-----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, OU1yanAhh3UmJg+264AopZDkpE8tUDNkJLgtanBCckqDUcyM2PPbk2YMBc4dG/vL bkVGPHlnvXCeDWgoD2DxwA== 0000950137-07-002625.txt : 20070222 0000950137-07-002625.hdr.sgml : 20070222 20070222155755 ACCESSION NUMBER: 0000950137-07-002625 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20070222 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070222 DATE AS OF CHANGE: 20070222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MIDWAY GAMES INC CENTRAL INDEX KEY: 0001022080 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 222906244 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-12367 FILM NUMBER: 07642253 BUSINESS ADDRESS: STREET 1: 2704 WEST ROSCOE STREET CITY: CHICAGO STATE: IL ZIP: 60618 BUSINESS PHONE: 7739612222 MAIL ADDRESS: STREET 1: 2704 WEST ROSCOE STREET CITY: CHICAGO STATE: IL ZIP: 60618 8-K 1 c12643e8vk.htm CURRENT REPORT e8vk
 

 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
 
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): February 22, 2007
MIDWAY GAMES INC.
(Exact Name of Registrant as Specified in Charter)
         
Delaware
(State or Other Jurisdiction of
Incorporation)
  1-12367
(Commission File Number)
  22-2906244
(I.R.S. Employer Identification
Number)
2704 West Roscoe Street, Chicago, Illinois 60618
(Address of Principal Executive Offices)           (Zip Code)
Registrant’s telephone number, including area code: (773) 961-2222
     Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
     o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
     o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
     o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
     o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
 
 

 


 

Item 2.02 Results of Operations and Financial Condition.
On February 22, 2007, Midway Games Inc. issued a press release discussing financial results for the fourth quarter and year ended December 31, 2006 and financial guidance. A copy of the press release is attached to this report as Exhibit 99.1. Exhibit 99.1 is incorporated herein by this reference.
The information in this Current Report on Form 8-K, including the exhibit included herewith, is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.
Item 9.01 Financial Statements and Exhibits.
          (d) Exhibits
       
  Exhibit No.   Description
 
   
 
99.1
  Press Release of Midway Games Inc. dated February 22, 2007

2


 

SIGNATURE
     Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
         
  MIDWAY GAMES INC.
 
 
February 22, 2007  By:   /s/ David F. Zucker    
    David F. Zucker   
    President and Chief Executive Officer   

3


 

         
EXHIBIT INDEX
     
Exhibit No.   Description
 
   
99.1
  Press Release of Midway Games Inc. dated February 22, 2007

4

EX-99.1 2 c12643exv99w1.htm PRESS RELEASE exv99w1
 

Exhibit 99.1
(MIDWAY LOGO)
FOR IMMEDIATE RELEASE
CONTACT:
Geoffrey Mogilner
Midway Games Inc.
(773) 961-2222
gmogilner@midway.com
MIDWAY REPORTS 2006 Q4 AND YEAR END RESULTS
Chicago, Illinois, February 22, 2007 — Midway Games Inc. (NYSE: MWY) today announced results of operations for the fourth quarter and full year ended December 31, 2006. The Company also provided guidance for the quarter ending March 31, 2007 and the year ending December 31, 2007.
FOURTH QUARTER RESULTS
Net revenues for the 2006 fourth quarter were $96.9 million, up 38.8% from 2005 fourth quarter net revenues of $69.8 million. The 2006 fourth quarter loss applicable to common stock was $2.0 million, which includes $0.8 million of stock option expense, or a loss of $0.02 per basic and diluted share, compared with a 2005 fourth quarter loss applicable to common stock of $37.8 million, or a loss of $0.42 per basic and diluted share.
Other recent operating and financial highlights include:
  Midway launched Mortal Kombat: Armageddon for PlayStation 2 and Xbox; Happy Feet for PlayStation 2, PC, Nintendo GameCube, Game Boy Advance (GBA), Nintendo DS and the Nintendo Wii; Blitz: The League for the Xbox 360; Rampage: Total Destruction and The Ant Bully for Wii; The Grim Adventures of Billy & Mandy for GBA and Wii; Blitz: The League Overtime, Mortal Kombat: Unchained, and Rush for the PlayStation Portable (PSP); and Unreal Anthology for the PC.
 
  Midway recently announced that Mortal Kombat: Armageddon, which has received multiple industry awards and accolades including Best Fighting Game of the Year 2006 from both Spike TV’s Video Game Awards and IGN.com as well as top review scores and nominations from a number of industry publications, has shipped over one million units.
 
  Midway announced that it has shipped over 1.8 million units of Happy Feet the video game, based on the Warner Bros. Pictures blockbuster feature film, Happy Feet, which released in the U.S. on November 17, 2006.
 
  Midway launched Blitz: The League for the Xbox 360, the next generation installment of our million-unit franchise which was a finalist for the GameSpot.com “Best Sports Game” of E3 2005 as well as “Best Alternative Sports Game of 2005.”
 
  Midway released four titles at or shortly following the launch of Nintendo’s newest home console, the Nintendo Wii: Happy Feet the video game, The Grim Adventures of Billy & Mandy, Rampage: Total Destruction and The Ant Bully.
 
  Midway announced numerous new intellectual properties and next generation titles at its January Gamers’ Day press event in Las Vegas including Hour of Victory, a cinematic, innovative first person

 


 

    shooter set in World War II; BlackSite: Area 51, an action packed, first person shooter with stunning visuals, life-like squad interactions and a multitude of online multiplayer modes; and two new handheld games, Touchmaster for the Nintendo DS and Hot Brain for the PSP.
 
  Also at the January Gamers’ Day, Midway showed impressive demonstrations of its other major front-line next generation and PC titles expected in 2007 including: Mortal Kombat: Armageddon for the Wii, The Lord of the Rings Online: Shadows of Angmar for PC, and Stranglehold, The Wheelman and Unreal Tournament III on multiple next generation platforms and PC.
FULL YEAR RESULTS
Net revenues for the year ended December 31, 2006, were $165.6 million, up 10.3% from $150.1 million for the year ended December 31, 2005. The loss applicable to common stock for the year ended December 31, 2006, was $77.8 million, which includes $3.3 million of stock option expense, or $0.86 per basic and diluted share, compared to a loss applicable to common stock of $112.8 million or $1.30 per basic and diluted share for the year ended December 31, 2005.
David F. Zucker, president and chief executive officer, commented, “The fourth quarter of 2006 was a landmark quarter for Midway: our largest revenue quarter in seven years that included our largest initial ship-in for a single title, Happy Feet; the culmination of our marquee franchise Mortal Kombat on current generation systems; and the kick-off of our next generation releases with Blitz: The League on Xbox 360 as well as our four Wii titles.”
OUTLOOK
For the year ending December 31, 2007, Midway expects the following:
    Net revenues are expected to grow approximately 36% to $225 million with a net loss of approximately $0.44 per basic and diluted share.
    On a non-GAAP basis, Midway expects a loss of approximately $0.27 per basic and diluted share, which excludes approximately:
    $0.03 of stock option expense,
 
    $0.13 of convertible debt non-cash interest expense, and
 
    $0.01 of deferred income tax expense related to goodwill.
For the first quarter ending March 31, 2007, the Company expects the following:
    Net revenues of approximately $7 million, with a net loss of approximately $0.25 per basic and diluted share.
    On a non-GAAP basis, Midway expects a first quarter loss of approximately $0.23 per basic and diluted share, which excludes approximately:
    $0.01 of stock option expense, and
 
    $0.01 of convertible debt non-cash interest expense.
    Mr. Zucker concluded, “Midway has made considerable progress since we embarked on our aggressive plan several years ago to revitalize the company. We believe our significant investment in building unified next generation technology and tools, expanding our sales and marketing resources both domestically and internationally, and instilling a culture of quality and innovation throughout the company position Midway for the growth we are projecting for 2007 and beyond. We anticipate that the portfolio of titles we have slated for 2007, including Stranglehold, BlackSite: Area 51, The Wheelman,

 


 

The Lord of the Rings Online, Unreal Tournament III and Hour of Victory, will pave the way for long-term success and larger opportunities for Midway as we enter this generation of console systems.”
NON-GAAP FINANCIAL MEASURES
Midway has included per share non-GAAP financial measures in its 2007 outlook. Midway does not intend for the presentation of the non-GAAP financial measures to be isolated from, a substitute for, or superior to the information that has been presented in accordance with GAAP. In addition, information used in the non-GAAP financial measures may be presented differently from non-GAAP financial measures used by other companies. The non-GAAP financial measures used by Midway include non-GAAP basic and diluted loss per share. These non-GAAP financial measures exclude the following items:
Stock Option Expense. Midway adopted SFAS No. 123R, “Share-Based Payment” beginning January 2006 in which it began to recognize as an expense the fair value of its stock options. A non-GAAP measurement that excludes stock option expense identifies the component of compensation expense that does not require cash outlay.
Convertible debt non-cash interest expense. In accordance with GAAP, Midway is required to record discounts on its convertible senior notes as a result of decreases in the conversion price of these notes. These amounts are amortized as interest expense through the first date on which the holders may redeem the notes. There is no cash outlay associated with this interest expense. A non-GAAP measurement that excludes the convertible debt non-cash interest expense allows for an easier comparison to prior periods, and also distinguishes this interest expense from the remainder of the interest expense, which requires (or required) a cash outlay by Midway.
Deferred tax expense related to goodwill. Midway recognizes deferred tax expense related to increases in the difference between the book basis and tax basis of goodwill. Goodwill is not amortized for book purposes but is amortized for tax purposes. This increase in the book to tax basis difference causes an increase in the related deferred tax liability balance that cannot be offset against deferred tax assets. Given the nature of this deferred tax expense, a non-GAAP measurement that excludes this expense is deemed relevant.
In the future, Midway may consider whether other significant items should be excluded when arriving at non-GAAP measures of financial performance.
Midway considers the non-GAAP financial measures used herein, when used together with the corresponding GAAP measures, to be helpful in providing meaningful additional information regarding its performance by excluding specific items that may not be indicative of Midway’s core business or projected operating results.
CONFERENCE CALL
Midway Games Inc. is hosting a conference call and simultaneous webcast open to the general public at 4:30 P.M. EST today, Thursday, February 22, 2007. The conference call number is (800) 299-7089 or

 


 

(617) 801-9714 (international callers). The passcode for the call is 26702293. Please call ten minutes in advance to ensure that you are connected prior to the presentation. Interested parties may also access the live call on the Internet at www.investor.midway.com or at www.earnings.com. Please log-on fifteen minutes in advance to ensure that you are connected prior to the call’s initiation. Following its completion, a replay of the call can be accessed until March 1st by dialing (888) 286-8010 or (617) 801-6888 (international callers). The passcode for the replay is 11655874. Additionally, a replay of the call will be available for twelve months on the Internet via www.investor.midway.com.
ABOUT MIDWAY
Midway Games Inc. (NYSE:MWY), headquartered in Chicago, Illinois, with offices throughout the world, is a leading developer and publisher of interactive entertainment software for major video game systems and personal computers. More information about Midway and its products can be found at www.midway.com.
FORWARD-LOOKING STATEMENTS
This press release contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, which describe the plans, strategies and goals, beliefs concerning future business conditions and the outlook for Midway Games Inc. (the “Company”) based on currently available information. Where possible, these forward-looking statements are identified by words such as “may,” “will,” “should,” “could,” “expect,” “eventually,” “anticipate,” “plan,” “strategy,” “believe,” “estimate,” “seek,” “intend” and similar expressions. The Company’s actual results could differ materially from those described in the forward-looking statements as a result of a number of risks and uncertainties, including, without limitation, the performance of the interactive entertainment industry, dependence on new product introductions and the ability to maintain the scheduling of such introductions, the current console platform transition and other technological changes, dependence on major platform manufacturers, volatility of the market price of the Company’s common stock, and other risks more fully described under “Item 1A. Risk Factors” in the Company’s Annual Report on Form 10-K for the year ended December 31, 2005, and in other filings made by the Company with the Securities and Exchange Commission. Each forward-looking statement, including, without limitation, financial guidance, speaks only as of the date on which it is made, and the Company undertakes no obligation to update any forward-looking statement to reflect events or circumstances after the date on which it is made or to reflect the occurrence of anticipated or unanticipated events or circumstances, except as required by law.
tables follow

 


 

     
Midway Games Inc., 02/22/07
  page 5
MIDWAY GAMES INC.
Consolidated Statements of Operations
(In thousands, except per share amounts)
                                 
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2006   2005     2006   2005  
 
  (unaudited)   (unaudited)   (unaudited)        
 
                               
Net revenues
  $ 96,864     $ 69,810     $ 165,574     $ 150,078  
Cost of sales:
                               
Product costs and distribution
    36,931       25,772       67,331       56,212  
Royalties and product development
    29,984       30,688       68,883       75,852  
 
                       
Total cost of sales
    66,915       56,460       136,214       132,064  
 
                       
Gross profit
    29,949       13,350       29,360       18,014  
 
       
Research and development expense
    8,497       11,527       37,022       39,693  
Selling and marketing expense
    15,702       21,592       43,150       57,189  
Administrative expense
    5,363       5,740       21,297       18,864  
Restructuring and other charges
    30       10,784       (130 )     10,784  
 
                       
Operating income (loss)
    357       (36,293 )     (71,979 )     (108,516 )
Interest income
    886       895       4,384       2,449  
Interest expense
    (3,680 )     (1,800 )     (11,241 )     (3,119 )
Other income and (expense), net
    942       (309 )     2,699       (2,040 )
 
                       
Loss before income taxes
    (1,495 )     (37,507 )     (76,137 )     (111,226 )
Provision for income taxes
    530       308       1,646       1,261  
 
                       
Net loss
    (2,025 )     (37,815 )     (77,783 )     (112,487 )
Preferred stock dividends:
                               
Distributed
          5             282  
Imputed
                      6  
 
                       
Loss applicable to common stock
  $ (2,025 )   $ (37,820 )   $ (77,783 )   $ (112,775 )
 
                       
 
       
Loss per share of common stock:
                               
Basic and diluted
  $ (0.02 )   $ (0.42 )   $ (0.86 )   $ (1.30 )
 
                       
 
       
Weighted average number of shares outstanding:
                               
Basic and diluted
    90,952       89,062       90,708       86,937  
 
                       
— balance sheet follows —

 


 

     
Midway Games Inc., 02/22/07
  page 6
MIDWAY GAMES INC.
Consolidated Balance Sheets
(In thousands)
                 
    December 31,     December 31,  
    2006     2005  
 
  (unaudited)        
 
               
Assets                
Current assets:
               
Cash and cash equivalents
  $ 73,422     $ 98,376  
Receivables, net
    51,366       30,835  
Inventories
    2,891       5,811  
Capitalized product development costs
    35,213       27,570  
Prepaid expenses and other current assets
    12,792       16,134  
 
           
Total current assets
    175,684       178,726  
Capitalized product development costs
    6,400       25  
Property and equipment, net
    20,407       19,049  
Goodwill
    41,273       41,108  
Other assets
    10,297       9,355  
 
           
Total assets
  $ 254,061     $ 248,263  
 
           
 
       
Liabilities and Stockholders’ Equity                
Current liabilities:
               
Accounts payable
  $ 7,864     $ 12,431  
Accrued compensation and related benefits
    4,541       4,060  
Accrued royalties
    8,097       3,938  
Accrued selling and marketing
    4,935       4,418  
Deferred revenue
    2,000       384  
Current portion of long-term debt
    3,333       3,333  
Other accrued liabilities
    15,164       13,440  
 
           
Total current liabilities
    45,934       42,004  
 
       
Convertible senior notes, less unamortized discount
    142,010       75,000  
Long-term debt
    3,611       6,944  
Deferred income taxes
    9,402       8,086  
Other noncurrent liabilities
    397       784  
 
       
Stockholders’ equity:
               
Common stock
    925       922  
Additional paid-in capital
    444,115       431,273  
Accumulated deficit
    (380,882 )     (303,099 )
Accumulated translation adjustment
    (1,671 )     (439 )
Deferred compensation
          (3,610 )
Treasury stock
    (9,780 )     (9,602 )
 
           
Total stockholders’ equity
    52,707       115,445  
 
           
Total liabilities and stockholders’ equity
  $ 254,061     $ 248,263  
 
           
— supplemental data follows —

 


 

     
Midway Games Inc., 02/22/07
  page 7
Midway Games Inc.
Revenue by Platform
(in thousands)
                                 
    Three-Months
    Ended December 31,
    2006   2005
 
                               
Microsoft Xbox 360
  $ 3,469       3.6 %   $       0.0 %
Nintendo Wii
    11,456       11.8 %           0.0 %
Sony PlayStation 2
    39,636       40.9 %     40,127       57.5 %
Microsoft Xbox
    6,793       7.0 %     19,847       28.4 %
Nintendo GameCube
    4,954       5.1 %     2,419       3.5 %
Sony PlayStation Portable
    9,090       9.4 %     1,729       2.5 %
Nintendo DS
    9,870       10.2 %           0.0 %
Nintendo Game Boy Advance
    6,999       7.2 %     1,725       2.5 %
Personal Computer
    2,189       2.3 %     1,754       2.5 %
Royalties
    2,371       2.5 %     1,952       2.8 %
Other
    37       0.0 %     257       0.3 %
 
                           
Total
  $ 96,864       100.0 %   $ 69,810       100.0 %
 
                           
                                 
    Year
    Ended December 31,
    2006   2005          
 
                               
Microsoft Xbox 360
  $ 3,469       2.1 %   $       0.0 %
Nintendo Wii
    11,456       6.9 %           0.0 %
Sony PlayStation 2
    75,955       45.8 %     77,590       51.7 %
Microsoft Xbox
    14,602       8.8 %     51,570       34.4 %
Nintendo GameCube
    11,184       6.8 %     5,452       3.6 %
Sony PlayStation Portable
    13,845       8.4 %     1,729       1.2 %
Nintendo DS
    9,870       6.0 %           0.0 %
Nintendo Game Boy Advance
    9,417       5.7 %     2,333       1.6 %
Personal Computer
    9,307       5.6 %     4,016       2.7 %
Royalties
    6,301       3.8 %     6,145       4.1 %
Other
    168       0.1 %     1,243       0.7 %
 
                           
Total
  $ 165,574       100.0 %   $ 150,078       100.0 %
 
                           

 


 

     
Midway Games Inc., 02/22/07
  page 8
Midway Games Inc.
Revenue by Geography
(in thousands)
                                 
    Three-Months
    Ended December 31,
    2006   2005
 
                               
North America
  $ 71,441       73.8 %   $ 58,257       83.5 %
International
    25,423       26.2 %     11,553       16.5 %
 
                           
Total
  $ 96,864       100.0 %   $ 69,810       100.0 %
 
                           
                                 
    Year
    Ended December 31,
    2006   2005
 
                               
North America
  $ 124,112       75.0 %   $ 118,285       78.8 %
International
    41,462       25.0 %     31,793       21.2 %
 
                           
Total
  $ 165,574       100.0 %   $ 150,078       100.0 %
 
                           
# # #

 

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