack as part of the consideration paid by the Company to acquire the racetrack, if (i) off-track betting becomes legally permissible in the State of Minnesota and (ii) the Company begins to conduct off-track betting with respect to or in connection with its operations, the Company will be required to pay to the IMR Fund, L.P. the greater of $700,000 per operating year, as defined, or 20% of the net pretax profit, as defined, for each of five operating years. At the date (if any) that these two conditions are met, the five minimum payments will be discounted back to their present value and the sum of those discounted payments will be recorded as an increase to the purchase price. The purchase price will be further increased if payments become due under the 20% of Net Pre-Tax Profit calculation. The first payment is to be made 90 days after the end of the third operating year in which off-track betting is conducted by the Company. Remaining payments would be made within 90 days of the end of each of the next four operating years. 6 MANAGEMENT'S DISCUSSION AND ANALYSIS GENERAL Canterbury Park Holding Corporation (the "Company") owns and operates Canterbury Park (the "Racetrack"), the only pari-mutuel horse racing facility in the State of Minnesota. The Company's revenues for the period from January 1, 1997 to March 31, 1997 and January 1, 1996 to March 31, 1996 were derived primarily from pari-mutuel take-out on races simulcast to Canterbury Park from racetracks throughout the country. In 1997 the Company intends to conduct approximately 324 simulcast racing days. In addition, the Company plans to conduct 56 days of live racing at the Racetrack from May 17, 1997 to September 1, 1997. During live race meets, the Company earns pari-mutuel take-out on live Thoroughbred, Quarter Horse and Harness races at the Racetrack. The Company earns additional pari-mutuel revenue from broadcasting its live races to out-of-state racetracks around the country. In addition to pari-mutuel revenues, the Company generates revenues from admissions, parking, publication sales, concessions, advertising, special events and other sources. On April 11, 1996, legislation became effective in Minnesota which, beginning July 1, 1996, exempted the first $12 million of pari-mutuel take-out from the 6% pari-mutuel tax. The legislation is effective until July 1, 1999 and benefits the horsepersons' purse fund as well as the Company during a statutorily mandated twelve-month period beginning July 1 and ending the following June 30. Effective July 1, 1996, pari-mutuel taxes have been estimated for the 12-month period from July 1, 1996 through June 30, 1997 and an estimated annual effective tax rate has been applied to pari-mutuel take-out generated since July 1, 1996. The legislation referred to above also provides that winning pari-mutuel tickets which are not cashed within one year of the end of the respective race meet will become the property of the Company. The legislation is effective through December 31, 1999 after which uncashed winning tickets will again be remitted to the State of Minnesota. The Company is recording revenue associated with the uncashed winning tickets at the time, based on historical experience, that management can reasonably estimate the amount of additional winning tickets from a race meet that will be presented for payment. RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996: During the first three months of 1997 the Company conducted 84 simulcast racing days compared to 77 days in 1996. Total wagering handle for the quarters ended March 31, 1997 and 1996 was $13,327,955 and $13,290,549, respectively. Total attendance for the periods ending March 31, 1997 and 1996 was 41,122 and 40,069, respectively, resulting in an average of 490 and 520 patrons per simulcast day, respectively, and per-patron wagering of $324 and $331, respectively. During February and March of 1997, the Company conducted simulcast racing on seven days per week, compared to six days per week during the first quarter of 1996. This change was in response to patron requests to provide simulcast racing on Tuesdays. While attendance on Tuesdays met management's expectations, average attendance on these Tuesdays was lower than the average attendance on all other days, thus lowering the average per-day attendance and handle while total attendance and handle increased. 7 Pari-mutuel revenue (gross wagering after deducting statutorily mandated amounts from the handle to be paid to winning bettors or "take-out") for the periods ending March 31, 1997 and 1996 was $2,672,324 and $2,634,991, respectively. Total pari-mutuel expenses including state pari-mutuel taxes, contributions to the Minnesota Breeders' Fund, statutory purses and host fees were $862,504 and $941,788 for the periods ending March 31, 1997 and 1996, respectively. Pari-mutuel tax expense for the quarter was $11,726, or 93% lower during the three months ended March 31, 1997 compared to the three months ended March 31, 1996 due primarily to the legislation described above. The Company has applied an estimated annual effective tax rate to the pari-mutuel take-out generated from July 1, 1996 through March 31, 1997. Statutory purse expense increased $67,065, or 36.6%, compared to 1996. This increase is primarily attributable to the legislation exempting the first $12 million of take-out from the State of Minnesota pari-mutuel tax. The effect of this legislation during the first three months of 1997 was to increase the Racetrack's net pari-mutuel revenue, thereby increasing the amounts paid to the horsepersons for purses during these non-racing season months. Concession revenues were approximately $21,000, or 5.5%, higher than the comparable period in 1996 due partly to higher attendance during the first quarter of 1997 compared to 1996, and partly to the increasing popularity of special events hosted by the facility. During the first three months of 1997 Canterbury Park hosted two major competitive snowmobile races, the All Canada show, the Minnesota Resort and Camping Show, a trade show and private parties. Comparatively, the first quarter of 1996 included two major snowmobile races but also a three-day arts and crafts fair held on March 29-31, 1996. In 1997, this extremely popular and well-attended arts and crafts fair was held on April 4-7 and the rental and concessions revenues will consequently be reflected in the second quarter financial results. Operating expense levels (excluding pari-mutuel expenses) increased by approximately $216,000, or 12.25%, compared to 1996. During the first quarter of 1996, prior to the enactment of the legislation described previously, the Company had just ended its second straight fiscal year with cumulative losses of $2,153,996. During the first quarter of 1996, the Company mandated extremely tight expense controls with spending occurring for only the most necessary of services, repairs, maintenance and supplies. In addition, after the 1995 live meet, certain reductions and consolidations of full-time staff were enacted to reduce wage expenses for the Company. Subsequent to those reductions, hiring was kept to a minimum. With the enactment of the legislation described above, and in view of the support of the State of Minnesota and the general public, the Company was able to refocus its goals from short-term to long-term. This emphasis on long-range planning necessitated a comprehensive review of major systems throughout the facility and of personnel levels, to ascertain that the Company's long-term goals could be met. Long-term goals of the Company include maximizing the potential of the facility with special events, increasing public awareness and support for horse racing, hosting annual live race meets, and providing high quality services and information to patrons. This change in emphasis is reflected primarily in increases in salaries and benefits, repairs, maintenance and supplies, marketing and advertising for Tele-racing and other expense categories. Net income was $515,720 for the three months ended March 31, 1997 compared to $522,781 in 1996. There is no estimated income tax expense for the three months ended 8 March 31, 1997 because management does not anticipate net income for the year ended December 31, 1997 to exceed the net operating loss carryforwards of $1,649,000 available at December 31, 1996. In addition, due to the seasonality of purse expense and to the additional expenses that will be incurred in connection with live racing, the Company does not expect to generate operating profits during the second and third quarters of fiscal year 1997. LIQUIDITY AND CAPITAL RESOURCES: During the period January 1, 1997 through March 31, 1997, cash provided by operating activities was $787,267, which resulted principally from net income of $515,720 and depreciation and amortization of $208,060. Cash used in financing activities during the first three months of 1997 consists primarily of payments totaling $770,683 reducing the Company's line of credit with Mr. Sampson. Net cash used in investing activities for the first quarter of 1997 results primarily from improvements to the facility of approximately $62,903, partially offset by proceeds received upon the sale of excess video equipment of $31,191. The Company is required by statute to segregate a portion of funds received from wagering on simulcast and live horse races for future payment as purses for live horse races at the Racetrack or other uses of Minnesota's horsepersons' association. Pursuant to an agreement with the MHBPA, during the three months ended March 31, 1997 and 1996, the Company has transferred into a trust account or paid directly to the MHBPA approximately $200,000 and $250,000 respectively. At March 31, 1997, the Company had an additional liability to MHBPA of approximately $664,000. This liability will be paid with interest in 1997 in accordance with the agreement. The Company believes that the funds to be generated from operations together with funds available under its $3,000,000 line of credit with Mr. Sampson will be sufficient to satisfy its liquidity and capital resource requirements for the next twelve months. The Company anticipates that it may pay down a portion of the borrowings under the line of credit with funds generated from operations and borrow additional amounts under the line of credit as funds are needed for working capital purposes. The Company is also attempting to obtain a credit facility from a traditional lender to replace the line of credit with Mr. Sampson. Mr. Sampson has advised the Company that if it is unable to obtain a credit facility from a traditional lender, then he will keep his line of credit in place until March 31, 1998. As of May 9, 1997, borrowings under the line of credit were $517,762. OPERATING PLAN: The Company plans a live race meet in 1997 which will consist of a 26-day mixed meet of Thoroughbred and Quarter Horse racing, a 27-day Thoroughbred-only meet, and three days of live harness racing over Labor Day weekend. The Company's ability to operate profitably in 1997 will largely depend on its ability to maintain levels of attendance and wagering handle for live and simulcast racing at levels similar to 1996. The Company will also need to maintain operating expenses at levels similar to 1996. In addition, the Company is emphasizing the expansion of special events in order to maximize 9 the potential of the facility year-round. Legislation which became effective in 1996 relating to the pari-mutuel tax and uncashed winning tickets will supplement cash flows in 1997, the first full fiscal year that the legislation will be in effect. Legislation was recently introduced at the 1997 Minnesota Legislative Session which would permit the Minnesota State Lottery to operate up to 1,500 video lottery terminals at the Canterbury Park Racetrack. The proposal is primarily structured to provide a source of financing for a new outdoor baseball stadium for the Minnesota Twins. Recent public polling has shown that public support is strong but the legislative session is nearing its conclusion and the issue is not likely to be resolved until the 1998 legislative session. No assurance can be given that the proposed legislation will be enacted and, if enacted, the Company is unable to provide any estimates as to the financial impact this legislation would have on the Company. FACTORS AFFECTING FUTURE PERFORMANCE: From time to time, in reports filed with the Securities and Exchange Commission, in press releases, and in other communications to shareholders or the investing public, the Company may comment on anticipated future financial performance. Such forward-looking statements, including statements contained in this Report on Form 10-QSB, are subject to risks and uncertainties which may adversely affect future financial performance, including, but not limited to, fluctuations in attendance at the Racetrack, changes in the level of wagering by patrons, legislative and regulatory changes, the impact of wagering products introduced by competitors, higher than expected expenses, and other risks applicable to the horse racing industry generally. 10 PART II OTHER INFORMATION Item 1. LEGAL PROCEEDINGS None Item 2. CHANGES IN SECURITIES None Item 3. DEFAULTS UPON SENIOR SECURITIES None Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None Item 5. OTHER INFORMATION None Item 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 1 EARNINGS PER SHARE SCHEDULE (b) Reports on Form 8-K None SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly cause this report to be signed on its behalf by the undersigned thereunto duly authorized. Canterbury Park Holding Corporation Dated: May 9, 1997 /s/ Randall D. Sampson ----------------------------------------------- Randall D. Sampson, President, Chief Executive Officer and Treasurer 11 EXHIBIT 1. EARNINGS PER SHARE SCHEDULE THREE MONTHS THREE MONTHS ENDED ENDED MARCH 31, MARCH 31, 1997 1996 Calculation of net income under the modified treasury stock method: Primary Net Income $515,720 $522,781 Assumed interest expense reduction 41,316 62,253 Assumed interest income increase 92,899 101,785 ----------- ----------- $649,935 $686,819 ----------- ----------- ----------- ----------- Calculation of weighted average number of common and common equivalent shares outstanding under the modified treasury stock method: Weighted average shares outstanding 2,962,526 2,939,271 Common stock equivalents 2,114,449 1,794,525 ----------- ----------- 5,076,975 4,733,796 ----------- ----------- ----------- ----------- Net income per common and common equivalent share $ 0.13 $ 0.15 ----------- ----------- ----------- ----------- 12 EX-27 2 FDS
5 3-MOS DEC-31-1997 JAN-01-1997 MAR-31-1997 292,356 0 340,628 14,602 78,376 819,688 10,635,410 2,178,870 9,278,869 2,935,018 0 0 0 29,674 6,323,177 9,287,869 532,739 3,400,567 270,921 2,843,534 41,313 7,500 41,316 515,720 0 515,720 0 0 0 515,720 .13 0
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