Puerto Rico | 66-0783622 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. employer identification number) | |
Cupey Center Building, Road 176, Kilometer 1.3, San Juan, Puerto Rico | 00926 | |
(Address of principal executive offices) | (Zip Code) |
☐ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
(d) | Exhibits. |
EVERTEC, Inc. | ||
(Registrant) | ||
Date: October 30, 2018 | By: | /s/ Joaquin A. Castrillo-Salgado |
Name: Joaquin A. Castrillo-Salgado | ||
Title: Chief Financial Officer |
• | Revenue grew 9% to $112.0 million |
• | GAAP Net Income attributable to common shareholders was $23.0 million or $0.31 per diluted share |
• | Adjusted EBITDA increased 25% to $52.1 million |
• | Adjusted earnings per common share was $0.45, an increase of 36% |
• | Revenue grew 9% to $335.6 million |
• | GAAP Net Income attributable to common shareholders was $66.1 million or $0.89 per diluted share |
• | Adjusted EBITDA increased 13% to $159.8 million |
• | Adjusted earnings per common share was $1.38, an increase of 13% |
• | Total consolidated revenue between $448 million and $452 million representing growth of 10% to 11% |
• | Adjusted earnings per common share of $1.79 to $1.83 representing growth of 22% to 24% as compared to $1.47 in 2017 |
• | Capital expenditures ranging between $37 million and $42 million |
• | Non-GAAP effective tax rate of approximately 13%. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
(Dollar amounts in thousands, except share data) | ||||||||||||||||
Revenues | $ | 112,017 | $ | 102,725 | $ | 335,638 | $ | 307,516 | ||||||||
Operating costs and expenses | ||||||||||||||||
Cost of revenues, exclusive of depreciation and amortization shown below | 49,464 | 62,699 | 146,015 | 149,902 | ||||||||||||
Selling, general and administrative expenses | 14,404 | 14,612 | 45,684 | 40,031 | ||||||||||||
Depreciation and amortization | 15,788 | 16,606 | 47,383 | 48,189 | ||||||||||||
Total operating costs and expenses | 79,656 | 93,917 | 239,082 | 238,122 | ||||||||||||
Income from operations | 32,361 | 8,808 | 96,556 | 69,394 | ||||||||||||
Non-operating income (expenses) | ||||||||||||||||
Interest income | 205 | 159 | 526 | 560 | ||||||||||||
Interest expense | (7,557 | ) | (8,012 | ) | (22,901 | ) | (22,454 | ) | ||||||||
Earnings of equity method investment | 238 | 155 | 612 | 413 | ||||||||||||
Other income, net | 1,130 | 192 | 1,878 | 2,829 | ||||||||||||
Total non-operating expenses | (5,984 | ) | (7,506 | ) | (19,885 | ) | (18,652 | ) | ||||||||
Income before income taxes | 26,377 | 1,302 | 76,671 | 50,742 | ||||||||||||
Income tax expense (benefit) | 3,302 | (4,840 | ) | 10,349 | 1,248 | |||||||||||
Net income | 23,075 | 6,142 | 66,322 | 49,494 | ||||||||||||
Less: Net income attributable to non-controlling interest | 78 | 40 | 251 | 274 | ||||||||||||
Net income attributable to EVERTEC, Inc.’s common stockholders | 22,997 | 6,102 | 66,071 | 49,220 | ||||||||||||
Other comprehensive income (loss), net of tax | ||||||||||||||||
Foreign currency translation adjustments | (4,325 | ) | 2,083 | (6,225 | ) | (518 | ) | |||||||||
Gain on cash flow hedge | 219 | 381 | 2,109 | 757 | ||||||||||||
Total comprehensive income attributable to EVERTEC, Inc.’s common stockholders | $ | 18,891 | $ | 8,566 | $ | 61,955 | $ | 49,459 | ||||||||
Net income per common share: | ||||||||||||||||
Basic | $ | 0.32 | $ | 0.08 | $ | 0.91 | $ | 0.68 | ||||||||
Diluted | $ | 0.31 | $ | 0.08 | $ | 0.89 | $ | 0.67 | ||||||||
Shares used in computing net income per common share: | ||||||||||||||||
Basic | 72,721,414 | 72,386,947 | 72,590,679 | 72,509,742 | ||||||||||||
Diluted | 74,657,100 | 73,093,718 | 74,123,431 | 73,090,012 |
(Dollar amounts in thousands) | September 30, 2018 | December 31, 2017 | ||||||
Assets | ||||||||
Current Assets: | ||||||||
Cash and cash equivalents | $ | 91,310 | $ | 50,423 | ||||
Restricted cash | 12,686 | 9,944 | ||||||
Accounts receivable, net | 82,865 | 83,328 | ||||||
Prepaid expenses and other assets | 29,671 | 25,011 | ||||||
Total current assets | 216,532 | 168,706 | ||||||
Investment in equity investee | 12,039 | 13,073 | ||||||
Property and equipment, net | 36,655 | 37,924 | ||||||
Goodwill | 396,035 | 398,575 | ||||||
Other intangible assets, net | 260,744 | 279,961 | ||||||
Deferred tax asset | 1,093 | 988 | ||||||
Other long-term assets | 5,500 | 3,561 | ||||||
Total assets | $ | 928,598 | $ | 902,788 | ||||
Liabilities and stockholders’ equity | ||||||||
Current Liabilities: | ||||||||
Accrued liabilities | $ | 45,174 | $ | 38,451 | ||||
Accounts payable | 37,397 | 41,135 | ||||||
Unearned income | 14,017 | 7,737 | ||||||
Income tax payable | 5,684 | 1,406 | ||||||
Current portion of long-term debt | 23,191 | 46,487 | ||||||
Short-term borrowings | — | 12,000 | ||||||
Total current liabilities | 125,463 | 147,216 | ||||||
Long-term debt | 541,949 | 557,251 | ||||||
Deferred tax liability | 11,509 | 13,820 | ||||||
Unearned income - long term | 24,217 | 23,486 | ||||||
Other long-term liabilities | 10,508 | 13,039 | ||||||
Total liabilities | 713,646 | 754,812 | ||||||
Stockholders’ equity | ||||||||
Preferred stock, par value $0.01; 2,000,000 shares authorized; none issued | — | — | ||||||
Common stock, par value $0.01; 206,000,000 shares authorized; 72,740,277 shares issued and outstanding at September 30, 2018 (December 31, 2017 - 72,393,933) | 727 | 723 | ||||||
Additional paid-in capital | 12,910 | 5,350 | ||||||
Accumulated earnings | 212,180 | 148,887 | ||||||
Accumulated other comprehensive loss, net of tax | (14,964 | ) | (10,848 | ) | ||||
Total EVERTEC, Inc. stockholders’ equity | 210,853 | 144,112 | ||||||
Non-controlling interest | 4,099 | 3,864 | ||||||
Total equity | 214,952 | 147,976 | ||||||
Total liabilities and equity | $ | 928,598 | $ | 902,788 |
Nine months ended September 30, | ||||||||
2018 | 2017 | |||||||
Cash flows from operating activities | ||||||||
Net income | $ | 66,322 | $ | 49,494 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 47,383 | 48,189 | ||||||
Amortization of debt issue costs and accretion of discount | 3,410 | 3,828 | ||||||
Provision for doubtful accounts and sundry losses | 1,065 | 452 | ||||||
Deferred tax benefit | (2,734 | ) | (6,338 | ) | ||||
Share-based compensation | 9,692 | 6,579 | ||||||
Loss on impairment of software | — | 6,473 | ||||||
Loss on disposition of property and equipment and other intangibles | 12 | 229 | ||||||
Earnings of equity method investment | (612 | ) | (413 | ) | ||||
Dividend received from equity method investment | 390 | — | ||||||
(Increase) decrease in assets: | ||||||||
Accounts receivable, net | (64 | ) | 5,446 | |||||
Prepaid expenses and other assets | (4,462 | ) | (3,813 | ) | ||||
Other long-term assets | (280 | ) | 1,447 | |||||
(Decrease) increase in liabilities: | ||||||||
Accounts payable and accrued liabilities | (3,674 | ) | (9,127 | ) | ||||
Income tax payable | 4,278 | 2,990 | ||||||
Unearned income | 7,655 | 4,570 | ||||||
Other long-term liabilities | 62 | (1,571 | ) | |||||
Total adjustments | 62,121 | 58,941 | ||||||
Net cash provided by operating activities | 128,443 | 108,435 | ||||||
Cash flows from investing activities | ||||||||
Additions to software | (15,385 | ) | (15,955 | ) | ||||
Acquisitions, net of cash acquired | — | (42,836 | ) | |||||
Property and equipment acquired | (9,620 | ) | (8,285 | ) | ||||
Proceeds from sales of property and equipment | 15 | 30 | ||||||
Net cash used in investing activities | (24,990 | ) | (67,046 | ) | ||||
Cash flows from financing activities | ||||||||
Statutory withholding taxes paid on share-based compensation | (2,128 | ) | (1,576 | ) | ||||
Net (decrease) increase in short-term borrowings | (12,000 | ) | 5,000 | |||||
Repayment of short-term borrowing for purchase of equipment and software | (686 | ) | (1,872 | ) | ||||
Dividends paid | (3,636 | ) | (21,762 | ) | ||||
Repurchase of common stock | — | (7,671 | ) | |||||
Repayment of long-term debt | (41,374 | ) | (14,748 | ) | ||||
Net cash used in financing activities | (59,824 | ) | (42,629 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | 43,629 | (1,240 | ) | |||||
Cash, cash equivalents and restricted cash at beginning of the period | 60,367 | 60,032 | ||||||
Cash, cash equivalents and restricted cash at end of the period | $ | 103,996 | $ | 58,792 |
Three months ended September 30, 2018 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | 28,951 | $ | 18,907 | $ | 24,486 | $ | 48,831 | $ | (9,158 | ) | $ | 112,017 | ||||||||||
Operating costs and expenses | 13,021 | 18,890 | 14,160 | 30,983 | 2,602 | 79,656 | |||||||||||||||||
Depreciation and amortization | 2,505 | 2,337 | 427 | 3,398 | 7,121 | 15,788 | |||||||||||||||||
Non-operating income (expenses) | 602 | 3,834 | — | 12 | (3,080 | ) | 1,368 | ||||||||||||||||
EBITDA | 19,037 | 6,188 | 10,753 | 21,258 | (7,719 | ) | 49,517 | ||||||||||||||||
Compensation and benefits (2) | 207 | 363 | 196 | 485 | 1,117 | 2,368 | |||||||||||||||||
Transaction, refinancing and other fees (3) | — | — | (1 | ) | 1 | 215 | 215 | ||||||||||||||||
Adjusted EBITDA | $ | 19,244 | $ | 6,551 | $ | 10,948 | $ | 21,744 | $ | (6,387 | ) | $ | 52,100 |
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $9.2 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees. |
(2) | Primarily represents share-based compensation, other compensation expense and severance payments. |
(3) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received. |
Three months ended September 30, 2017 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | 25,225 | $ | 17,432 | $ | 21,555 | $ | 46,275 | $ | (7,762 | ) | $ | 102,725 | ||||||||||
Operating costs and expenses | 16,219 | 21,396 | 19,444 | 31,620 | 5,238 | 93,917 | |||||||||||||||||
Depreciation and amortization | 2,259 | 2,608 | 618 | 4,024 | 7,097 | 16,606 | |||||||||||||||||
Non-operating income (expenses) | 567 | 1,732 | — | — | (1,952 | ) | 347 | ||||||||||||||||
EBITDA | 11,832 | 376 | 2,729 | 18,679 | (7,855 | ) | 25,761 | ||||||||||||||||
Compensation and benefits (2) | 205 | 139 | 216 | 781 | 1,007 | 2,348 | |||||||||||||||||
Transaction, refinancing and other fees (3) | 3,160 | 3,221 | 6,464 | — | 757 | 13,602 | |||||||||||||||||
Adjusted EBITDA | $ | 15,197 | $ | 3,736 | $ | 9,409 | $ | 19,460 | $ | (6,091 | ) | $ | 41,711 |
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $7.8 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees. |
(2) | Primarily represents share-based compensation, other compensation expense and severance payments. |
(3) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received and an impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable. |
Nine months ended September 30, 2018 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | 84,162 | $ | 58,534 | $ | 73,829 | $ | 145,985 | $ | (26,872 | ) | $ | 335,638 | ||||||||||
Operating costs and expenses | 39,084 | 55,357 | 41,413 | 90,349 | 12,879 | 239,082 | |||||||||||||||||
Depreciation and amortization | 7,230 | 7,035 | 1,268 | 10,437 | 21,413 | 47,383 | |||||||||||||||||
Non-operating income (expenses) | 1,969 | 7,048 | 8 | 378 | (6,913 | ) | 2,490 | ||||||||||||||||
EBITDA | 54,277 | 17,260 | 33,692 | 66,451 | (25,251 | ) | 146,429 | ||||||||||||||||
Compensation and benefits (2) | 885 | 1,080 | 746 | 1,609 | 6,350 | 10,670 | |||||||||||||||||
Transaction, refinancing and other fees (3) | (250 | ) | — | — | 1 | 2,986 | 2,737 | ||||||||||||||||
Adjusted EBITDA | $ | 54,912 | $ | 18,340 | $ | 34,438 | $ | 68,061 | $ | (15,915 | ) | $ | 159,836 |
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $26.9 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees. |
(2) | Primarily represents share-based compensation, other compensation expense and severance payments. |
(3) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement and the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received. |
Nine months ended September 30, 2017 | |||||||||||||||||||||||
(In thousands) | Payment Services - Puerto Rico & Caribbean | Payment Services - Latin America | Merchant Acquiring, net | Business Solutions | Corporate and Other (1) | Total | |||||||||||||||||
Revenues | $ | 78,821 | $ | 43,369 | $ | 67,546 | $ | 142,944 | $ | (25,164 | ) | $ | 307,516 | ||||||||||
Operating costs and expenses | 39,703 | 47,265 | 46,545 | 90,985 | 13,624 | 238,122 | |||||||||||||||||
Depreciation and amortization | 6,677 | 6,327 | 1,813 | 12,120 | 21,252 | 48,189 | |||||||||||||||||
Non-operating income (expenses) | 1,676 | 7,187 | 1 | 3 | (5,625 | ) | 3,242 | ||||||||||||||||
EBITDA | 47,471 | 9,618 | 22,815 | 64,082 | (23,161 | ) | 120,825 | ||||||||||||||||
Compensation and benefits (2) | 429 | 446 | 432 | 1,293 | 3,951 | 6,551 | |||||||||||||||||
Transaction, refinancing and other fees (3) | 2,500 | 3,221 | 6,464 | — | 1,439 | 13,624 | |||||||||||||||||
Adjusted EBITDA | $ | 50,400 | $ | 13,285 | $ | 29,711 | $ | 65,375 | $ | (17,771 | ) | $ | 141,000 |
(1) | Corporate and Other consists of corporate overhead, certain leveraged activities, other non-operating expenses and intersegment eliminations. Intersegment eliminations predominantly reflect the $25.2 million processing fee from Payments Services - Puerto Rico and Caribbean to Merchant Acquiring and cost transfer fees from Corporate and Other to Payment Services Latin America for leveraged services and management fees. |
(2) | Primarily represents share-based compensation, other compensation expense and severance payments. |
(3) | Primarily represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received and an impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable. |
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
(Dollar amounts in thousands, except share data) | 2018 | 2017 | 2018 | 2017 | ||||||||||||
Net income | $ | 23,075 | $ | 6,142 | $ | 66,322 | $ | 49,494 | ||||||||
Income tax expense (benefit) | 3,302 | (4,840 | ) | 10,349 | 1,248 | |||||||||||
Interest expense, net | 7,352 | 7,853 | 22,375 | 21,894 | ||||||||||||
Depreciation and amortization | 15,788 | 16,606 | 47,383 | 48,189 | ||||||||||||
EBITDA | 49,517 | 25,761 | 146,429 | 120,825 | ||||||||||||
Equity income (1) | (238 | ) | (155 | ) | (179 | ) | (413 | ) | ||||||||
Compensation and benefits (2) | 2,367 | 2,348 | 10,669 | 6,551 | ||||||||||||
Transaction, refinancing and other fees (3) | 454 | 974 | 2,917 | 1,254 | ||||||||||||
Exit activity (4) | — | 12,783 | — | 12,783 | ||||||||||||
Adjusted EBITDA | 52,100 | 41,711 | 159,836 | 141,000 | ||||||||||||
Operating depreciation and amortization (5) | (7,365 | ) | (7,969 | ) | (21,909 | ) | (23,126 | ) | ||||||||
Cash interest expense, net (6) | (6,473 | ) | (6,500 | ) | (19,396 | ) | (18,238 | ) | ||||||||
Income tax expense (7) | (4,558 | ) | (2,867 | ) | (15,492 | ) | (9,836 | ) | ||||||||
Non-controlling interest (8) | (121 | ) | (106 | ) | (385 | ) | (431 | ) | ||||||||
Adjusted net income | $ | 33,583 | $ | 24,269 | $ | 102,654 | $ | 89,369 | ||||||||
Net income per common share (GAAP): | ||||||||||||||||
Diluted | $ | 0.31 | $ | 0.08 | $ | 0.89 | $ | 0.67 | ||||||||
Adjusted Earnings per common share (Non-GAAP): | ||||||||||||||||
Diluted | $ | 0.45 | $ | 0.33 | $ | 1.38 | $ | 1.22 | ||||||||
Shares used in computing adjusted earnings per common share: | ||||||||||||||||
Diluted | 74,657,100 | 73,093,718 | 74,123,431 | 73,090,012 |
1) | Represents the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., net of cash dividends received. |
2) | Primarily represents share-based compensation and other compensation expense of $2.4 million for the both the quarters ended September 30, 2018 and 2017. Primarily represents share-based compensation and other compensation expense of $9.7 million and $6.6 million for the nine months ended September 30, 2018 and 2017 and severance payments $1.0 million for the nine months ended September 30, 2018. |
3) | Represents fees and expenses associated with corporate transactions as defined in the Credit Agreement, recorded as part of selling, general and administrative expenses and cost of revenues. |
4) | Impairment charge and contractual fee accrual for a third party software solution that was determined to be commercially unviable. |
5) | Represents operating depreciation and amortization expense, which excludes amounts generated as a result of the Merger and other from purchase accounting intangibles generated from acquisitions. |
6) | Represents interest expense, less interest income, as they appear on our consolidated statements of income and comprehensive income, adjusted to exclude non-cash amortization of the debt issue costs, premium and accretion of discount. |
7) | Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discreet items. |
8) | Represents the 35% non-controlling equity interest in Processa, net of amortization for intangibles created as part of the purchase. |
2018 Outlook | 2017 Actual | ||||||||||||
(Dollar amounts in millions, except per share data) | |||||||||||||
Revenues | $ | 448 | to | $ | 452 | $ | 407 | ||||||
Earnings per Share (EPS) - Diluted (GAAP) | $ | 1.16 | to | $ | 1.20 | $ | 0.76 | ||||||
Per share adjustment to reconcile GAAP EPS to Non-GAAP Adjusted EPS: | |||||||||||||
Share-based comp, non-cash equity earnings and other (1) | $ | 0.23 | $ | 0.23 | $ | 0.33 | |||||||
Merger related depreciation and amortization (2) | $ | 0.45 | $ | 0.45 | $ | 0.42 | |||||||
Non-cash interest expense (3) | $ | 0.05 | $ | 0.05 | $ | 0.07 | |||||||
Tax effect of non-GAAP adjustments (4) | $ | (0.10 | ) | $ | (0.10 | ) | $ | (0.10 | ) | ||||
Non-controlling interest (5) | $ | — | $ | — | $ | (0.01 | ) | ||||||
Total adjustments | $ | 0.63 | $ | 0.63 | $ | 0.71 | |||||||
Adjusted Earnings per common share (Non-GAAP) | $ | 1.79 | to | $ | 1.83 | $ | 1.47 | ||||||
Shares used in computing adjusted earnings per share (in millions) | 74.3 | 72.9 |
1) | Represents share based compensation, the elimination of non-cash equity earnings from our 19.99% equity investment in Consorcio de Tarjetas Dominicanas S.A., and other adjustments to reconcile GAAP EPS to Non-GAAP EPS. |
2) | Represents depreciation and amortization expenses amounts generated as a result of the Merger and other M&A transactions. |
3) | Represents non-cash amortization of the debt issue costs, premium and accretion of discount. |
4) | Represents income tax expense calculated on adjusted pre-tax income using the applicable GAAP tax rate, adjusted for certain discreet items of approximately 13% . |
5) | Represents the 35% non-controlling equity interest in Processa, net of amortization of intangibles created as part of the purchase. |
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