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Cadre Holdings Reports Fourth Quarter and Full Year 2022 Financial Results

Generated Record Full Year Net Sales and Adjusted EBITDA

Exceeded Pricing Growth Target Above Inflation in Q4 and Full Year

Expects Full Year 2023 Net Sales of $463 to $493 million and adjusted EBITDA of $76 to $82 million

Cadre Holdings, Inc. (NYSE: CDRE) ("Cadre" or "the Company"), a global leader in the manufacturing and distribution of safety and survivability equipment for first responders, announced today its consolidated operating results for the quarter and year ended December 31, 2022.

Fourth Quarter and Year Ended 2022 Highlights

  • Net sales of $123.6 million for the fourth quarter; net sales of $457.8 million for the year ended December 31, 2022
  • Gross profit margin of 39.2% for the fourth quarter; gross profit margin of 38.4% for the year ended December 31, 2022
  • Net income of $6.6 million, or $0.17 per diluted share, for the fourth quarter; net income of $5.8 million, or $0.16 per diluted share, for the year ended December 31, 2022
  • Adjusted EBITDA of $22.4 million for the fourth quarter; Adjusted EBITDA of $75.7 million for the year ended December 31, 2022
  • Adjusted EBITDA margin of 18.1% for the fourth quarter; Adjusted EBITDA margin of 16.5% for the year ended December 31, 2022
  • Adjusted EBITDA conversion of 93% for the fourth quarter; Adjusted EBITDA conversion of 94% for the year ended December 31, 2022
  • Declared quarterly cash dividend of $0.08 per share in January 2023

“Cadre’s strong Q4 results capped off an outstanding year for the Company, as we continued to capitalize on our entrenched positions in law enforcement, first responder and military markets,” said Warren Kanders, CEO and Chairman. “Against a backdrop of persistent supply chain disruptions and inflationary pressures, Cadre once again exceeded our 1% pricing growth target above inflation and generated record full year net sales and adjusted EBITDA. Consistent with our strategic focus on adding high margin companies with leading market positions and strong recurring revenues and cash flows, we completed two accretive acquisitions in 2022 and are pleased with their efficient integration and favorable prospects.”

Mr. Kanders added, “Looking ahead in 2023, we anticipate our resilient operating model to continue to drive strong free cash flows that enable us to capitalize on attractive opportunities. Executing targeted M&A is a core tenet of Cadre’s strategy and remains a top priority. As we navigate the current M&A environment, we are focused on actively evaluating deals in line with our key criteria and maintaining our disciplined approach, complemented by our core organic growth initiatives. Going forward we believe Cadre is ideally positioned to further enhance our leadership in providing mission-critical safety and survivability equipment, as we seek to execute our strategic objectives and build significant value, while driving margin expansion over the long term.”

Fourth Quarter and Year Ended 2022 Operating Results

For the quarter ended December 31, 2022, Cadre generated net sales of $123.6 million, as compared to $103.5 million for the quarter ended December 31, 2021. The increase in the Product segment was primarily the result of recent acquisitions but we also experienced double digit percent increases for armor products, duty gear products and crowd control products, which were offset by project timing in our EOD products. The increase in the Distribution segment was primarily the result of agency demand for hard goods.

For the year ended December 31, 2022, Cadre generated net sales of $457.8 million, as compared to $427.3 million for the prior year period, mainly driven by recent acquisitions, armor and duty gear products demand, and agency demand for hard goods through our Distribution segment.

For the quarter ended December 31, 2022, Cadre generated gross profit of $48.5 million, as compared to $39.2 million for the quarter ended December 31, 2021. For the year ended December 31, 2022, Cadre generated gross profit of $175.7 million, as compared to $170.7 million for the prior year period.

Gross profit margin was 39.2% for the quarter ended December 31, 2022, as compared to 37.9% for the quarter ended December 31, 2021 mainly driven by favorable pricing above inflation and product mix.

Gross profit margin was 38.4% for the year ended December 31, 2022, as compared to 39.9% for the prior year period, mainly driven by 110 basis points from the amortization of inventory step-up recorded as part of the recent acquisitions and unfavorable channel and portfolio mix, partially offset by pricing in excess of material inflation.

Net income was $6.6 million for the quarter ended December 31, 2022, as compared to net income of $4.3 million for the quarter ended December 31, 2021. The increase resulted primarily from improved revenue partially offset by increased stock-based compensation expense.

Net income was $5.8 million for the year ended December 31, 2022, as compared to net income of $12.7 million for the prior year period, primarily as a result of increased stock-based compensation expense, partially offset by an increase in net sales and the loss on extinguishment of debt related to the August 2021 debt refinance.

Cadre generated $22.4 million of Adjusted EBITDA for the quarter ended December 31, 2022, as compared to $15.3 million for the quarter ended December 31, 2021. Adjusted EBITDA margin was 18.1% for the quarter ended December 31, 2022, as compared to 14.7% for the prior year period.

Cadre generated $75.7 million of Adjusted EBITDA for the year ended December 31, 2022, as compared to $71.4 million for the prior year period. Adjusted EBITDA margin was 16.5% for the year ended December 31, 2022, as compared to 16.7% for the prior year period.

Product segment gross profit margin was 40.4% for the fourth quarter and 40.3% for the year ended December 31, 2022. This compares to 38.8% and 40.9% for the respective prior year periods.

Distribution segment gross profit margin was 21.8% for the fourth quarter and 21.1% for the year ended December 31, 2022. This compares to 23.9% and 24.9% for the respective prior year periods.

Liquidity, Cash Flows and Capital Allocation

  • Cash and cash equivalents increased by $11.4 million from $33.9 million as of December 31, 2021 to $45.3 million as of December 31, 2022.
  • Total debt decreased by $10.0 million from $159.7 million as of December 31, 2021, to $149.7 million as of December 31, 2022.
  • Net debt (total debt net of cash and cash equivalents) decreased by $21.4 million from $125.8 million as of December 31, 2021, to $104.4 million as of December 31, 2022.
  • Capital expenditures totaled $1.5 million for the fourth quarter and $4.7 million for the year ended December 31, 2022, compared with $0.8 million for the fourth quarter and $3.0 million for the year ended December 31, 2021.

Dividend

On January 24, 2023, the Company announced that its Board of Directors declared a quarterly cash dividend of $0.08 per share, or $0.32 per share on an annualized basis. Cadre's dividend payment was made on February 17, 2023, to shareholders of record as of the close of business on the record date of February 3, 2023. The declaration of any future dividend is subject to the discretion of the Company's Board of Directors.

2023 Outlook

For the full year 2023, Cadre expects to generate net sales in the range of $463 million to $493 million and Adjusted EBITDA in the range of $76 million and $82 million. Cadre expects Adjusted EBITDA conversion in the range of 87-90% for the full year.

Conference Call

Cadre management will host a conference call on Wednesday, March 15, 2023, at 5:00 PM EST to discuss the latest corporate developments and financial results. The dial-in number for callers in the US is (888)-510-2553 and the dial-in number for international callers is 646-960-0473. The access code for all callers is 1410384. A live webcast will also be available on the Company’s website at https://www.cadre-holdings.com/.

A replay of the call will be available through March 29, 2023. To access the replay, please dial 800-770-2030 in the U.S. or +1-647-362-9199 if outside the U.S., and then enter the access code 1410384.

About Cadre

Headquartered in Jacksonville, Florida, Cadre is a global leader in the manufacturing and distribution of safety and survivability products for first responders. Cadre's equipment provides critical protection to allow users to safely and securely perform their duties and protect those around them in hazardous or life-threatening situations. The Company's core products include body armor, explosive ordnance disposal equipment, and duty gear. Our highly engineered products are utilized in over 100 countries by federal, state and local law enforcement, fire and rescue professionals, explosive ordnance disposal teams, and emergency medical technicians. Our key brands include Safariland® and Med-Eng®, amongst others.

Use of Non-GAAP Measures

The Company reports its financial results in accordance with U.S. generally accepted accounting principles (“GAAP”). The press release contains the non-GAAP measures: (i) earnings before interest, taxes, other income or expense, depreciation and amortization (“EBITDA”), (ii) adjusted EBITDA, (iii) adjusted EBITDA margin and (iv) adjusted EBITDA conversion rate. The Company believes the presentation of these non-GAAP measures provides useful information for the understanding of its ongoing operations and enables investors to focus on period-over-period operating performance, and thereby enhances the user’s overall understanding of the Company’s current financial performance relative to past performance and provides, along with the nearest GAAP measures, a baseline for modeling future earnings expectations. Non-GAAP measures are reconciled to comparable GAAP financial measures within this press release. The Company cautions that non-GAAP measures should be considered in addition to, but not as a substitute for, the Company’s reported GAAP results. Additionally, the Company notes that there can be no assurance that the above referenced non-GAAP financial measures are comparable to similarly titled financial measures used by other publicly traded companies.

Forward-Looking Statements

Except for historical information, certain matters discussed in this press release may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include but are not limited to all projections and anticipated levels of future performance. Forward-looking statements involve risks, uncertainties and other factors that may cause our actual results to differ materially from those discussed herein. Any number of factors could cause actual results to differ materially from projections or forward-looking statements in this press release, including, but not limited to, those risks and uncertainties more fully described from time to time in the Company’s public reports filed with the Securities and Exchange Commission, including under the section titled “Risk Factors” in the Company's Annual Report on Form 10-K, and/or Quarterly Reports on Form 10-Q, as well as in the Company’s Current Reports on Form 8-K. All forward-looking statements included in this press release are based upon information available to the Company as of the date of this press release and speak only as of the date hereof. We assume no obligation to update any forward-looking statements to reflect events or circumstances after the date of this press release.

 

CADRE HOLDINGS, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

December 31, 2022

 

December 31, 2021

Assets

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

45,286

 

$

33,857

Accounts receivable, net

 

 

64,557

 

 

48,344

Inventories

 

 

70,273

 

 

63,978

Prepaid expenses

 

 

10,091

 

 

10,353

Other current assets

 

 

6,811

 

 

3,171

Assets held for sale

 

 

 

 

278

Total current assets

 

 

197,018

 

 

159,981

Property and equipment, net

 

 

45,285

 

 

33,053

Operating lease assets

 

 

8,489

 

 

Deferred tax assets, net

 

 

2,255

 

 

7,059

Intangible assets, net

 

 

50,695

 

 

42,415

Goodwill

 

 

81,576

 

 

66,262

Other assets

 

 

6,634

 

 

3,026

Total assets

 

$

391,952

 

$

311,796

 

 

 

 

 

 

 

Liabilities, Mezzanine Equity and Shareholders' Equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

23,406

 

$

19,328

Accrued liabilities

 

 

38,720

 

 

40,736

Income tax payable

 

 

4,584

 

 

1,255

Liabilities held for sale

 

 

 

 

128

Current portion of long-term debt

 

 

12,211

 

 

13,174

Total current liabilities

 

 

78,921

 

 

74,621

Long-term debt

 

 

137,476

 

 

146,516

Long-term operating lease liabilities

 

 

4,965

 

 

Deferred tax liabilities

 

 

3,508

 

 

1,297

Other liabilities

 

 

1,192

 

 

722

Total liabilities

 

 

226,062

 

 

223,156

 

 

 

 

 

 

 

Mezzanine equity

 

 

 

 

 

 

Preferred stock ($0.0001 par value, 10,000,000 shares authorized, no shares issued and outstanding as of December 31, 2022 and December 31, 2021)

 

 

 

 

 

 

 

 

 

 

 

Shareholders' equity

 

 

 

 

 

 

Common stock ($0.0001 par value, 190,000,000 shares authorized, 37,332,271 and 34,383,350 shares issued and outstanding as of December 31, 2022 and December 31, 2021, respectively)

 

 

4

 

 

3

Additional paid-in capital

 

 

206,540

 

 

127,606

Accumulated other comprehensive income (loss)

 

 

2,087

 

 

(1,917)

Accumulated deficit

 

 

(42,741)

 

 

(37,052)

Total shareholders’ equity

 

 

165,890

 

 

88,640

Total liabilities, mezzanine equity and shareholders' equity

 

$

391,952

 

$

311,796

 

CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands, except share and per share amounts)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended December 31,

 

Year Ended December 31,

 

 

2022

 

2021

 

2022

 

2021

Net sales

 

$

123,645

 

$

103,537

 

$

457,837

 

$

427,288

Cost of goods sold

 

 

75,117

 

 

64,342

 

 

282,159

 

 

256,598

Gross profit

 

 

48,528

 

 

39,195

 

 

175,678

 

 

170,690

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling, general and administrative

 

 

34,857

 

 

27,794

 

 

153,288

 

 

114,962

Restructuring and transaction costs

 

 

975

 

 

1,939

 

 

4,355

 

 

3,430

Related party expense

 

 

132

 

 

142

 

 

1,478

 

 

579

Other general income

 

 

(159)

 

 

 

 

(159)

 

 

Total operating expenses

 

 

35,805

 

 

29,875

 

 

158,962

 

 

118,971

Operating income

 

 

12,723

 

 

9,320

 

 

16,716

 

 

51,719

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,710)

 

 

(2,296)

 

 

(6,206)

 

 

(16,425)

Loss on extinguishment of debt

 

 

 

 

 

 

 

 

(15,155)

Other expense, net

 

 

1,675

 

 

(66)

 

 

(1,137)

 

 

(947)

Total other expense, net

 

 

(35)

 

 

(2,362)

 

 

(7,343)

 

 

(32,527)

Income before provision for income taxes

 

 

12,688

 

 

6,958

 

 

9,373

 

 

19,192

Provision for income taxes

 

 

(6,089)

 

 

(2,670)

 

 

(3,553)

 

 

(6,531)

Net income

 

$

6,599

 

$

4,288

 

$

5,820

 

$

12,661

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.18

 

$

0.13

 

$

0.16

 

$

0.44

Diluted

 

$

0.17

 

$

0.13

 

$

0.16

 

$

0.44

Weighted average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

37,332,271

 

 

31,908,350

 

 

36,109,844

 

 

28,598,692

Diluted

 

 

37,887,600

 

 

31,908,350

 

 

36,122,374

 

 

28,598,692

 

CADRE HOLDINGS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

Year Ended December 31,

 

 

2022

 

2021

Cash Flows From Operating Activities:

 

 

 

 

 

 

Net income

 

$

5,820

 

$

12,661

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

15,651

 

 

13,718

Amortization of original issue discount and debt issue costs

 

 

740

 

 

3,193

Amortization of inventory step-up

 

 

4,255

 

 

Loss on extinguishment of debt

 

 

 

 

15,155

Deferred income taxes

 

 

(1,087)

 

 

4,772

Stock-based compensation

 

 

31,858

 

 

355

Gain on sale of fixed assets

 

 

(170)

 

 

Provision for (recoveries from) losses on accounts receivable

 

 

417

 

 

(188)

Foreign exchange loss

 

 

1,517

 

 

102

Changes in operating assets and liabilities, net of impact of acquisitions:

 

 

 

 

 

 

Accounts receivable

 

 

(11,536)

 

 

(4,641)

Inventories

 

 

1,162

 

 

(3,189)

Prepaid expenses and other assets

 

 

(7,711)

 

 

(4,564)

Accounts payable and other liabilities

 

 

5,493

 

 

2,720

Net cash provided by operating activities

 

 

46,409

 

 

40,094

Cash Flows From Investing Activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(4,494)

 

 

(2,832)

Proceeds from disposition of property and equipment

 

 

411

 

 

Business acquisitions, net of cash acquired

 

 

(55,543)

 

 

Net cash used in investing activities

 

 

(59,626)

 

 

(2,832)

Cash Flows From Financing Activities:

 

 

 

 

 

 

Proceeds from revolving credit facilities

 

 

43,000

 

 

257,980

Principal payments on revolving credit facilities

 

 

(43,000)

 

 

(258,612)

Proceeds from term loans

 

 

 

 

198,716

Principal payments on term loans

 

 

(10,116)

 

 

(266,000)

Proceeds from insurance premium financing

 

 

3,989

 

 

5,010

Principal payments on insurance premium financing

 

 

(4,952)

 

 

(3,061)

Payment of capital leases

 

 

(25)

 

 

(43)

Payments for debt issuance costs

 

 

 

 

(2,198)

Payments on extinguishment of debt

 

 

 

 

(4,217)

Taxes paid in connection with employee stock transactions

 

 

(6,300)

 

 

Proceeds from initial public offering, net of underwriter discounts

 

 

 

 

83,421

Proceeds from secondary offering, net of underwriter discounts

 

 

56,329

 

 

Deferred offering costs

 

 

(2,953)

 

 

(4,841)

Dividends distributed

 

 

(11,509)

 

 

(12,751)

Net cash provided by (used in) financing activities

 

 

24,463

 

 

(6,596)

Effect of foreign exchange rates on cash and cash equivalents

 

 

183

 

 

318

Change in cash and cash equivalents

 

 

11,429

 

 

30,984

Cash and cash equivalents, beginning of period

 

 

33,857

 

 

2,873

Cash and cash equivalents, end of period

 

$

45,286

 

$

33,857

Supplemental Disclosure of Cash Flows Information:

 

 

 

 

 

 

Cash paid for income taxes, net

 

$

1,395

 

$

1,158

Cash paid for interest

 

$

6,109

 

$

13,336

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

Accruals and accounts payable for capital expenditures

 

$

172

 

$

197

 

CADRE HOLDINGS, INC.

SEGMENT INFORMATION

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2022

 

 

 

 

 

 

 

 

Reconciling

 

 

 

 

 

Products

 

Distribution

 

Items(1)

 

Total

Net sales

 

$

107,482

 

$

23,270

 

$

(7,107)

 

$

123,645

Cost of goods sold

 

 

64,053

 

 

18,196

 

 

(7,132)

 

 

75,117

Gross profit

 

$

43,429

 

$

5,074

 

$

25

 

$

48,528

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three months ended December 31, 2021

 

 

 

 

 

 

 

 

Reconciling

 

 

 

 

 

Products

 

Distribution

 

Items(1)

 

Total

Net sales

 

$

88,150

 

$

20,957

 

$

(5,570)

 

$

103,537

Cost of goods sold

 

 

53,957

 

 

15,953

 

 

(5,568)

 

 

64,342

Gross profit

 

$

34,193

 

$

5,004

 

$

(2)

 

$

39,195

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2022

 

 

 

 

 

 

 

 

Reconciling

 

 

 

 

 

Products

 

Distribution

 

Items(1)

 

Total

Net sales

 

$

385,423

 

$

97,106

 

$

(24,692)

 

$

457,837

Cost of goods sold

 

 

230,245

 

 

76,633

 

 

(24,719)

 

 

282,159

Gross profit

 

$

155,178

 

$

20,473

 

$

27

 

$

175,678

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Year ended December 31, 2021

 

 

 

 

 

 

 

 

Reconciling

 

 

 

 

 

Products

 

Distribution

 

Items(1)

 

Total

Net sales

 

$

362,189

 

$

90,043

 

$

(24,944)

 

$

427,288

Cost of goods sold

 

 

213,881

 

 

67,649

 

 

(24,932)

 

 

256,598

Gross profit

 

$

148,308

 

$

22,394

 

$

(12)

 

$

170,690

______________
(1)

Reconciling items consist primarily of intercompany eliminations and items not directly attributable to operating segments.

 

CADRE HOLDINGS, INC.

RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

(Unaudited)

(In thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Year Ended

 

 

 

December 31,

 

December 31,

 

 

 

2022

 

2021

 

2022

 

2021

 

Net income

 

$

6,599

 

$

4,288

 

$

5,820

 

$

12,661

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

4,332

 

 

3,292

 

 

15,651

 

 

13,718

 

Interest expense

 

 

1,710

 

 

2,296

 

 

6,206

 

 

16,425

 

Provision for income taxes

 

 

6,089

 

 

2,670

 

 

3,553

 

 

6,531

 

EBITDA

 

$

18,730

 

$

12,546

 

$

31,230

 

$

49,335

 

Add back:

 

 

 

 

 

 

 

 

 

 

 

 

 

Restructuring and transaction costs(1)

 

 

975

 

 

1,939

 

 

5,355

 

 

3,430

 

Other general income(2)

 

 

(159)

 

 

 

 

(159)

 

 

 

Loss on extinguishment of debt(3)

 

 

 

 

 

 

 

 

15,155

 

Other expense, net(4)

 

 

(1,675)

 

 

66

 

 

1,137

 

 

947

 

Stock-based compensation expense(5)

 

 

2,878

 

 

355

 

 

32,239

 

 

355

 

Stock-based compensation payroll tax expense(6)

 

 

 

 

 

 

305

 

 

 

LTIP bonus(7)

 

 

436

 

 

358

 

 

1,369

 

 

2,162

 

Amortization of inventory step-up(8)

 

 

1,200

 

 

 

 

4,255

 

 

 

Adjusted EBITDA

 

$

22,385

 

$

15,264

 

$

75,731

 

$

71,384

 

Less: Capital expenditures

 

 

(1,456)

 

 

(804)

 

 

(4,666)

 

 

(3,029)

 

Adjusted EBITDA less capital expenditures

 

$

20,929

 

$

14,460

 

$

71,065

 

$

68,355

 

Adjusted EBITDA conversion rate(9)

 

 

93

%

 

95

%

 

94

%

 

96

%

Adjusted EBITDA margin(10)

 

 

18.1

%

 

14.7

%

 

16.5

%

 

16.7

%

_______________

(1)

Reflects the “Restructuring and transaction costs” line item on our consolidated statement of operations, which primarily includes transaction costs composed of legal and consulting fees, and $1.0 million paid to Kanders & Company, Inc., a company controlled by our Chief Executive Officer, for services related to the acquisition of Cyalume, which is included in related party expense in the Company’s consolidated statements of operations.

(2)

Reflects the “Other general income” line item on our consolidated statement of operations and includes a gain from a long-lived asset sale.

(3)

Reflects losses incurred in connection with the August 2021 debt refinance.

(4)

Reflects the “Other expense, net” line item on our consolidated statement of operations and primarily includes losses on foreign currency transactions.

(5)

Reflects compensation expense related to equity and liability classified stock-based compensation plans.

(6)

Reflects payroll taxes associated with vested stock-based compensation awards.

(7)

Reflects the cost of a cash-based long-term incentive plan awarded to employees that vests over three years.

(8)

Reflects amortization expense related to the step-up inventory adjustment recorded as part of the recent acquisitions.

(9)

Reflects (Adjusted EBITDA less capital expenditures) / Adjusted EBITDA.

(10)

Reflects Adjusted EBITDA / Net Sales for the relevant periods.

 

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