Star Group, L.P. (the "Company" or "Star") (NYSE:SGU), a home
energy distributor and services provider, today filed its fiscal
2017 annual report on Form 10-K with the SEC and announced
financial results for the fiscal 2017 fourth quarter and year ended
September 30, 2017.
Three Months Ended September 30, 2017
Compared to Three Months Ended September 30, 2016
For the fiscal 2017 fourth quarter, Star
reported a 12.0 percent increase in total revenue to $181.6
million, compared with $162.1 million in the prior-year period. The
revenue growth reflects higher selling prices – in response to an
increase in wholesale product costs of 24.4 cents per gallon –
greater service and installation sales, and an increase in home
heating oil and propane volume sold. Home heating oil and propane
volume sold rose by 2.0 million gallons, or 9.7 percent, to 22.6
million gallons largely due to the additional sales volume provided
from acquisitions. Home heating oil and propane margins declined by
approximately 4.3 cents per gallon in the base business (excluding
acquisitions) compared to the fourth quarter of fiscal 2016 largely
due to lower per gallon margins on sales to price-protected
customers which were impacted, in part, by the increase in
wholesale product costs.
During the fiscal 2017 fourth quarter, Star's
net loss decreased by $1.3 million to a loss of $17.7 million, as
the favorable impact of a non-cash change in the fair value of
derivative instruments of $11.1 million more than offset $7.8
million of higher delivery and branch expense, including an
increase in insurance costs of $2.9 million compared to the prior
year period.
The Company's Adjusted EBITDA loss for the
fiscal 2017 fourth quarter increased by $8.0 million, to a loss of
$29.2 million, primarily due to higher operating expenses in the
base business of $6.1 million, an Adjusted EBITDA loss of $0.7
million attributable to acquisitions, and the impact from lower per
gallon margins of $1.0 million. Operating expenses in the base
business rose due to higher insurance costs of $2.7 million and an
increase in spending attributable to additional staffing in the
areas of information technology, customer service, operations
management, and sales and marketing. Legal and professional fees
were also $0.7 million higher in the fourth quarter of 2017 versus
the prior-year period, primarily related to expenses associated
with the Company’s election to be treated as a corporation, instead
of a partnership, for federal income tax purposes (commonly
referred to as a “check-the-box” election) and amendments to the
Company’s partnership agreement to give effect to such change in
income tax classification, including expenses associated with
holding a special unitholder meeting to seek unitholder approval of
the check-the-box election and corresponding amendments to the
Company’s partnership agreement. Adjusted EBITDA is a non-GAAP
financial measure (see reconciliation below) that should not be
considered as an alternative to net income (as an indicator of
operating performance) or as an alternative to cash flow (as a
measure of liquidity or ability to service debt obligations) but
provides additional information for evaluating the Company’s
ability to pay distributions.
Fiscal Year Ended September 30, 2017
Compared to Fiscal Year Ended September 30, 2016
Star reported a 14.0 percent increase in total
revenue to $1.3 billion, versus $1.2 billion in the prior-year
period, due to higher selling prices – in response to higher
wholesale product costs of 26.4 cents per gallon – an increase in
total volume sold of 4.1 percent, and higher air conditioning
installation and service sales.
Home heating oil and propane volume sold
increased by 14.4 million gallons, or 4.8 percent, to 316.9 million
gallons, as the additional sales volume provided from acquisitions
and colder weather was only partially offset by net customer
attrition and other factors. Temperatures in Star's geographic
areas of operation for fiscal 2017 were 7.0 percent colder than
last year’s comparable period but 12.4 percent warmer than normal
as reported by the National Oceanic and Atmospheric
Administration.
Net income decreased by $18.0 million, or 40.1
percent, to $26.9 million as the positive impact from colder
temperatures and acquisitions was more than offset by an
unfavorable, non-cash change in the fair value of derivative
instruments of $16.0 million, the absence of a $12.5 million credit
as was recorded in fiscal 2016 under the Company’s weather hedge
contract, and an increase in spending largely due to additional
staffing in the areas of information technology, customer service,
operations management, and sales and marketing and other expense
increases.
Adjusted EBITDA decreased by $14.7 million, or
15.4 percent, to $81.0 million as the impact of higher home heating
oil and propane volume sold and slightly better home heating oil
and propane per gallon margins were more than offset by the absence
of a $12.5 million credit as was recorded in fiscal 2016 under
the Company’s weather hedge contract, lower service and
installations gross profit, and additional costs related to
staffing in the areas of information technology, customer service,
operations management, and sales and marketing and other expense
increases.
"We accomplished a good deal this fiscal year,
and not just operationally," said Steven J. Goldman, Star Group’s
Chief Executive Officer. "Total heating oil and propane volume sold
rose to 317 million gallons, boosted by slightly colder weather,
while we invested in critical areas such as information technology,
service, and sales to help increase client retention as well as
support our organic growth initiatives. Net customer attrition
improved to 1.5 percent from 5.1 percent in fiscal 2016 –
reflecting both higher gains as well as lower losses. I’m really
proud of this track record as we head into the busy winter
season.
"In addition, we recently announced that our
unitholders approved the Company’s check-the-box election at a
special unitholder meeting held on October 25, 2017. This new
income tax classification will allow the Company to save on
administrative expense going forward while potentially broadening
its base of interested institutional investors. We also changed our
name to Star Group, L.P. to better reflect the full scope of
products and services we offer. Overall, we believe these
developments position us well for the future – one in which Star
provides a growing complement of home comfort solutions to its
customers across the U.S."
EBITDA and Adjusted EBITDA (Non-GAAP
Financial Measures)EBITDA (Earnings from continuing
operations before net interest expense, income taxes, depreciation
and amortization) and Adjusted EBITDA (Earnings from continuing
operations before net interest expense, income taxes, depreciation
and amortization, (increase) decrease in the fair value of
derivatives, multiemployer pension plan withdrawal charge, gain or
loss on debt redemption, goodwill impairment, and other non-cash
and non-operating charges) are non-GAAP financial measures that are
used as supplemental financial measures by management and external
users of our financial statements, such as investors, commercial
banks and research analysts, to assess:
- our compliance with certain financial covenants included in our
debt agreements;
- our financial performance without regard to financing methods,
capital structure, income taxes or historical cost basis;
- our operating performance and return on invested capital
compared to those of other companies in the retail distribution of
refined petroleum products, without regard to financing methods and
capital structure;
- our ability to generate cash sufficient to pay interest on our
indebtedness and to make distributions to our partners; and
- the viability of acquisitions and capital expenditure projects
and the overall rates of return of alternative investment
opportunities.
The method of calculating Adjusted EBITDA may
not be consistent with that of other companies, and EBITDA and
Adjusted EBITDA both have limitations as analytical tools and so
should not be viewed in isolation but in conjunction with
measurements that are computed in accordance with GAAP. Some of the
limitations of EBITDA and Adjusted EBITDA are:
- EBITDA and Adjusted EBITDA do not reflect our cash used for
capital expenditures;
- Although depreciation and amortization are non-cash charges,
the assets being depreciated or amortized often will have to be
replaced and EBITDA and Adjusted EBITDA do not reflect the cash
requirements for such replacements;
- EBITDA and Adjusted EBITDA do not reflect changes in, or cash
requirements for, our working capital requirements;
- EBITDA and Adjusted EBITDA do not reflect the cash necessary to
make payments of interest or principal on our indebtedness;
and
- EBITDA and Adjusted EBITDA do not reflect the cash required to
pay taxes.
REMINDER: Star’s management
will host a conference call and webcast tomorrow, December 7, 2017,
at 11:00 a.m. Eastern Time. The conference call dial-in number is
1-877-327-7688 or 1-412-317-5112 (for international callers). A
webcast is also available at
http://www.stargrouplp.com/events-and-presentations.
About Star Group, L.P.Star
Group, L.P. is a full service provider specializing in the sale of
home heating products and services to residential and commercial
customers to heat their homes and buildings. The Company also sells
and services heating and air conditioning equipment to its home
heating oil and propane customers and, to a lesser extent, provides
these offerings to customers outside of its home heating oil and
propane customer base. In certain of Star's marketing areas, the
Company provides home security and plumbing services primarily to
its home heating oil and propane customer base. Star also sells
diesel fuel, gasoline and home heating oil on a delivery only
basis. Star is the nation's largest retail distributor of home
heating oil based upon sales volume. Including its propane
locations, Star serves customers in the more northern and eastern
states within the Northeast, Central and Southeast U.S. regions.
Additional information is available by obtaining the Company's SEC
filings at www.sec.gov and by visiting Star's website at
www.stargrouplp.com.
Forward Looking InformationThis
news release includes "forward-looking statements" which represent
the Company’s expectations or beliefs concerning future events that
involve risks and uncertainties, including those associated with
the effect of weather conditions on our financial performance; the
price and supply of the products we sell; the consumption patterns
of our customers; our ability to obtain satisfactory gross profit
margins; our ability to obtain new customers and retain existing
customers; our ability to make strategic acquisitions; the impact
of litigation; our ability to contract for our current and future
supply needs; natural gas conversions; future union relations and
the outcome of current and future union negotiations; the impact of
future governmental regulations, including environmental, health
and safety regulations; the ability to attract and retain
employees; customer creditworthiness; counterparty
creditworthiness; marketing plans; general economic conditions and
new technology. All statements other than statements of historical
facts included in this news release are forward-looking statements.
Without limiting the foregoing, the words "believe," "anticipate,"
"plan," "expect," "seek," "estimate" and similar expressions are
intended to identify forward-looking statements. Although the
Company believes that the expectations reflected in such
forward-looking statements are reasonable, it can give no assurance
that such expectations will prove to be correct and actual results
may differ materially from those projected as a result of certain
risks and uncertainties. These risks and uncertainties include, but
are not limited to, those set forth under the heading "Risk
Factors" and "Business Strategy" in our Annual Report on Form 10-K
(the "Form 10-K") for the fiscal year ended September 30, 2017.
Important factors that could cause actual results to differ
materially from the Company’s expectations ("Cautionary
Statements") are disclosed in this news release and in the Form
10-K. All subsequent written and oral forward-looking statements
attributable to the Company or persons acting on its behalf are
expressly qualified in their entirety by the Cautionary Statements.
Unless otherwise required by law, the Company undertakes no
obligation to update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise
after the date of this news release.
(financials follow)
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STAR GROUP, L.P. AND SUBSIDIARIES |
CONSOLIDATED BALANCE SHEETS |
|
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|
|
|
|
|
|
|
September 30, |
|
September 30, |
(in thousands) |
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash and
cash equivalents |
|
$ |
52,458 |
|
|
$ |
139,188 |
|
Receivables, net of allowance of $5,540 and $4,419,
respectively |
|
|
96,603 |
|
|
|
78,650 |
|
Inventories |
|
|
59,596 |
|
|
|
45,894 |
|
Fair
asset value of derivative instruments |
|
|
5,932 |
|
|
|
3,987 |
|
Prepaid
expenses and other current assets |
|
|
26,652 |
|
|
|
27,139 |
|
Total
current assets |
|
|
241,241 |
|
|
|
294,858 |
|
|
|
|
|
|
Property
and equipment, net |
|
|
79,673 |
|
|
|
70,410 |
|
Goodwill |
|
|
225,915 |
|
|
|
212,760 |
|
Intangibles, net |
|
|
105,218 |
|
|
|
97,656 |
|
Deferred
tax assets, net |
|
|
- |
|
|
|
5,353 |
|
Restricted
cash |
|
|
250 |
|
|
|
- |
|
Investments |
|
|
11,777 |
|
|
|
- |
|
Deferred
charges and other assets, net |
|
|
9,843 |
|
|
|
11,074 |
|
Total
assets |
|
$ |
673,917 |
|
|
$ |
692,111 |
|
|
|
|
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LIABILITIES AND PARTNERS’ CAPITAL |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts
payable |
|
$ |
26,739 |
|
|
$ |
25,690 |
|
Fair
liability value of derivative instruments |
|
|
289 |
|
|
|
2,285 |
|
Current
maturities of long-term debt |
|
|
10,000 |
|
|
|
16,200 |
|
Accrued
expenses and other current liabilities |
|
|
108,449 |
|
|
|
103,855 |
|
Unearned
service contract revenue |
|
|
60,133 |
|
|
|
56,971 |
|
Customer
credit balances |
|
|
66,723 |
|
|
|
84,921 |
|
Total
current liabilities |
|
|
272,333 |
|
|
|
289,922 |
|
|
|
|
|
|
Long-term
debt |
|
|
65,717 |
|
|
|
75,441 |
|
Deferred
tax liabilities, net |
|
|
6,140 |
|
|
|
- |
|
Other
long-term liabilities |
|
|
23,659 |
|
|
|
25,255 |
|
|
|
|
|
|
Partners’ capital |
|
|
|
|
Common
unitholders |
|
|
325,762 |
|
|
|
322,771 |
|
General
partner |
|
|
(929 |
) |
|
|
(516 |
) |
Accumulated other comprehensive loss, net of taxes |
|
|
(18,765 |
) |
|
|
(20,762 |
) |
Total
partners’ capital |
|
|
306,068 |
|
|
|
301,493 |
|
Total
liabilities and partners’ capital |
|
$ |
673,917 |
|
|
$ |
692,111 |
|
|
|
|
|
|
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STAR GROUP, L.P. AND
SUBSIDIARIES |
CONSOLIDATED STATEMENTS OF
OPERATIONS |
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Three Months Ended |
|
Twelve Months Ended |
|
|
|
September 30, |
|
September 30, |
|
(in thousands, except per unit
data) |
|
|
2017 |
|
|
|
2016 |
|
|
|
2017 |
|
|
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2016 |
|
|
|
|
(unaudited) |
|
(unaudited) |
|
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Sales: |
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|
|
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|
|
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|
Product |
|
$ |
114,769 |
|
|
$ |
97,495 |
|
|
$ |
1,065,076 |
|
|
$ |
911,014 |
|
|
Installations and services |
|
|
66,815 |
|
|
|
64,569 |
|
|
|
258,479 |
|
|
|
250,324 |
|
|
Total
sales |
|
|
181,584 |
|
|
|
162,064 |
|
|
|
1,323,555 |
|
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|
1,161,338 |
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Cost and
expenses: |
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|
|
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|
Cost of
product |
|
|
82,584 |
|
|
|
66,297 |
|
|
|
675,386 |
|
|
|
539,831 |
|
|
Cost of
installations and services |
|
|
56,533 |
|
|
|
53,968 |
|
|
|
239,670 |
|
|
|
229,010 |
|
|
(Increase) decrease in the fair value of derivative
instruments |
|
|
(9,219 |
) |
|
|
1,854 |
|
|
|
(2,193 |
) |
|
|
(18,217 |
) |
|
Delivery
and branch expenses |
|
|
65,547 |
|
|
|
57,738 |
|
|
|
306,534 |
|
|
|
276,493 |
|
|
Depreciation and amortization expenses |
|
|
7,177 |
|
|
|
6,571 |
|
|
|
27,882 |
|
|
|
26,530 |
|
|
General
and administrative expenses |
|
|
6,854 |
|
|
|
5,841 |
|
|
|
24,998 |
|
|
|
23,366 |
|
|
Finance
charge income |
|
|
(766 |
) |
|
|
(599 |
) |
|
|
(4,054 |
) |
|
|
(3,079 |
) |
|
Operating
income (loss) |
|
|
(27,126 |
) |
|
|
(29,606 |
) |
|
|
55,332 |
|
|
|
87,404 |
|
|
Interest
expense, net |
|
|
(1,657 |
) |
|
|
(2,004 |
) |
|
|
(6,775 |
) |
|
|
(7,485 |
) |
|
Amortization of debt issuance costs |
|
|
(309 |
) |
|
|
(313 |
) |
|
|
(1,281 |
) |
|
|
(1,247 |
) |
|
Income
(loss) before income taxes |
|
|
(29,092 |
) |
|
|
(31,923 |
) |
|
|
47,276 |
|
|
|
78,672 |
|
|
Income tax
expense (benefit) |
|
|
(11,345 |
) |
|
|
(12,828 |
) |
|
|
20,376 |
|
|
|
33,738 |
|
|
Net
income (loss) |
|
$ |
(17,747 |
) |
|
$ |
(19,095 |
) |
|
$ |
26,900 |
|
|
$ |
44,934 |
|
|
General
Partner’s interest in net income (loss) |
|
|
(103 |
) |
|
|
(110 |
) |
|
|
156 |
|
|
|
252 |
|
|
Limited
Partners’ interest in net income (loss) |
|
$ |
(17,644 |
) |
|
$ |
(18,985 |
) |
|
$ |
26,744 |
|
|
$ |
44,682 |
|
|
|
|
|
|
|
|
|
|
|
|
Per unit
data (Basic and Diluted): |
|
|
|
|
|
|
|
|
|
Net
income (loss) available to limited partners |
|
$ |
(0.32 |
) |
|
$ |
(0.34 |
) |
|
$ |
0.48 |
|
|
$ |
0.78 |
|
|
Dilutive
impact of theoretical distribution of earnings under FASB ASC
260-10-45-60 |
|
|
- |
|
|
|
- |
|
|
|
0.02 |
|
|
|
0.08 |
|
|
Limited
Partner’s interest in net income (loss) under FASB ASC
260-10-45-60 |
|
$ |
(0.32 |
) |
|
$ |
(0.34 |
) |
|
$ |
0.46 |
|
|
$ |
0.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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Weighted
average number of Limited Partner units outstanding (Basic and
Diluted) |
|
|
55,888 |
|
|
|
56,382 |
|
|
|
55,888 |
|
|
|
57,022 |
|
|
|
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SUPPLEMENTAL INFORMATION |
STAR GROUP, L.P. AND
SUBSIDIARIESRECONCILIATION OF EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
|
|
Three Months Ended September
30, |
(in thousands) |
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
Net
loss |
|
$ |
(17,747 |
) |
|
$ |
(19,095 |
) |
Plus: |
|
|
|
|
Income
tax benefit |
|
|
(11,345 |
) |
|
|
(12,828 |
) |
Amortization of debt
issuance cost |
|
|
309 |
|
|
|
313 |
|
Interest expense,
net |
|
|
1,657 |
|
|
|
2,004 |
|
Depreciation and
amortization |
|
|
7,177 |
|
|
|
6,571 |
|
EBITDA |
|
|
(19,949 |
) |
|
|
(23,035 |
) |
|
|
|
|
|
(Increase) / decrease in the fair value of derivative
instruments |
|
(9,219 |
) |
|
|
1,854 |
|
Adjusted
EBITDA |
|
|
(29,168 |
) |
|
|
(21,181 |
) |
|
|
|
|
|
Add / (subtract) |
|
|
|
|
Income
tax benefit |
|
|
11,345 |
|
|
|
12,828 |
|
Interest expense,
net |
|
|
(1,657 |
) |
|
|
(2,004 |
) |
Recovery
of losses on accounts receivable |
|
|
(622 |
) |
|
|
(499 |
) |
Decrease
in accounts receivables |
|
|
20,680 |
|
|
|
10,318 |
|
Increase
in inventories |
|
|
(14,359 |
) |
|
|
(3,423 |
) |
Increase
in customer credit balances |
|
|
22,672 |
|
|
|
8,516 |
|
Change
in deferred taxes |
|
|
5,683 |
|
|
|
(3,629 |
) |
Change
in other operating assets and liabilities |
|
|
(16,726 |
) |
|
|
(9,154 |
) |
Net cash
used in operating activities |
|
$ |
(2,152 |
) |
|
$ |
(8,228 |
) |
|
|
|
|
|
Net cash
used in investing activities |
|
$ |
(31,162 |
) |
|
$ |
(3,875 |
) |
|
|
|
|
|
Net cash
used in financing activities |
|
$ |
(8,802 |
) |
|
$ |
(19,865 |
) |
|
|
|
|
|
Home
heating oil and propane gallons sold |
|
|
22,600 |
|
|
|
20,600 |
|
Other
petroleum products |
|
|
28,700 |
|
|
|
27,900 |
|
Total all
products |
|
|
51,300 |
|
|
|
48,500 |
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL INFORMATIONSTAR
GROUP, L.P. AND SUBSIDIARIESRECONCILIATION OF
EBITDA AND ADJUSTED
EBITDA(Unaudited) |
|
|
|
|
|
|
|
Twelve Months Ended September
30, |
(in thousands) |
|
|
2017 |
|
|
|
2016 |
|
|
|
|
|
|
Net
income |
|
$ |
26,900 |
|
|
$ |
44,934 |
|
Plus: |
|
|
|
|
Income
tax expense |
|
|
20,376 |
|
|
|
33,738 |
|
Amortization of debt
issuance cost |
|
|
1,281 |
|
|
|
1,247 |
|
Interest expense,
net |
|
|
6,775 |
|
|
|
7,485 |
|
Depreciation and
amortization |
|
|
27,882 |
|
|
|
26,530 |
|
EBITDA |
|
|
83,214 |
|
|
|
113,934 |
|
|
|
|
|
|
(Increase) / decrease in the fair value of derivative
instruments |
|
(2,193 |
) |
|
|
(18,217 |
) |
Adjusted
EBITDA |
|
|
81,021 |
|
|
|
95,717 |
|
|
|
|
|
|
Add / (subtract) |
|
|
|
|
Income
tax expense |
|
|
(20,376 |
) |
|
|
(33,738 |
) |
Interest expense,
net |
|
|
(6,775 |
) |
|
|
(7,485 |
) |
Provision (recovery) for losses on accounts receivable |
|
|
1,639 |
|
|
|
(639 |
) |
(Increase) decrease in accounts receivables |
|
|
(19,844 |
) |
|
|
10,965 |
|
(Increase) decrease in inventories |
|
|
(10,598 |
) |
|
|
9,979 |
|
(Decrease) increase in customer credit balances |
|
|
(23,085 |
) |
|
|
6,490 |
|
Change
in deferred taxes |
|
|
10,134 |
|
|
|
9,670 |
|
Change
in other operating assets and liabilities |
|
|
8,942 |
|
|
|
10,998 |
|
Net cash
provided by operating activities |
|
$ |
21,058 |
|
|
$ |
101,957 |
|
|
|
|
|
|
Net cash
used in investing activities |
|
$ |
(66,381 |
) |
|
$ |
(19,631 |
) |
|
|
|
|
|
Net cash
used in financing activities |
|
$ |
(41,157 |
) |
|
$ |
(43,646 |
) |
|
|
|
|
|
Home
heating oil and propane gallons sold |
|
|
316,900 |
|
|
|
302,500 |
|
Other
petroleum products |
|
|
112,100 |
|
|
|
109,500 |
|
Total all
products |
|
|
429,000 |
|
|
|
412,000 |
|
|
CONTACT:Star GroupInvestor
Relations203/328-7310
Chris Witty Darrow Associates 646/438-9385 or
cwitty@darrowir.com
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