Delaware | 001-35674 | 20-8050955 | ||||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
Delaware | 333-148153 | 20-4381990 | ||||
(State or Other Jurisdiction of Incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
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. |
Item 9.01. | Financial Statements and Exhibits. |
(d) | Exhibits |
Exhibit No. | Description | |
99.1 | Press Release dated August 4, 2014. |
REALOGY HOLDINGS CORP. | ||
By: | /s/ ANTHONY E. HULL | |
Anthony E. Hull, Executive Vice President, Chief Financial Officer and Treasurer |
REALOGY GROUP LLC | ||
By: | /s/ ANTHONY E. HULL | |
Anthony E. Hull, Executive Vice President, Chief Financial Officer and Treasurer |
Exhibit No. | Exhibit | |
99.1 | Press Release dated August 4, 2014. |
• | Net revenue for second quarter 2014 was $1.5 billion, a 1% decrease compared to second quarter 2013. |
• | Adjusted EBITDA1 for second quarter 2014 was $269 million, down 3% from $278 million in the second quarter of 2013, primarily due to an approximately $11 million reduction in earnings related to the decrease in refinancing activity at our mortgage origination joint venture and within the Company's title and settlement services segment. |
• | Net income for second quarter 2014 was $68 million and basic earnings per share for the quarter was $0.47, which includes $73 million of interest expense, $46 million of depreciation and amortization expense and $17 million in pre-tax charges related to the Company's repurchase of $354 million of its 7.875% First and a Half Lien Notes during the quarter. |
• | Basic earnings per share was $0.59 excluding the $17 million of debt extinguishment charges and $14 million of mark-to-market interest rate swap losses. |
• | Realogy generated $198 million of free cash flow during the quarter, or $1.36 per share. |
Investor Contacts: | Media Contact: | |
Alicia Swift | Mark Panus | |
(973) 407-4669 | (973) 407-7215 | |
alicia.swift@realogy.com | mark.panus@realogy.com | |
Jennifer Pepper | ||
(973) 407-7487 | ||
jennifer.pepper@realogy.com |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Revenues | |||||||||||||||
Gross commission income | $ | 1,170 | $ | 1,169 | $ | 1,908 | $ | 1,845 | |||||||
Service revenue | 211 | 233 | 376 | 416 | |||||||||||
Franchise fees | 92 | 91 | 155 | 148 | |||||||||||
Other | 39 | 40 | 80 | 81 | |||||||||||
Net revenues | 1,512 | 1,533 | 2,519 | 2,490 | |||||||||||
Expenses | |||||||||||||||
Commission and other agent-related costs | 804 | 800 | 1,304 | 1,254 | |||||||||||
Operating | 340 | 353 | 676 | 680 | |||||||||||
Marketing | 52 | 49 | 103 | 99 | |||||||||||
General and administrative | 65 | 93 | 135 | 160 | |||||||||||
Former parent legacy costs (benefit), net | — | (2 | ) | 1 | (1 | ) | |||||||||
Restructuring costs | — | 4 | — | 4 | |||||||||||
Depreciation and amortization | 46 | 44 | 92 | 86 | |||||||||||
Interest expense, net | 73 | 67 | 143 | 156 | |||||||||||
Loss on the early extinguishment of debt | 17 | 43 | 27 | 46 | |||||||||||
Other (income)/expense, net | (1 | ) | — | (1 | ) | — | |||||||||
Total expenses | 1,396 | 1,451 | 2,480 | 2,484 | |||||||||||
Income before income taxes, equity in earnings and noncontrolling interests | 116 | 82 | 39 | 6 | |||||||||||
Income tax expense | 51 | 9 | 17 | 16 | |||||||||||
Equity in earnings of unconsolidated entities | (4 | ) | (13 | ) | (1 | ) | (22 | ) | |||||||
Net income | 69 | 86 | 23 | 12 | |||||||||||
Less: Net income attributable to noncontrolling interests | (1 | ) | (2 | ) | (1 | ) | (3 | ) | |||||||
Net income attributable to Realogy Holdings | $ | 68 | $ | 84 | $ | 22 | $ | 9 | |||||||
Earnings per share attributable to Realogy Holdings: | |||||||||||||||
Basic earnings per share: | $ | 0.47 | $ | 0.58 | $ | 0.15 | $ | 0.06 | |||||||
Diluted earnings per share: | $ | 0.46 | $ | 0.57 | $ | 0.15 | $ | 0.06 | |||||||
Weighted average common and common equivalent shares outstanding: | |||||||||||||||
Basic: | 145.9 | 145.4 | 145.9 | 145.2 | |||||||||||
Diluted: | 146.8 | 146.6 | 147.0 | 146.4 |
June 30, 2014 | December 31, 2013 | ||||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 209 | $ | 236 | |||
Trade receivables (net of allowance for doubtful accounts of $31 and $37) | 165 | 121 | |||||
Relocation receivables | 349 | 270 | |||||
Deferred income taxes | 200 | 186 | |||||
Other current assets | 110 | 104 | |||||
Total current assets | 1,033 | 917 | |||||
Property and equipment, net | 203 | 205 | |||||
Goodwill | 3,360 | 3,335 | |||||
Trademarks | 736 | 732 | |||||
Franchise agreements, net | 1,529 | 1,562 | |||||
Other intangibles, net | 352 | 365 | |||||
Other non-current assets | 230 | 210 | |||||
Total assets | $ | 7,443 | $ | 7,326 | |||
LIABILITIES AND EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 157 | $ | 123 | |||
Securitization obligations | 252 | 252 | |||||
Due to former parent | 64 | 63 | |||||
Revolving credit facilities and current portion of long-term debt | 19 | 19 | |||||
Accrued expenses and other current liabilities | 397 | 454 | |||||
Total current liabilities | 889 | 911 | |||||
Long-term debt | 3,932 | 3,886 | |||||
Deferred income taxes | 361 | 337 | |||||
Other non-current liabilities | 204 | 179 | |||||
Total liabilities | 5,386 | 5,313 | |||||
Commitments and contingencies | |||||||
Equity: | |||||||
Realogy Holdings preferred stock: $.01 par value; 50,000,000 shares authorized, none issued and outstanding at June 30, 2014 and December 31, 2013. | — | — | |||||
Realogy Holdings common stock: $.01 par value; 400,000,000 shares authorized, 146,160,078 shares outstanding at June 30, 2014 and 146,125,337 shares outstanding at December 31, 2013. | 1 | 1 | |||||
Additional paid-in capital | 5,655 | 5,635 | |||||
Accumulated deficit | (3,585 | ) | (3,607 | ) | |||
Accumulated other comprehensive loss | (17 | ) | (19 | ) | |||
Total stockholders' equity | 2,054 | 2,010 | |||||
Noncontrolling interests | 3 | 3 | |||||
Total equity | 2,057 | 2,013 | |||||
Total liabilities and equity | $ | 7,443 | $ | 7,326 |
For Three Months Ended June 30, | For Six Months Ended June 30, | ||||||||||||||||||||
2014 | 2013 | % Change | 2014 | 2013 | % Change | ||||||||||||||||
Real Estate Franchise Services (a) | |||||||||||||||||||||
Closed homesale sides | 293,450 | 302,420 | (3 | %) | 497,422 | 512,200 | (3 | %) | |||||||||||||
Average homesale price | $ | 252,606 | $ | 236,590 | 7 | % | $ | 246,088 | $ | 226,076 | 9 | % | |||||||||
Average homesale broker commission rate | 2.53 | % | 2.55 | % | (2) bps | 2.53 | % | 2.55 | % | (2) bps | |||||||||||
Net effective royalty rate | 4.46 | % | 4.51 | % | (5) bps | 4.47 | % | 4.53 | % | (6) bps | |||||||||||
Royalty per side | $ | 297 | $ | 281 | 6 | % | $ | 291 | $ | 272 | 7 | % | |||||||||
Company Owned Real Estate Brokerage Services | |||||||||||||||||||||
Closed homesale sides | 87,803 | 92,878 | (5 | %) | 144,489 | 150,938 | (4 | %) | |||||||||||||
Average homesale price | $ | 511,969 | $ | 478,280 | 7 | % | $ | 502,979 | $ | 458,867 | 10 | % | |||||||||
Average homesale broker commission rate | 2.47 | % | 2.49 | % | (2) bps | 2.48 | % | 2.50 | % | (2) bps | |||||||||||
Gross commission income per side | $ | 13,335 | $ | 12,598 | 6 | % | $ | 13,220 | $ | 12,226 | 8 | % | |||||||||
Relocation Services | |||||||||||||||||||||
Initiations | 51,306 | 51,311 | — | % | 89,205 | 87,262 | 2 | % | |||||||||||||
Referrals | 27,346 | 26,258 | 4 | % | 43,842 | 41,935 | 5 | % | |||||||||||||
Title and Settlement Services | |||||||||||||||||||||
Purchase title and closing units | 33,104 | 34,157 | (3 | %) | 53,879 | 55,663 | (3 | %) | |||||||||||||
Refinance title and closing units | 6,410 | 23,123 | (72 | %) | 13,609 | 47,623 | (71 | %) | |||||||||||||
Average fee per closing unit | $ | 2,013 | $ | 1,490 | 35 | % | $ | 1,889 | $ | 1,415 | 33 | % |
(a) | Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment. |
Quarter Ended | Year Ended | |||||||||||||||||||
March 31, 2013 | June 30, 2013 | September 30, 2013 | December 31, 2013 | December 31, 2013 | ||||||||||||||||
Real Estate Franchise Services (a) | ||||||||||||||||||||
Closed homesale sides | 209,779 | 302,420 | 315,432 | 255,793 | 1,083,424 | |||||||||||||||
Average homesale price | $ | 210,919 | $ | 236,590 | $ | 240,408 | $ | 237,776 | $ | 233,011 | ||||||||||
Average homesale broker commission rate | 2.56 | % | 2.55 | % | 2.53 | % | 2.53 | % | 2.54 | % | ||||||||||
Net effective royalty rate | 4.57 | % | 4.51 | % | 4.46 | % | 4.44 | % | 4.49 | % | ||||||||||
Royalty per side | $ | 258 | $ | 281 | $ | 281 | $ | 278 | $ | 276 | ||||||||||
Company Owned Real Estate Brokerage Services | ||||||||||||||||||||
Closed homesale sides | 58,060 | 92,878 | 93,083 | 72,619 | 316,640 | |||||||||||||||
Average homesale price | $ | 427,812 | $ | 478,280 | $ | 475,823 | $ | 490,666 | $ | 471,144 | ||||||||||
Average homesale broker commission rate | 2.52 | % | 2.49 | % | 2.49 | % | 2.49 | % | 2.50 | % | ||||||||||
Gross commission income per side | $ | 11,630 | $ | 12,598 | $ | 12,527 | $ | 12,856 | $ | 12,459 | ||||||||||
Relocation Services | ||||||||||||||||||||
Initiations | 35,951 | 51,311 | 42,788 | 35,655 | 165,705 | |||||||||||||||
Referrals | 15,677 | 26,258 | 28,406 | 21,032 | 91,373 | |||||||||||||||
Title and Settlement Services | ||||||||||||||||||||
Purchase title and closing units | 21,506 | 34,157 | 33,540 | 26,369 | 115,572 | |||||||||||||||
Refinance title and closing units | 24,500 | 23,123 | 17,625 | 10,948 | 76,196 | |||||||||||||||
Average price per closing unit | $ | 1,322 | $ | 1,490 | $ | 1,579 | $ | 1,649 | $ | 1,504 |
(a) | Includes all franchisees except for our Company Owned Real Estate Brokerage Services segment. |
For the Three Months Ended | |||||||
March 31, 2014 | June 30, 2014 | ||||||
Net revenues (a) | |||||||
Real Estate Franchise Services | $ | 144 | $ | 196 | |||
Company Owned Real Estate Brokerage Services | 750 | 1,182 | |||||
Relocation Services | 86 | 107 | |||||
Title and Settlement Services | 81 | 108 | |||||
Corporate and Other | (54 | ) | (81 | ) | |||
Total Company | $ | 1,007 | $ | 1,512 | |||
EBITDA (b) | |||||||
Real Estate Franchise Services | $ | 79 | $ | 137 | |||
Company Owned Real Estate Brokerage Services | (20 | ) | 91 | ||||
Relocation Services | 7 | 26 | |||||
Title and Settlement Services | (5 | ) | 17 | ||||
Corporate and Other | (25 | ) | (33 | ) | |||
Total Company | $ | 36 | $ | 238 | |||
Less: | |||||||
Depreciation and amortization | 46 | 46 | |||||
Interest expense, net | 70 | 73 | |||||
Income tax expense (benefit) | (34 | ) | 51 | ||||
Net income (loss) attributable to Realogy Holdings | $ | (46 | ) | $ | 68 |
(a) | Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $54 million and $81 million for the three months ended March 31, 2014 and June 30, 2014, respectively. Such amounts are eliminated through the Corporate and Other line. |
(b) | The three months ended March 31, 2014 includes $10 million related to the loss on early extinguishment of debt, $1 million related to the Phantom Value Plan and $1 million of former parent legacy costs. The three months ended June 30, 2014 includes $17 million related to the loss on early extinguishment of debt, $1 million related to the Phantom Value Plan. |
For the Three Months Ended | For the Year Ended | ||||||||||||||||||
March 31, | June 30, | September 30, | December 31, | December 31, | |||||||||||||||
2013 | 2013 | 2013 | 2013 | 2013 | |||||||||||||||
Net revenues (a) | |||||||||||||||||||
Real Estate Franchise Services | $ | 135 | $ | 193 | $ | 193 | $ | 169 | $ | 690 | |||||||||
Company Owned Real Estate Brokerage Services | 686 | 1,182 | 1,178 | 944 | 3,990 | ||||||||||||||
Relocation Services | 87 | 108 | 127 | 97 | 419 | ||||||||||||||
Title and Settlement Services | 100 | 130 | 134 | 103 | 467 | ||||||||||||||
Corporate and Other | (51 | ) | (80 | ) | (79 | ) | (67 | ) | (277 | ) | |||||||||
Total Company | $ | 957 | $ | 1,533 | $ | 1,553 | $ | 1,246 | $ | 5,289 | |||||||||
EBITDA (b) | |||||||||||||||||||
Real Estate Franchise Services | $ | 72 | $ | 133 | $ | 133 | $ | 110 | $ | 448 | |||||||||
Company Owned Real Estate Brokerage Services | (8 | ) | 102 | 91 | 21 | 206 | |||||||||||||
Relocation Services | 10 | 27 | 45 | 22 | 104 | ||||||||||||||
Title and Settlement Services | 4 | 20 | 17 | 9 | 50 | ||||||||||||||
Corporate and Other | (15 | ) | (78 | ) | (50 | ) | (12 | ) | (155 | ) | |||||||||
Total Company | $ | 63 | $ | 204 | $ | 236 | $ | 150 | $ | 653 | |||||||||
Less: | |||||||||||||||||||
Depreciation and amortization | 42 | 44 | 44 | 46 | 176 | ||||||||||||||
Interest expense, net | 89 | 67 | 74 | 51 | 281 | ||||||||||||||
Income tax expense (benefit) | 7 | 9 | 9 | (267 | ) | (242 | ) | ||||||||||||
Net income (loss) attributable to Realogy | $ | (75 | ) | $ | 84 | $ | 109 | $ | 320 | $ | 438 |
(a) | Transactions between segments are eliminated in consolidation. Revenues for the Real Estate Franchise Services segment include intercompany royalties and marketing fees paid by the Company Owned Real Estate Brokerage Services segment of $51 million, $80 million, $79 million and $67 million for the three months ended March 31, 2013, June 30, 2013, September 30, 2013 and December 31, 2013, respectively. Such amounts are eliminated through the Corporate and Other line. |
(b) | The three months ended March 31, 2013 includes $3 million related to the loss on early extinguishment of debt and $1 million of former parent legacy costs. |
Less | Equals | Plus | Equals | ||||||||||||||||
Year Ended | Six Months Ended | Six Months Ended | Six Months Ended | Twelve Months Ended | |||||||||||||||
December 31, 2013 | June 30, 2013 | December 31, 2013 | June 30, 2014 | June 30, 2014 | |||||||||||||||
Net income attributable to Realogy Group (a) | $ | 438 | $ | 9 | $ | 429 | $ | 22 | $ | 451 | |||||||||
Income tax (benefit) expense | (242 | ) | 16 | (258 | ) | 17 | (241 | ) | |||||||||||
Income before income taxes | 196 | 25 | 171 | 39 | 210 | ||||||||||||||
Interest expense, net | 281 | 156 | 125 | 143 | 268 | ||||||||||||||
Depreciation and amortization | 176 | 86 | 90 | 92 | 182 | ||||||||||||||
EBITDA (b) | 653 | 267 | 386 | 274 | 660 | ||||||||||||||
Covenant calculation adjustments: | |||||||||||||||||||
Former parent legacy benefit, net | (2 | ) | |||||||||||||||||
Loss on the early extinguishment of debt | 49 | ||||||||||||||||||
Pro forma effect of business optimization initiatives (c) | 9 | ||||||||||||||||||
Non-cash charges (d) | 34 | ||||||||||||||||||
Pro forma effect of acquisitions and new franchisees (e) | 12 | ||||||||||||||||||
Incremental securitization interest costs (f) | 4 | ||||||||||||||||||
Adjusted EBITDA | $ | 766 | |||||||||||||||||
Total senior secured net debt (g) | $ | 2,355 | |||||||||||||||||
Senior secured leverage ratio | 3.07 | x |
(a) | Net income (loss) attributable to Realogy consists of: (i) income of $109 million for the third quarter of 2013, (ii) income of $320 million for the fourth quarter of 2013. (iii) a loss of $46 million for the first quarter of 2014 and (iv) income of $68 million for the second quarter of 2014. |
(b) | EBITDA consists of: (i) $236 million for the third quarter of 2013, (ii) $150 million for the fourth quarter of 2013, (iii) $36 million for the first quarter of 2014 and (iv) $238 million for the second quarter of 2014. |
(c) | Represents the twelve-month pro forma effect of business optimization initiatives including $5 million related to business cost cutting initiatives, $1 million related to our Relocation Services integration costs, $2 million related to vendor renegotiations and $1 million of other items. |
(d) | Represents the elimination of non-cash expenses, including $50 million of stock-based compensation expense and $3 million of other items less $19 million for the change in the allowance for doubtful accounts and notes reserves from July 1, 2013 through June 30, 2014. |
(e) | Represents the estimated impact of acquisitions and new franchisees as if they had been acquired or signed on July 1, 2013. Franchisee sales activity is comprised of new franchise agreements as well as growth acquired by existing franchisees with our assistance. We have made a number of assumptions in calculating such estimate and there can be no assurance that we would have generated the projected levels of EBITDA had we owned the acquired entities or entered into the franchise contracts as of July 1, 2013. |
(f) | Incremental borrowing costs incurred as a result of the securitization facilities refinancing for the twelve months ended June 30, 2014. |
(g) | Represents total borrowings under the senior secured credit facility and borrowings secured by a first priority lien on our assets of $2,489 million plus $18 million of capital lease obligations less $152 million of readily available cash as of June 30, 2014. Pursuant to the terms of our senior secured credit facility, total senior secured net debt does not include the First and a Half Lien Notes, other indebtedness secured by a lien on our assets that is pari passu or junior in priority to the First and a Half Lien Notes, our securitization obligations or unsecured indebtedness, including the 3.375% Senior Notes and the 4.50% Senior Notes. |
Three Months Ended | |||||||
June 30, 2014 | June 30, 2013 | ||||||
Net income attributable to Realogy | $ | 68 | $ | 84 | |||
Income tax expense | 51 | 9 | |||||
Income before income taxes | 119 | 93 | |||||
Interest expense, net | 73 | 67 | |||||
Depreciation and amortization | 46 | 44 | |||||
EBITDA | 238 | 204 | |||||
Restructuring costs and former parent legacy costs, net | — | 2 | |||||
Loss on the early extinguishment of debt | 17 | 43 | |||||
Non-cash charges | 10 | 20 | |||||
Pro forma cost savings for restructuring initiatives | — | 2 | |||||
Pro forma effect of business optimization initiatives | 1 | 3 | |||||
Non-recurring fair value adjustments for purchase accounting | — | 1 | |||||
Pro forma effect of acquisitions and new franchisees | 2 | 1 | |||||
Fees for secondary offering | — | 1 | |||||
Incremental securitization interest costs | 1 | 1 | |||||
Adjusted EBITDA | $ | 269 | $ | 278 |
For the three months ended | |||||||
June 30, 2014 | |||||||
($ in millions) | ($ per share) | ||||||
Net income attributable to Realogy Holdings / Basic earnings per share | $ | 68 | $ | 0.47 | |||
Income tax expense, net of payments | 48 | 0.33 | |||||
Interest expense, net | 73 | 0.50 | |||||
Cash interest payments | (38 | ) | (0.26 | ) | |||
Depreciation and amortization | 46 | 0.31 | |||||
Capital expenditures | (18 | ) | (0.12 | ) | |||
Loss on the early extinguishment of debt | 17 | 0.12 | |||||
Working capital adjustments | 15 | 0.10 | |||||
Relocation assets, net of securitization | (13 | ) | (0.09 | ) | |||
Free Cash Flow / Cash Earnings Per Share | $ | 198 | $ | 1.36 | |||
Basic weighted average number of common shares outstanding (in millions) | 145.9 |
For the three months ended | |||||||
June 30, 2014 | |||||||
($ in millions) | ($ per share) | ||||||
Net income attributable to Realogy Holdings / Basic earnings per share | $ | 68 | $ | 0.47 | |||
Loss on the early extinguishment of debt | 17 | 0.12 | |||||
Mark-to-market interest rate swap losses | 14 | 0.09 | |||||
Tax impact | (13 | ) | (0.09 | ) | |||
Net income before loss on the early extinguishment of debt and mark-to-market interest rate swap losses | $ | 86 | $ | 0.59 | |||
Basic weighted average number of common shares outstanding (in millions) | 145.9 |
• | these measures do not reflect changes in, or cash required for, our working capital needs; |
• | these measures do not reflect our interest expense (except for interest related to our securitization obligations), or the cash requirements necessary to service interest or principal payments on our debt; |
• | these measures do not reflect our income tax expense or the cash requirements to pay our taxes; |
• | these measures do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; |
• | although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often require replacement in the future, and these measures do not reflect any cash requirements for such replacements; and |
• | other companies may calculate these measures differently so they may not be comparable. |
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