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): January 9, 2019
Premier, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 001-36092 | 35-2477140 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
13034 Ballantyne Corporate Place
Charlotte, NC 28277
(Address of Principal Executive Offices) (Zip Code)
(704) 357-0022
(Registrants Telephone Number, Including Area Code)
Not Applicable
(Former Name or Former Address, if Changed Since Last Report)
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:
☐ | 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)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2). Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 7.01. | Regulation FD Disclosure. |
Premier, Inc. (the Company) is scheduled to present at the 37th Annual J.P. Morgan Healthcare Conference in San Francisco, California on Wednesday, January 9, 2019 at 1:30 p.m. Pacific Time. The presentation and subsequent breakout question and answer session will be audio webcast live through the investor relations page on the Companys website at investors.premierinc.com, where presentation slides also will be made available. A webcast replay will be archived on the Companys website for approximately 90 days.
Pursuant to Regulation FD, the Company hereby furnishes the presentation materials attached as Exhibit 99.1 to this Current Report on Form 8-K, which information is incorporated into this Item 7.01 by this reference. A related press release announcing the Companys participation in the conference is also attached as Exhibit 99.2 to this Current Report on Form 8-K, which information is incorporated into this Item 7.01 by this reference.
The information in this Current Report on Form 8-K under this Item 7.01, as well as Exhibit 99.1 and Exhibit 99.2, shall not be deemed filed for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the Exchange Act), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act except as shall be expressly set forth by specific reference in such a filing. The furnishing of this report is not intended to constitute a determination by the registrant that the information is material or that the dissemination of the information is required by Regulation FD.
The information included in this Current Report on Form 8-K and any exhibits hereto will not be deemed an admission as to the materiality of any such information.
Use and Definition of Non-GAAP Financial Measures
The financial data contained in the presentation materials attached hereto as Exhibit 99.1 includes financial measures that are not calculated in accordance with generally accepted accounting principles (Non-GAAP), including EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Fully Distributed Net Income, Adjusted Fully Distributed Earnings per Share and Free Cash Flow, each as defined below.
The Company defines EBITDA as net income before interest and investment income, net, income tax expense, depreciation and amortization and amortization of purchased intangible assets. The Company defines Adjusted EBITDA as EBITDA before merger and acquisition related expenses and non-recurring, non-cash or non-operating items and including equity in net income of unconsolidated affiliates. For all Non-GAAP financial measures, the Company considers non-recurring items to be income or expenses and other items that have not been earned or incurred within the prior two years and are not expected to recur within the next two years. Such items include certain strategic and financial restructuring expenses. Non-operating items include gains or losses on the disposal of assets and interest and investment income or expense.
The Company defines Segment Adjusted EBITDA as the segments net revenue less cost of revenue and operating expenses directly attributable to the segment, excluding depreciation and amortization, amortization of purchased intangible assets, merger and acquisition related expenses and non-recurring or non-cash items, and including equity in net income of unconsolidated affiliates. Operating expenses directly attributable to the segment include expenses associated with sales and marketing, general and administrative, and product development activities specific to the operation of each segment. General and administrative corporate expenses that are not specific to a particular segment are not included in the calculation of Segment Adjusted EBITDA.
The Company defines Adjusted Fully Distributed Net Income as net income attributable to the Company (i) excluding income tax expense, (ii) excluding the impact of adjustment of redeemable limited partners capital to redemption amount, (iii) excluding the effect of non-recurring and non-cash items, (iv) assuming the exchange of all the Class B common units for shares of Class A common stock, which results in the elimination of non-controlling interest in Premier Healthcare Alliance, L.P., and (v) reflecting an adjustment for income tax expense on Non-GAAP fully distributed net income before income taxes at the Companys estimated effective income tax rate. The Company defines Adjusted Fully Distributed Earnings per Share as Adjusted Fully Distributed Net Income divided by diluted weighted average shares.
The Company defines Free Cash Flow as net cash provided by operating activities less distributions and tax receivable agreement payments to limited partners and purchases of property and equipment. Free Cash Flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments.
Adjusted EBITDA and Free Cash Flow are supplemental financial measures used by the Company and by external users of its financial statements and are considered to be indicators of the operational strength and performance of the Companys business. Adjusted EBITDA and Free Cash Flow measures allow the Company to assess its performance without regard to financing methods and capital structure and without the impact of other matters that the Company does not consider indicative of the operating performance of its business. More specifically, Segment Adjusted EBITDA is the primary earnings measure the Company uses to evaluate the performance of its business segments.
The Company uses Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Earnings per Share to facilitate a comparison of its operating performance on a consistent basis from period to period that, when viewed in combination with the Companys results prepared in accordance with GAAP, provides a more complete understanding of factors and trends affecting its business. The Company believes Adjusted EBITDA and Segment Adjusted EBITDA assist its board of directors, management and investors in comparing the Companys operating performance on a consistent basis from period to period because they remove the impact of earnings elements attributable to the Companys asset base (primarily depreciation and amortization) and certain items outside the control of its management team, e.g., taxes, as well as other non-cash (such as impairment of intangible assets, purchase accounting adjustments and stock-based compensation) and non-recurring items (such as strategic and financial restructuring expenses), from the Companys operating results. The Company believes Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Earnings per Share assist its board of directors, management and investors in comparing its net income and earnings per share on a consistent basis from period to period because these measures remove non-cash (such as impairment of intangible assets, purchase accounting adjustments and stock-based compensation) and non-recurring items (such as strategic and financial restructuring expenses), and eliminate the variability of non-controlling interest that results from member owner exchanges of Class B common units for shares of Class A common stock. The Company believes Free Cash Flow is an important measure because it represents the cash that the Company generates after payment of tax distributions to limited partners and capital investment to maintain existing products and services and ongoing business operations, as well as development of new and upgraded products and services to support future growth. Free Cash Flow allows the Company to enhance stockholder value through acquisitions, partnerships, joint ventures, investments in related businesses and debt reduction.
Despite the importance of these Non-GAAP financial measures in analyzing the Companys business, determining compliance with certain financial covenants in its Credit Facility, measuring and determining incentive compensation and evaluating its operating performance relative to competitors, EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Fully Distributed Net Income, Adjusted Fully Distributed Earnings per Share and Free Cash Flow are not measurements of financial performance under GAAP, may have limitations as analytical tools and should not be considered in isolation from, or as an alternative to, net income, net cash provided by operating activities, or any other measure of the Companys performance derived in accordance with GAAP.
Some of the limitations of the EBITDA, Adjusted EBITDA and Segment Adjusted EBITDA measures include that they do not reflect: the Companys capital expenditures or its future requirements for capital expenditures or contractual commitments; changes in, or cash requirements for, its working capital needs; the interest expense or the cash requirements to service interest or principal payments under its Credit Facility; income tax payments the Company is required to make; and any cash requirements for replacements of assets being depreciated or amortized.
In addition, EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA and Free Cash Flow are not measures of liquidity under GAAP, or otherwise, and are not alternatives to cash flows from operating activities. Some of the limitations of Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Earnings per Share measures are that they do not reflect income tax expense or income tax payments the Company is required to make. In addition, Adjusted Fully Distributed Net Income and Adjusted Fully Distributed Earnings per Share are not measures of profitability under GAAP.
The Company urges investors to review the reconciliation of these Non-GAAP financial measures included in the Appendix to Exhibit 99.1 of this Form 8-K and in the Companys Quarterly Report on Form 10-Q for the quarter ended September 30, 2018 (Form 10-Q), filed with the United States Securities and Exchange Commission (the SEC). To properly and prudently evaluate the Companys business, investors should review (i) the unaudited consolidated financial statements and related notes included in the Form 10-Q, (ii) the audited consolidated financial statements and related notes included in the Companys Annual Report on Form 10-K for the year ended June 30, 2018, filed with the SEC, and (iii) the future periodic and current reports the Company files with the SEC, and investors should not rely on any single financial measure to evaluate the Companys business. In addition, because the EBITDA, Adjusted EBITDA, Segment Adjusted EBITDA, Adjusted Fully Distributed Net Income, Adjusted Fully Distributed Earnings per Share and Free Cash Flow measures are susceptible to varying calculations, such Non-GAAP financial measures, as presented in the presentation materials, may differ from, and may therefore not be comparable to, similarly titled measures used by other companies.
Non-recurring and non-cash items excluded in the Companys calculation of Adjusted EBITDA, Segment Adjusted EBITDA and Adjusted Fully Distributed Net Income consist of stock-based compensation, acquisition related expenses, remeasurement of tax receivable agreement liabilities, enterprise resource planning (ERP) implementation expenses, acquisition related adjustment revenue, remeasurement gain attributable to acquisition of Innovatix, LLC, loss on disposal of long-lived assets, loss (gain) on FFF put and call rights, impairment on investments and other expense.
Forward-Looking Statements
Statements made in the presentation materials attached hereto as Exhibit 99.1 that are not statements of historical or current facts, including, but not limited to, those related to expected financial performance, growth trends and market uncertainty in our Supply Chain and Performance Services business segments and their respective business units, our ability to implement our strategic priorities, evolving long-term and nearer-term strategies and growth opportunities, cross-selling to our existing and future members, the impact of regulatory developments and uncertainty, anticipated emerging healthcare trends, and our ability to manage through these issues, FY2019 revenue visibility, the statements related to fiscal 2019 outlook and guidance and the assumptions underlying such guidance and Premiers repurchase activity under its stock repurchase program are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements of the Company to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any forward looking statements. In addition to statements that explicitly describe such risks and uncertainties, readers are urged to consider statements in the conditional or future tenses or that include terms such as believes, belief, expects, estimates, intends, anticipates or plans to be uncertain and forward-looking. Forward-looking statements may include comments as to the Companys beliefs and expectations as to future financial performance, events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside the Companys control. More information on potential factors that could affect the Companys financial results is included from time to time in the Cautionary Note Regarding Forward-Looking Statements, Risk Factors and Managements Discussion and Analysis of Financial Condition and Results of Operations sections of the Companys periodic and current filings with the SEC and made available on the Companys website at investors.premierinc.com. Forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or future events that occur after that date, or otherwise.
Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
99.1 | Premier, Inc. Presentation Materials, dated January 9, 2019 | |
99.2 | Press Release of Premier, Inc., dated December 26, 2018 |
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.
Premier, Inc. | ||||||
By: | /s/ Susan D. DeVore | |||||
Name: | Susan D. DeVore | |||||
Title: | President and Chief Executive Officer | |||||
Date: January 9, 2019 |
Reducing Costs, Improving Quality, Reinventing Healthcare J.P. Morgan Healthcare Conference 01.09.19 Exhibit 99.1
Forward-looking statements and non-GAAP financial measures Forward-looking Statements – Certain statements included in this presentation that are not historical or current facts including, but not limited to, those related to expected financial performance, growth trends and market uncertainty in our Supply Chain and Performance Services business segments and their respective business units, our ability to implement our strategic priorities, evolving long-term and nearer-term strategies and growth opportunities, cross-selling to our existing and future members, the impact of regulatory developments and uncertainty, anticipated emerging healthcare trends, and our ability to manage through these issues, FY2019 revenue visibility, the statements related to fiscal 2019 outlook and guidance and the assumptions underlying such guidance and Premier’s repurchase activity under its stock repurchase program are “forward-looking statements” within the meaning of the federal securities laws. Forward-looking statements may involve known and unknown risks, uncertainties and other factors that may cause the actual results of Premier to be materially different from historical results or from any future results or projections expressed or implied by such forward-looking statements. Accordingly, readers should not place undue reliance on any forward looking statements. Readers are urged to consider statements in the conditional or future tenses or that include terms such as “believes,” “belief,” “expects,” “estimates,” “intends,” “anticipates” or “plans” to be uncertain and forward-looking. Forward-looking statements may include comments as to Premier’s beliefs and expectations as to future events and trends affecting its business and are necessarily subject to uncertainties, many of which are outside Premier’s control. You should carefully read Premier’s periodic and current filings with the SEC for more information on potential risks and other factors that could affect Premier’s financial results. Forward-looking statements speak only as of the date they are made. Premier undertakes no obligation to publicly update or revise any forward-looking statements. Non-GAAP Financial Measures – This presentation includes certain “non-GAAP financial measures” as defined in Regulation G under the Securities Exchange Act of 1934. Schedules are attached that reconcile the non-GAAP financial measures included in this presentation to the most directly comparable financial measures calculated and presented in accordance with Generally Accepted Accounting Principles in the United States. You should carefully read Premier’s periodic and current filings with the SEC for definitions and further explanation and disclosure regarding our use of non-GAAP financial measures and such filings should be read in conjunction with this presentation.
Company Overview 3
Premier is a leading healthcare improvement company with a multi-year track record of revenue and earnings growth, a flexible balance sheet and strong cash flow generation. We believe we are well positioned to invest in future growth and return capital to stockholders. Investment profile Positioned to deliver stockholder value.
5 5 Turning data into actionable insights at the point of care Increasing physician participation and alignment with alternative payment programs 2 Significant proposed reform of the pharmaceutical market 4 Acceleration in the shift to value-based care and risk 1 Emerging healthcare trends Employers contracting with providers; active consumer engagement 3 Vertical and horizontal consolidation 6
By integrating Premier’s core supply chain and clinical solutions with technology and wrap-around consulting services, we believe Premier is uniquely positioned to help healthcare providers achieve these critical objectives. Premier’s role in the future of healthcare Providers face increasing financial pressure, market consolidation, data integration challenges, disruption and increasing competition. Providers must reduce costs, improve quality and safety outcomes and assume risk. 5 6
It’s all about the data insights Supply Chain Value-Based Care Quality & Regulatory Cost Management Safety Pharmacy Market leading enterprise analytics enable Premier to deliver highly differentiated and significant value for its members. [1] As of December 31, 2018, based on Premier’s proprietary database known as the Premier Healthcare Database and other data points available to Premier members and subscribers. Powers Our Capabilities Benefits Our Customers Device Manufacturers Providers and their Health Plans Employers Pharma [1]
Premier’s significant footprint and scale ~2,400 CONTRACTS ~1,300 SUPPLIERS Note: Data as of fiscal year ended June 30, 2018.
Premier’s unique member alignment Co-develop solutions with members Committees composed of ~400 individuals, representing ~140 member hospitals ~1,450 hospitals in performance improvement collaboratives Note: Data as of fiscal year ended June 30, 2018, except member ownership as of October 31, 2018. LONG-TERM EXPERIENCE Significant health system member ownership ALIGNMENT Strategic board alignment Premier field force embedded in member health systems LONG-TERM EXPERIENCE CO-INNOVATION Member owner tenure averages ~19 years
Supply Chain Services Group Purchasing Integrated Pharmacy Performance Services Direct Sourcing ~78% of FY18 Consolidated Net Revenue ~81% of FY18 Non-GAAP Pre-Corporate Segment Adjusted EBITDA ~22% of FY18 Consolidated Net Revenue ~19% of FY18 Non-GAAP Pre-Corporate Segment Adjusted EBITDA eCommerce, Technology and Enterprise Analytics Embedded Field Force Healthcare Informatics and Data Analytics Performance Improvement Collaboratives Consulting Services Integrated platform provides comprehensive solutions 10
The Premier model at a glance Business Multiple Revenue Drivers Significant revenue visibility* 89% - 94% of FY2019 revenue guidance range available under contract High 5-year average retention/renewal rates** 98% GPO retention 94% SaaS institutional renewal rate SaaS-based subscriptions / license fees Fee-for-service Service subscriptions Supply Chain Services Performance Services Consolidated *As provided on August 21, 2018. ** Five-year average as of fiscal year-end June 30, 2018 Supplier paid administrative fees Drug reimbursement Contract manufactured product sales 11
Vendor agnostic, payer neutral data analytics from multiple sources CLAIMS FINANCIAL COST MANAGEMENT QUALITY & REGULATORY VALUE-BASED CARE SAFETY RESEARCH Combining people, process, and technology to SUPPLY CHAIN Reduce costs Improve outcomes Optimize Value-based care ENTERPRISE PURCHASING BILLING CLINICAL ANY DATA The PremierConnect® platform enables innovative data analytics 12
$2.5M Delivering annual ROI for our member health systems* GPO/Direct Sourcing Supply Chain Analytics Clinical Analytics (Quality/Safety) Integrated Platform Analytics Consulting Services $382k Dedicated Support Staff Annual Admin Fee Share/Tax Distribution Remaining TRA Value $10.4M Annual Cost Reduction Remaining Equity Value $1.7M Annual Spend: Product/Services Partnership Costs * Solely for illustrative purposes based on one member’s actual experience in fiscal 2018 and the Remaining TRA Value and Remaining Equity Value are current through the October 31, 2018 member owner Class B unit quarterly exchange. Each member’s total value varies by scope of relationship with Premier, investment size, and utilization of Premier products and services. 2018 ROI exclusive of TRA and equity value = 17:1 An all-in enterprise relationship spanning 28 years of products/services partnership: $27.3M $5.9M
CAGR: 18% CAGR: 12% CAGR: 15% Consolidated Net Revenue* (in millions) Non-GAAP Adjusted EBITDA* (in millions) Non-GAAP Adjusted Fully Distributed EPS* * For periods prior to October 1, 2013, comparisons are with non-GAAP pro forma information that reflects the impact of the company’s 2013 reorganization and initial public offering. See non-GAAP reconciliations to GAAP equivalents in Appendix. Recurring and visible revenue High customer retention rates Free cash flow generation Strong balance sheet Multiple growth drivers Core “chassis” built Premier’s diversified model has delivered consistent growth 14
* As of November 9, 2018 debt refinancing. **Non-GAAP adjusted EBITDA and free cash flow figures are for fiscal year ended June 30, 2018. Flexible balance sheet and strong non-GAAP free cash flow generation * Non-GAAP free cash flow expected to exceed 50% of non-GAAP adjusted EBITDA for fiscal 2019 $543 Adj. EBITDA $336 Free Cash Flow
16 Capital allocation priorities return of capital to stockholders continue growth and expansion maintain flexible balance sheet
Supply Chain Services Performance Services Group Purchasing Integrated Pharmacy Direct Sourcing Comprehensive data acquisition and management Emerging technology enablement Consumer engagement & activation Vertically integrated services and standardized care Supply chain analytics Workflow eCommerce Logistics / fulfillment Value-based care delivery and payment Ambulatory clinical integration Research / applied sciences Predictive analytics / precision medicine Co-manage total supply chain outcomes with members Co-manage total clinical and cost outcomes with members Strategic acquisition, investment and partnership opportunities 17
Strategic Growth Opportunities 18
Enterprise supply chain strategic priorities Best in class contract portfolio Direct manufacturing portfolio Logistics / fulfillment partner(s) Supply chain leadership experts Centralized expert analysts Co-management ERP-agnostic supply chain overlay Customizable eCommerce platform Centralized value analysis 19
Workflow Integration Delivery Partner End-to-End Actionable Opportunity Large Employers Health Systems Life Sciences Clinical Performance Total Cost Revenue & Productivity Drive clinical, financial and operational transformation through integrated technology platform, consulting services and best practice sharing through the collaboratives. Improve quality by leveraging our integrated data to test new therapeutic interventions. Access new markets to improve quality and reduce cost by building high-value network models in partnership with members. Enterprise analytics and performance improvement strategic priorities 20
Stanson – Embedding evidence-based insight into provider workflow Ranked #1 by KLAS for clinical process improvement solutions 21
22 Nearer-term growth opportunities enabled by unique capabilities generic drug shortage solutions high compliance portfolio high-value care network
Final Thoughts 23
24 Premier’s key differentiators Compelling financial model reflecting multi-year revenue and earnings growth, flexible balance sheet and strong free cash flow Unique member alignment and long-term relationships Integrated technology platform and differentiated data assets Well-positioned to capitalize on industry trends Disciplined growth strategy
25 Thank you
Appendix
Premier leadership Note: Experience as of January 1, 2019. Susan DeVore President and CEO 15 years Premier, 29 years healthcare Cap Gemini Ernst & Young David Hargraves SVP, Supply Chain Services 3 years Premier, 16 years supply chain University of Pittsburgh Medical Center (UPMC) Leigh Anderson President, Performance Services 5 years Premier, 22 years healthcare informatics Hospital Corporation of America, HealthTrust, GHX Mike Alkire Chief Operating Officer 14 years Premier, 14 years healthcare Cap Gemini Ernst & Young Craig McKasson Chief Financial Officer 21 years Premier, 25 years healthcare Ernst & Young
Fiscal 2019 guidance(1) Fiscal 2019 Financial Guidance (in millions, except per share data) ASC 606 Impact of ASC 606 ASC 605 Net Revenue: Supply Chain Services segment $1,305.0 - $1,357.0 ($50.0) $1,355.0 - $1,407.0 Products revenue ($50.0) Performance Services segment $350.0 - $364.0 ($16.0) $366.0 - $380.0 Licensed safety technology revenue ($11.0) Reseller or subcontractor revenue ($5.0) Total Net Revenue $1,655.0 - $1,721.0 ($66.0) $1,721.0 - $1,787.0 Non-GAAP adjusted EBITDA $550.0 - $572.0 ($9.0) $559.0 - $581.0 Licensed safety technology ($9.0) Non-GAAP adjusted fully distributed EPS(2) $2.55 - $2.67 ($0.05) $2.60 - $2.72 Licensed safety technology ($0.05) For the year ending June 30, 2019. As of November 6, 2018. See accompanying page for fiscal 2019 notes and assumptions to guidance. Does not reflect the impact of previously announced $250 million stock repurchase plan for periods after September 30, 2018. Premier has adjusted fiscal year 2019 guidance to reflect the new revenue recognition standard, which it adopted July 1, 2019 using the modified retrospective approach. As illustrated below, the adjustments are solely due to the impact of the adoption of the new standard.
Guidance Footnotes: * The company does not meaningfully reconcile guidance for non-GAAP adjusted EBITDA and non-GAAP adjusted fully distributed earnings per share to net income attributable to stockholders or earnings per share attributable to stockholders because the company cannot provide guidance for more significant reconciling items between net income attributable to stockholders and adjusted EBITDA and between earnings per share attributable to stockholders and non-GAAP adjusted fully distributed earnings per share without unreasonable effort. This is due to two primary reasons: • Reasonable guidance cannot be provided for reconciling the adjustment of redeemable limited partners’ capital to redemption amount – historically the largest adjustment in the reconciliation from non-GAAP to GAAP amounts – due to the fact that the increase or decrease in this item is based on the change in the number of shares of Class B stock outstanding and change in stock price between quarters, which the company cannot predict, control or reasonably estimate. • Reasonable guidance cannot be provided for earnings per share attributable to stockholders because the ongoing quarterly member-owner exchange of Class B common stock and corresponding Class B units into shares of Class A common stock impacts the number of shares of Class A common stock outstanding each quarter, which the company cannot predict, control or reasonably estimate. Member owners have the right, but not the obligation, to exchange shares on a quarterly basis, and the company has the discretion to settle any exchanged shares for Class A common stock, cash, or a combination thereof, neither of which can be predicted, controlled or reasonably estimated at this time. Fiscal 2019 annual guidance footnotes and key assumptions (for year ending June 30, 2019)* Key Assumptions*: Supply Chain Services assumptions: Net administrative fees revenue growth of low to mid-single digits Products revenue, which were estimated to grow 7% to 11% under the previous revenue recognition standard, will now reflect 0% to 4% percent year-over-year growth. This entirely results from the impact of the new standard, which caused an estimated $50 million gross-to-net revenue reduction. Continued high GPO retention rates Performance Services assumptions: Continued demand for integrated offerings of cloud-based subscription and licensed products, consulting and collaboratives Continued high SaaS institutional renewal rates Other assumptions: Non-GAAP free cash flow expected to exceed 50% of non-GAAP adjusted EBITDA Capital expenditures of approximately $90 million to $95 million, representing 5% to 6% of consolidated net revenue Consolidated non-GAAP adjusted EBITDA margin in the range of 32 to 35% Stock-based compensation approximating $36 million to $38 million Adjusted fully distributed net income and earnings per share calculations to reflect an effective tax rate of 26% Amortization of purchased intangible assets of approximately $54 million Guidance does not contemplate any material acquisitions *As of November 6, 2018
Strategic business diversification impact on non-GAAP adjusted EBITDA margin Although consolidated non-GAAP adjusted EBITDA margin has compressed with strategic diversification, non-GAAP adjusted EBITDA in dollars has shown strong growth, supported by stable to expanding margin trends in the underlying businesses. * For periods prior to October 1, 2013, comparisons are with non-GAAP pro forma information that reflects the impact of the company’s 2013 reorganization and initial public offering. Non-GAAP adjusted EBITDA margin is defined as consolidated non-GAAP adjusted EBITDA divided by consolidated net revenue. See non-GAAP reconciliations to GAAP equivalents in Appendix. ** Y-O-Y Decline predominantly due to acquisition of Acro Pharmaceutical Services in August 2016. ***Y-O-Y decline partially due to acquisition of Acro Pharmaceutical Services in August 2016. A B C
Supply Chain Services strategic priorities and historical growth Expand member base Drive further penetration of existing members Leverage analytics and eCommerce capabilities Continue to organically expand products business Co-manage total supply chain metrics with a subset of members CAGR: 20% CAGR: 11% * For periods prior to October 1, 2013, comparisons are with non-GAAP pro forma information that reflects the impact of the company’s 2013 reorganization and initial public offering. See non-GAAP reconciliations to GAAP equivalents in Appendix. Create end-to-end supply chain capabilities
Performance Services strategic priorities and historical growth Develop enterprise analytics and performance improvement capability to facilitate a consolidated, real-time view into performance Explore new channels of revenue by leveraging unique data assets and differentiated capabilities in new ways Co-innovation by leveraging cognitive computing “backbone” Navigate the journey to value-based payment models Enable care delivery transformation Co-manage total outcomes metrics with a subset of members Enable clinical improvement through data analytics and wrap-around services * See non-GAAP reconciliations to GAAP equivalents in Appendix. CAGR: 12% CAGR: 14% Performance Services Segment Net Revenue (in millions)
Continue cross-selling into well-established and expanding member base Reduce Costs | Improve Quality and Safety | Optimize Value-Based Care Premier Product Offering Penetration within Highly Committed Member Base** Premier Product Offering Penetration within Existing Member Base* * Hospitals in Existing Member Base are counted in a category (improve quality & safety, reduce cost, optimize value-based care) if they participate in at least one offering in that category (numerator). The hospital cohort is based on those hospitals that were Premier members at June 30, 2014 and June 30, 2018 (denominator). ** Hospitals in Highly Committed Member Base are counted in a category (improve quality & safety, reduce cost, optimize value-based care) if they participate in at least one offering in that category (numerator). Cohort of hospitals in Highly Committed Member Base is comprised of 558 hospitals, whose executives serve on Premier’s board of directors and other executive advisory committees including Premier’s Member Value Improvement Committee, Member Quality Improvement Committee and Member Technology Improvement Committee (denominator).
Premier, Inc. formed in 2013 with two classes of stock: Class A shares held by public investors Class B shares held by member owners Class B units eligible to exchange 1/7th per year on quarterly basis, over 7-year period. Member owners currently own ~52% of equity and have exchanged or settled for cash ~50% of shares eligible for exchange. [1] Member owners exchanging their Class B units have generally done so to comply with internal policies related to investment diversification, or to help fund their operations and/or certain capital expenditures. Historically, the member owners’ exchange decisions have not materially impacted their ongoing business relationship with Premier. At October 2013At October 31, 2018 Class B shares: 112.6 (78%)69.6 (52%) Total shares: 145.0 (100%)132.8 (100%) [1] As of October 31, 2018. 34 Member owner exchange process has increased liquidity since IPO
Structural implications of Premier Inc. Structure Structured as “Up-C” with Premier, Inc. (parent C-Corp) above operating partnership and subsidiaries Premier, Inc. formed with two classes of stock Class A shares held by public investors Class B shares allocated to member owners ~22% of Limited Partner equity sold to public, ~78% retained by member owners as Class B units Class B units eligible to exchange 1/7th per year, over seven-year period Exchange of Class B units for Class A shares (on a 1-for-1 basis), cash or a combination thereof as B units become eligible for exchange subject to ROFR by members owners and Premier, Inc. Quarterly exchanges, beginning October 31, 2014, have been the primary driver for injecting liquidity into the public market. Given Up-C structure and differences between taxes paid by our Class A unit holder (Premier GP) vs. distributions to our Class B unit holders (members owners), we calculate Adjusted Fully Distributed Net Income for comparability purposes Reflects taxes and net income as if the Company was a C-Corp for all periods presented Class A and Class B shares will be used to calculate fully diluted EPS to eliminate variability due to member exchanges over time Impact of IPO and Exchange Process Adjusted fully distributed net income Share count
Unique member alignment – ownership structure Premier Services, LLC (General Partner) Premier Healthcare Alliance, L.P. CLASS A SHARES CLASS B SHARES & CLASS B LP UNITS PUBLIC STOCKHOLDERS MEMBER OWNERS Premier Healthcare Solutions Inc. Premier Supply Chain Improvement Inc. [ 52% ] Premier Inc. [ 48% ] Note: % Ownership as of October 31, 2018. 48% (Class A LP Units) 100% 100% 100%
Premier’s GPO Economics / Value Equation
Efficient GPO model reduces costs for providers and manufacturers* * Illustrative for average member owner in fiscal 2018, including 30% fee share and tax distribution. Net admin fee retained by GPO approximates 1% of product price Provider Distributor & Manufacturer Total Savings & Economic Value Delivered Averages 1.6% Administrative fee Retains ~ 1% admin fees
Collaborating to ensure consistent, low-cost & efficient supply chain Premier provides Best industry pricing with predictive aggregated demand and supply Efficient supply chain outcomes Confidence in product value Clinician confidence Value analysis E-commerce Long-term contracting Standardization/compliance Priority access Analytics Most innovative products Dedicated supply chain High quality, safety, efficacy at low price Predictive aggregated supply Detailed price, comparative effectiveness & resource utilization analytics Management of shortages safety alerts & recalls Clinician and SME support Supplier contract flexibility for technology/pricing innovations Uniform sourcing process Disaster response, continuity management Member requires Reduced selling costs Aggregated demand One-time negotiation E-commerce Price-activation technology Field and SME support Dedicated supplier engagement team Regulator & recall interaction Analytics Standardization/compliance Supplier requires
Among all online retailers surveyed: Competition pricing averaged 72% to 143% above Premier** Comparative online pricing survey Best in KLAS 2017 [2] [1] Premier compared pricing on the 100 products most frequently purchased* by members against other online retailers, including Amazon Business, NexTag and Google Shopping the findings *During the period from November 2017 through October 2018, based on pricing tiers. **Pricing averaged during the period from December 17-28, 2018.
Non-GAAP Reconciliation Tables
Fiscal 2018, fiscal 2017 and fiscal 2016 non-GAAP reconciliations The following table provides the reconciliation of net income to non-GAAP Adjusted EBITDA, the reconciliation of income before income taxes to non-GAAP Adjusted EBITDA, and non-GAAP Segment Adjusted EBITA to non-GAAP Adjusted EBITDA (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of non-GAAP Adjusted EBITDA and non-GAAP Segment Adjusted EBITDA. (Slide 1 of 3)
Fiscal 2018, fiscal 2017 and fiscal 2016 non-GAAP reconciliations The following table provides the reconciliation of net income to non-GAAP Adjusted EBITDA, the reconciliation of income before income taxes to non-GAAP Adjusted EBITDA, and non-GAAP Segment Adjusted EBITA to non-GAAP Adjusted EBITDA (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of non-GAAP Adjusted EBITDA and non-GAAP Segment Adjusted EBITDA. (Slide 2 of 3)
Fiscal 2018, fiscal 2017 and fiscal 2016 non-GAAP reconciliations The following table provides the reconciliation of net income to non-GAAP Adjusted EBITDA, the reconciliation of income before income taxes to non-GAAP Adjusted EBITDA, and non-GAAP Segment Adjusted EBITA to non-GAAP Adjusted EBITDA (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of non-GAAP Adjusted EBITDA and non-GAAP Segment Adjusted EBITDA. (Slide 3 of 3)
Fiscal 2018, fiscal 2017 and fiscal 2016 non-GAAP reconciliations The following table provides the reconciliation of net income attributable to stockholders to Non-GAAP Adjusted Fully Distributed Net Income and the reconciliation of the numerator and denominator for earnings (loss) per share attributable to stockholders to Non-GAAP Adjusted Fully Distributed Earnings per Share for the periods presented (in thousands). Refer to "Our Use of Non-GAAP Financial Measures“ in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Non-GAAP Adjusted Fully Distributed Net Income and Non-GAAP Adjusted Fully Distributed Earnings per Share. (Slide 1 of 1)
Fiscal 2018, fiscal 2017 and fiscal 2016 non-GAAP reconciliations The following table provides the reconciliation of earnings per share attributable to stockholders to Non-GAAP Adjusted Fully Distributed Earnings per Share for the periods presented. Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Non-GAAP Adjusted Fully Distributed Earnings per Share. (Slide 1 of 1)
Fiscal 2018, fiscal 2017 and fiscal 2016 non-GAAP reconciliations We define Non-GAAP Free Cash Flow as net cash provided by operating activities less distributions and TRA payments to limited partners and purchases of property and equipment. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments. A summary of Non-GAAP Free Cash Flow and reconciliation to net cash provided by operating activities for the periods presented follows (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding non-GAAP Free Cash Flow. (Slide 1 of 1)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations The following table provides the reconciliation of net income to Adjusted EBITDA, the reconciliation of income before income taxes to Adjusted EBITDA, and non-GAAP Segment Adjusted EBITDA to non-GAAP Adjusted EBITDA (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Adjusted EBITDA and Segment Adjusted EBITDA. (Slide 1 of 3)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations The following table provides the reconciliation of net income to Adjusted EBITDA, the reconciliation of income before income taxes to Adjusted EBITDA, and non-GAAP Segment Adjusted EBITDA to non-GAAP Adjusted EBITDA (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Adjusted EBITDA and Segment Adjusted EBITDA. (Slide 2 of 3)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations The following table provides the reconciliation of net income to Adjusted EBITDA, the reconciliation of income before income taxes to Adjusted EBITDA, and non-GAAP Segment Adjusted EBITDA to non-GAAP Adjusted EBITDA (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Adjusted EBITDA and Segment Adjusted EBITDA. (Slide 3 of 3)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations The following table shows the reconciliation of net income (loss) attributable to stockholders to Non-GAAP Adjusted Fully Distributed Net Income and the reconciliation of the numerator and denominator for earnings (loss) per share attributable to stockholders to Non-GAAP Adjusted Fully Distributed Earnings per Share for the periods presented (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Non-GAAP Adjusted Fully Distributed Net Income and Non-GAAP Adjusted Fully Distributed Earnings per Share. (Slide 1 of 3)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations The following table shows the reconciliation of net income (loss) attributable to stockholders to Non-GAAP Adjusted Fully Distributed Net Income and the reconciliation of the numerator and denominator for earnings (loss) per share attributable to stockholders to Non-GAAP Adjusted Fully Distributed Earnings per Share for the periods presented (in thousands). Refer to "Our Use of Non-GAAP Financial Measures" in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Non-GAAP Adjusted Fully Distributed Net Income and Non-GAAP Adjusted Fully Distributed Earnings per Share. (Slide 2 of 3)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations The following table shows the reconciliation of net income (loss) attributable to stockholders to Non-GAAP Adjusted Fully Distributed Net Income and the reconciliation of the numerator and denominator for earnings (loss) per share attributable to stockholders to Non-GAAP Adjusted Fully Distributed Earnings per Share for the periods presented (in thousands). Refer to "Our Use of Non-GAAP Financial Measures“ in our most recently filed Form 10-K for further information regarding items excluded in our calculation of Non-GAAP Adjusted Fully Distributed Net Income and Non-GAAP Adjusted Fully Distributed Earnings per Share. (Slide 3 of 3)
Fiscal 2017, fiscal 2016 and fiscal 2015 non-GAAP reconciliations We define Non-GAAP Free Cash Flow as net cash provided by operating activities less distributions and TRA payments to limited partners and purchases of property and equipment. Free cash flow does not represent discretionary cash available for spending as it excludes certain contractual obligations such as debt repayments. A summary of Non-GAAP Free Cash Flow and reconciliation to net cash provided by operating activities for the periods presented follows (in thousands): (Slide 1 of 1)
Fiscal 2014 non-GAAP reconciliations The table that follows shows the reconciliation of the numerator and denominator for (loss) earnings per share attributable to stockholders after adjustment of redeemable limited partners' capital to redemption amount to non-GAAP pro forma Adjusted Fully Distributed Earnings Per Share for the periods presented (in thousands): (Slide 1 of 2) (a) Represents legal, accounting and other expenses related to acquisition activities. (b) Represents legal, accounting and other expenses directly related to the Reorganization and IPO. (c) Represents the gain on sale of investment in GHX. (d) Represents adjustment to tax receivable agreement liability for the Premier LP change in tax accounting method approved by the Internal Revenue Service subsequent to the original recording of the tax receivable agreement liability. (e) Reflects the elimination of the noncontrolling interest in Premier LP as if all member owners of Premier LP had fully exchanged their Class B common units for shares of Class A common stock. (f) Reflects income tax expense at an estimated effective income tax rate of 40% of income before income taxes assuming the conversion of all Class B common units into shares of Class A common stock and the tax impact of excluding strategic and financial restructuring expenses.
Fiscal 2014 non-GAAP reconciliations The table that follows shows the reconciliation of actual and pro forma net income to Adjusted EBITDA and the reconciliation of actual and pro forma Segment Adjusted EBITDA to operating income for the periods presented (in thousands). (Slide 2 of 2) (b) Represents legal, accounting and other expenses related to acquisition activities. (c) Represents legal, accounting and other expenses directly related to strategic and financial restructuring expenses. (e) Represents adjustment to tax receivable agreement liability for the Premier LP change in tax accounting method approved by the Internal Revenue Service subsequent to the original recording of the TRA liability. (g) Corporate consists of general and administrative corporate expenses that are not specific to either of our segments.
Fiscal 2014 non-GAAP reconciliations The table that follows shows the reconciliation of the numerator and denominator for (loss) earnings per share attributable to stockholders after adjustment of redeemable limited partners' capital to redemption amount to non-GAAP pro forma Adjusted Fully Distributed Earnings Per Share for the periods presented (in thousands): (Slide 1 of 2) (a) Represents legal, accounting and other expenses related to acquisition activities. (b) Represents legal, accounting and other expenses directly related to the Reorganization and IPO. (c) Represents the gain on sale of investment in GHX. (d) Represents adjustment to tax receivable agreement liability for the Premier LP change in tax accounting method approved by the Internal Revenue Service subsequent to the original recording of the tax receivable agreement liability. (e) Reflects the elimination of the noncontrolling interest in Premier LP as if all member owners of Premier LP had fully exchanged their Class B common units for shares of Class A common stock. (f) Reflects income tax expense at an estimated effective income tax rate of 40% of income before income taxes assuming the conversion of all Class B common units into shares of Class A common stock and the tax impact of excluding strategic and financial restructuring expenses.
Fiscal 2014 non-GAAP reconciliations The table that follows shows the reconciliation of the numerator and denominator for (loss) earnings per share attributable to stockholders after adjustment of redeemable limited partners' capital to redemption amount to non-GAAP pro forma Adjusted Fully Distributed Earnings Per Share for the periods presented (in thousands). (Slide 2 of 2)
Fiscal 2014 non-GAAP reconciliations The table that follows shows the reconciliation of (loss) earnings per share attributable to stockholders to non-GAAP pro forma Adjusted Fully Distributed Earnings Per Share for the periods presented: (a) Represents legal, accounting and other expenses related to acquisition activities. (b) Represents legal, accounting and other expenses directly related to the Reorganization and IPO. During the fiscal year ended June 30, 2015, strategic and financial restructuring expenses were incurred in connection with the company directed offering conducted pursuant to the Registration Rights Agreement. During the fiscal year ended June 30, 2014, strategic and financial restructuring expenses were incurred in connection with the Reorganization and IPO. (c) Represents the gain on sale of investment in GHX. (d) Represents adjustment to tax receivable agreement liability for the Premier LP change in tax accounting method approved by the Internal Revenue Service subsequent to the original recording of the tax receivable agreement liability. (e) Reflects the elimination of the noncontrolling interest in Premier LP as if all member owners of Premier LP had fully exchanged their Class B common units for shares of Class A common stock. (f) Reflects income tax expense at an estimated effective income tax rate of 40% of income before income taxes assuming the conversion of all Class B common units into shares of Class A common stock and the tax impact of excluding strategic and financial restructuring expenses. (g) Reflects impact of increased share count assuming the conversion of all Class B common units into shares of Class A common stock.
Exhibit 99.2
Healthcare Improvement Company Premier Inc. to Present at 37th Annual J.P. Morgan Healthcare Conference in San Francisco on Wednesday, January 9, 2019 at 1:30 p.m. PT
CHARLOTTE, NC, Dec. 26, 2018 Premier Inc. (NASDAQ: PINC), a leading healthcare improvement company, announced today that its President and CEO, Susan DeVore, will present at the 37th Annual J.P. Morgan Healthcare Conference on Jan. 9, 2019.
The presentation and subsequent Q&A will be audio webcast live at 1:30 p.m. PT and can be accessed through a link provided on the investor relations page of Premiers website at investors.premierinc.com. The audio webcast will be archived on Premiers website for approximately 90 days.
DeVore will be accompanied by Premiers Chief Operating Officer, Michael J. Alkire, and Chief Financial Officer, Craig McKasson.
About Premier Inc.
Premier Inc. (NASDAQ: PINC) is a leading healthcare improvement company, uniting an alliance of more than 4,000 U.S. hospitals and health systems and approximately 165,000 other providers and organizations to transform healthcare. With integrated data and analytics, collaboratives, supply chain solutions, and consulting and other services, Premier enables better care and outcomes at a lower cost. Premier plays a critical role in the rapidly evolving healthcare industry, collaborating with members to co-develop long-term innovations that reinvent and improve the way care is delivered to patients nationwide. Headquartered in Charlotte, N.C., Premier is passionate about transforming American healthcare. Please visit Premiers news and investor sites on www.premierinc.com; as well as Twitter, Facebook, LinkedIn, YouTube, Instagram and Premiers blog for more information about the company.
Investor contact: | Media contact: | |
Jim Storey | Amanda Forster | |
Vice President, Investor Relations | Vice President, Public Relations | |
704.816.5958 | 202.879.8004 | |
jim_storey@premierinc.com | amanda_forster@premierinc.com |
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