UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 23, 2018
Blue Buffalo Pet Products, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 001-37510 | 46-0552933 | ||
(State or Other Jurisdiction of Incorporation) |
(Commission File Number) |
(IRS Employer Identification No.) |
11 River Road
Wilton, CT 06897
(Address of Principal Executive Offices) (Zip Code)
(203) 762-9751
(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 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
2.02 Results of Operations and Financial Condition.
On February 23, 2018, Blue Buffalo Pet Products, Inc. (the Company) issued a press release announcing the results of the Company for the fourth quarter and full year ended December 31, 2017. A copy of the press release is being furnished as Exhibit 99.1 attached hereto and is incorporated by reference herein.
Item 7.01 Regulation FD Disclosure.
On February 23, 2018, the Company and General Mills, Inc. (GMI) issued a joint press release announcing the entry into a definitive merger agreement under which GMI will acquire the Company for $40.00 per share of common stock, in cash. A copy of the joint press release is being furnished as Exhibit 99.2 attached hereto and is incorporated by reference herein.
As permitted by General Instruction B.2 of Form 8-K, information that is furnished shall not be deemed filed for any purpose, including 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. The information and exhibits in this Current Report on Form 8-K shall not be deemed incorporated by reference into 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 filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit No. |
Description | |
99.1 | Press Release issued by Blue Buffalo Pet Products, Inc. dated February 23, 2018 announcing results for the fourth quarter and full year ended December 31, 2017. | |
99.2 | Joint Press Release issued by Blue Buffalo Pet Products, Inc. and General Mills, Inc. dated February 23, 2018. |
EXHIBIT INDEX
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.
BLUE BUFFALO PET PRODUCTS, INC. | ||
By: | /s/ Lawrence Miller | |
Name: | Lawrence Miller | |
Title: | Senior Vice President, General Counsel and Secretary |
Date: February 23, 2018
Exhibit 99.1
Blue Buffalo Reports Fourth Quarter and Full Year 2017 Results
Wilton, CTFebruary 23, 2018Blue Buffalo Pet Products, Inc. (the Company) (NASDAQ: BUFF), the leading natural pet food company in the United States, today announced its fourth quarter and full year 2017 results.
| Fourth Quarter Highlights |
| Net sales of $337 million, up 14.2% |
| Net income of $54 million, up 54.1%; Adjusted Net Income of $54 million, up 50.2% |
| Adjusted EBITDA of $80 million, up 22.4% |
| Diluted EPS of $0.27, up 55.3%; Adjusted Diluted EPS of $0.27, up 51.4% |
| Full Year Highlights |
| Net sales of $1,275 million, up 10.9% |
| Net income of $194 million, up 48.6%; Adjusted Net Income of $195 million, up 24.3% |
| Adjusted EBITDA of $319 million, up 15.8% |
| Diluted EPS of $0.97, up 48.9%; Adjusted Diluted EPS of $0.98, up 24.5% |
| 2018 Outlook |
| Net sales between $1,400 million and $1,430 million |
| Adjusted Diluted EPS of $1.20 to $1.24 |
Im pleased to say that 2017 was a strong year, said CEO Billy Bishop. Blue Buffalos momentum continues to be strong as we gained share, broadened our distribution footprint, and built two new plants to fuel our growth. Looking ahead, were very optimistic about our future.
1
Fourth Quarter of 2017 Compared to Fourth Quarter of 2016
Net sales increased $41.9 million, or 14.2%, to $337.0 million, driven primarily by volume growth. Net sales of Dry Foods increased $25.9 million, or 10.8%, to $265.9 million while net sales of Wet Foods, Treats and Other Products increased $16.0 million, or 28.9%, to $71.1 million.
Gross profit increased $19.9 million, or 15.1%, to $151.9 million and gross margin was 45.1%, up 40 bps compared with 44.7% in the fourth quarter of 2016. The increase in gross margin was driven primarily by favorable product mix and supply chain efficiencies, which were partially offset by higher distribution costs.
Selling, general, and administrative expenses increased $3.1 million, or 4.4%, to $75.0 million. Adjusted SG&A, which excludes litigation expenses and costs incurred in preparing for our public offerings, increased $4.6 million, or 6.5%. This increase was primarily due to our ongoing investment in advertising and marketing consistent with our brand building strategy.
Net income increased $18.8 million, or 54.1%, to $53.6 million, or $0.27 per diluted share in the fourth quarter of 2017, as compared to $34.8 million, or $0.17 per diluted share, in the fourth quarter of 2016. Adjusted Net Income, which excludes litigation expenses and costs incurred in preparing for our public offerings, increased $17.9 million, or 50.2%, to $53.5 million in the fourth quarter of 2017, compared to $35.6 million in the fourth quarter of 2016. Adjusted Diluted Earnings Per Share in the fourth quarter of 2017 increased 51.4% to $0.27, compared to $0.18 in the fourth quarter of 2016.
Full Year Ended December 31, 2017 Compared to Full Year Ended December 31, 2016
Net sales increased $124.8 million, or 10.9%, to $1,274.6 million, primarily driven by volume growth. Net sales of Dry Foods increased $79.3 million, or 8.5%, to $1,013.5 million, while net sales of Wet Foods, Treats and Other Products increased $45.5 million, or 21.1%, to $261.1 million.
Gross profit increased $73.4 million, or 14.2%, to $589.1 million and gross margin was 46.2%, up 130 bps compared with 44.9% in 2016. The increase in gross margin was driven primarily by favorable product mix and supply chain efficiencies, which were partially offset by higher distribution costs.
2
Selling, general, and administrative expenses increased $23.1 million, or 8.8%, to $285.8 million. Adjusted SG&A, which excludes litigation expenses and costs incurred in preparing for our public offerings, increased $30.0 million, or 11.8%. This increase was primarily due to our ongoing investment in advertising and marketing consistent with our brand building strategy.
During the fourth quarter of 2016, Blue Buffalo Company, Ltd. (BBC), a wholly owned subsidiary of the Company, entered into a settlement agreement with respect to the previously disclosed Nestlé Purina lawsuit. In connection with the settlement agreement, the Company recorded a charge of $32.0 million.
Net income increased $63.3 million, or 48.6%, to $193.5 million, or $0.97 per diluted share in 2017, as compared to $130.2 million, or $0.65 per diluted share in 2016. Adjusted Net Income increased $38.0 million, or 24.3%, to $194.8 million in 2017, compared to $156.8 million in 2016. Adjusted Diluted Earnings Per Share in 2017 increased 24.5% to $0.98, compared to $0.79 in 2016.
Net cash provided by operating activities was $193.9 million in 2017 compared with $127.2 million in 2016. Net cash provided by operating activities for fiscal 2017 increased by $66.6 million as 2016 included a $32.0 million payment related to a settlement agreement with respect to the previously disclosed Nestlé Purina lawsuit.
Cash and cash equivalents were $282.2 million as of December 31, 2017 as compared to $292.7 million as of December 31, 2016.
Impact of Tax Reform
The Tax Cuts and Jobs Act of 2017 was signed into law on December 22, 2017. The significant change that impacted 2017 was the remeasurement of deferred taxes in connection with the reduction in the corporate statutory income tax rate from 35% to 21%. The impact of these adjustments increased our net income for both the three and twelve months ended December 31, 2017 by $5.4 million.
Full Year 2018 Outlook
For the full year 2018, the Company expects to deliver net sales between $1,400 million and $1,430 million and Adjusted Diluted Earnings Per Share of $1.20 to $1.24.
3
Information Regarding Todays Announcement of Definitive Merger Agreement with General Mills, Inc.
In a separate press release issued this morning, Blue Buffalo announced that it has entered into a definitive merger agreement with General Mills, Inc. under which General Mills, Inc. will acquire Blue Buffalo for $40.00 per common share, in cash, or an enterprise value of approximately $8.0 billion. For further information on the transaction, please visit http://ir.bluebuffalo.com to access a copy of the press release.
In light of this announcement, Blue Buffalo no longer plans to update financial guidance and will not hold its investor conference call on fourth quarter 2017 results, previously planned for 5 pm ET on February 27, 2018.
Important Information Regarding Non-GAAP Financial Measures
The Company presents non-GAAP financial measures, including Adjusted Net Income, Adjusted EBITDA, Adjusted Diluted EPS, Adjusted SG&A, Adjusted Income Taxes, Adjusted Operating Income and Adjusted Gross Profit, in this press release as management uses these measures in assessing our operating performance, and we believe they are helpful to investors, securities analysts and other interested parties, in evaluating the performance of companies in our industry. We also believe that these non-GAAP financial measures are useful to management and investors, securities analysts and other interested parties as measures of our comparative operating performance from period to period. These non-GAAP financial measures are not measurements of financial performance under GAAP. They should not be considered as alternatives to cash flow from operating activities, as measures of liquidity, or as alternatives to net income as a measure of our operating performance or any other measures of performance derived in accordance with GAAP. The methods used by the Company to calculate its non-GAAP financial measures may differ significantly from methods used by other companies to compute similar measures. As a result, any non-GAAP financial measures presented herein may not be comparable to similar measures provided by other companies. Please see the schedules to this press release for additional information and reconciliations of such non-GAAP financial measures to the nearest GAAP measure. With respect to our expectations under Full Year 2018 Outlook above, for Adjusted Diluted EPS a reconciliation to the closest corresponding GAAP financial measure is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to litigation expenses and public offering costs excluded from this non-GAAP financial measure. We expect the variability of these charges to have a potentially unpredictable, and potentially significant, impact on our future GAAP financial results.
4
About Blue Buffalo
Blue Buffalo, based in Wilton, CT, is the nations leading natural pet food company, providing natural foods and treats for dogs and cats under its BLUE Life Protection Formula, BLUE Wilderness, BLUE Basics, BLUE Freedom, and BLUE Natural Veterinary Diet lines. Paying tribute to its founding mission, the Company, through the Blue Buffalo Foundation, is a leading sponsor of pet cancer awareness and of critical research studies of pet cancer, including causes, treatments and the role of nutrition, at leading veterinary medical schools and clinics across the United States. For more information about Blue Buffalo, visit the Companys website at www.BlueBuffalo.com.
Forward-looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements include, but are not limited to, statements related to the expectations regarding the performance of the Companys business, financial results, liquidity and capital resources and other non-historical statements, including the statements in the Full Year 2018 Outlook section of this press release. You can identify these forward-looking statements by the use of words such as outlook, forecast, guidance, believes, expects, potential, continues, may, will, should, could, seeks, approximately, projects, predicts, intends, plans, estimates, anticipates or the negative version of these words or other comparable words. Such forward-looking statements are subject to various risks and uncertainties, including, among others, risks inherent to the pet food industry, macroeconomic factors beyond the Companys control, competition for customers, risks related to the Companys manufacturing and supply chain, the success of the Companys Heartland manufacturing facility, risk of disruption at the Companys third party distribution centers, risks related to the Companys expansion outside the United States, the Companys ability to protect the Companys intellectual property and that of third parties, performance of the Companys information technology systems, adverse litigation judgments or settlements and the Companys indebtedness. Additional factors that could cause the Companys results to differ materially from those described in the forward-looking statements can be found under the section entitled Risk Factors in the Companys Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (the SEC) on February 26, 2018, as such risk factors may
5
be updated from time to time in our periodic filings with the SEC, and which are accessible on the SECs website at www.sec.gov. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. These factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included in this release and in the Companys filings with the SEC. The Company undertakes no obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise, except as required by law.
Contacts:
Investors & Financial Analysts
Michael Nathenson
EVP & CFO
203-665-3400
investors@bluebuff.com
Media
Phil Cheevers
VP, Communications
203-665-3234
media@bluebuff.com
6
Blue Buffalo Pet Products, Inc.
Unaudited Consolidated Statements of Income
(dollars in thousands, except for share data)
Three Months Ended December 31, |
Twelve Months Ended December 31, |
|||||||||||||||
2017 | 2016 | 2017 | 2016 | |||||||||||||
Net sales |
$ | 336,963 | $ | 295,096 | $ | 1,274,589 | $ | 1,149,778 | ||||||||
Cost of sales |
185,104 | 163,157 | 685,501 | 634,095 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Gross profit |
151,859 | 131,939 | 589,088 | 515,683 | ||||||||||||
Selling, general, and administrative expenses |
75,049 | 71,912 | 285,849 | 262,761 | ||||||||||||
Provision for legal settlement |
| | | 32,000 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Operating income |
76,810 | 60,027 | 303,239 | 220,922 | ||||||||||||
Interest expense |
2,162 | 3,385 | 11,141 | 14,619 | ||||||||||||
Interest income |
(653 | ) | (143 | ) | (1,440 | ) | (505 | ) | ||||||||
Other non-operating expense, net |
181 | | 213 | | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Income before income taxes |
75,120 | 56,785 | 293,325 | 206,808 | ||||||||||||
Provision for income taxes |
21,500 | 21,983 | 99,796 | 76,567 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Net income |
$ | 53,620 | $ | 34,802 | $ | 193,529 | $ | 130,241 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Basic net income per common share |
$ | 0.27 | $ | 0.18 | $ | 0.99 | $ | 0.66 | ||||||||
Diluted net income per common share |
$ | 0.27 | $ | 0.17 | $ | 0.97 | $ | 0.65 | ||||||||
Basic weighted average shares |
195,302,613 | 196,516,632 | 196,256,128 | 196,363,084 | ||||||||||||
Diluted weighted average shares |
197,889,189 | 199,446,875 | 198,918,417 | 199,348,746 |
7
Blue Buffalo Pet Products, Inc.
Unaudited Consolidated Balance Sheets
(dollars in thousands, except for share data)
December 31, 2017 |
December 31, 2016 |
|||||||
ASSETS |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ | 282,223 | $ | 292,656 | ||||
Receivables, net |
150,260 | 115,446 | ||||||
Inventories |
79,945 | 70,941 | ||||||
Prepaid expenses and other current assets |
7,893 | 6,130 | ||||||
|
|
|
|
|||||
Total current assets |
520,321 | 485,173 | ||||||
Restricted cash |
781 | 781 | ||||||
Property, plant and equipment, net |
326,404 | 162,232 | ||||||
Deferred income taxes |
52 | 1,311 | ||||||
Other assets |
1,028 | 853 | ||||||
|
|
|
|
|||||
Total assets |
$ | 848,586 | $ | 650,350 | ||||
|
|
|
|
|||||
LIABILITIES AND STOCKHOLDERS EQUITY |
||||||||
Current liabilities: |
||||||||
Current maturities of long-term debt |
$ | 4,000 | $ | 3,960 | ||||
Accounts payable |
63,979 | 35,238 | ||||||
Other current liabilities |
70,994 | 59,629 | ||||||
|
|
|
|
|||||
Total current liabilities |
138,973 | 98,827 | ||||||
Long-term debt |
389,914 | 379,177 | ||||||
Deferred income taxes |
7,095 | 12,660 | ||||||
Other long-term liabilities |
13,468 | 13,348 | ||||||
|
|
|
|
|||||
Total liabilities |
549,450 | 504,012 | ||||||
Commitments and contingencies |
||||||||
Stockholders equity: |
||||||||
Preferred stock; $0.01 par value; 150,000,000 shares authorized; none issued or outstanding at December 31, 2017 and December 31, 2016 |
| | ||||||
Common stock, voting; $0.01 par value; 1,500,000,000 shares authorized; 197,615,064 and 196,524,010 shares issued at December 31, 2017 and December 31, 2016, respectively |
1,976 | 1,965 | ||||||
Additional paid-in capital |
81,113 | 71,420 | ||||||
Retained earnings |
266,221 | 72,692 | ||||||
Accumulated other comprehensive income (loss) |
(174 | ) | 261 | |||||
Treasury stock, at cost: 2,092,774 and no shares at December 31, 2017 and December 31, 2016, respectively |
(50,000 | ) | | |||||
|
|
|
|
|||||
Total stockholders equity |
299,136 | 146,338 | ||||||
|
|
|
|
|||||
Total liabilities and stockholders equity |
$ | 848,586 | $ | 650,350 | ||||
|
|
|
|
8
Blue Buffalo Pet Products, Inc.
Unaudited Consolidated Statements of Cash Flows
(dollars in thousands)
Year Ended December 31, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: |
||||||||
Net income |
$ | 193,529 | $ | 130,241 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: |
||||||||
Depreciation and amortization |
10,514 | 9,200 | ||||||
Amortization of debt issuance costs |
354 | 122 | ||||||
Stock-based compensation |
3,683 | 4,609 | ||||||
Loss on disposal of fixed assets |
593 | 49 | ||||||
Deferred income taxes |
(4,306 | ) | 11,988 | |||||
Payment for class action legal settlement |
| (32,000 | ) | |||||
Effect of changes in operating assets and liabilities: |
||||||||
Receivables |
(33,611 | ) | (35,509 | ) | ||||
Inventories |
(8,930 | ) | 12,493 | |||||
Prepaid expenses and other assets |
(1,928 | ) | (2,109 | ) | ||||
Accounts payable |
27,995 | 4,563 | ||||||
Other liabilities |
5,966 | 23,596 | ||||||
|
|
|
|
|||||
Net cash provided by operating activities |
193,859 | 127,243 | ||||||
|
|
|
|
|||||
Cash flows from investing activities: |
||||||||
Capital expenditures |
(170,970 | ) | (56,345 | ) | ||||
Restricted cash |
| (308 | ) | |||||
Proceeds from the sale of fixed assets |
| 15 | ||||||
|
|
|
|
|||||
Net cash used in investing activities |
(170,970 | ) | (56,638 | ) | ||||
|
|
|
|
|||||
Cash flows from financing activities: |
||||||||
Proceeds from issuance of debt |
400,000 | | ||||||
Repayment of long-term debt |
(382,147 | ) | | |||||
Repurchase of common stock |
(50,000 | ) | | |||||
Payment of debt issuance costs |
(4,352 | ) | | |||||
Principal payments on long-term debt |
(2,990 | ) | (3,960 | ) | ||||
Proceeds from exercise of stock options |
6,021 | 1,915 | ||||||
|
|
|
|
|||||
Net cash used in financing activities |
(33,468 | ) | (2,045 | ) | ||||
|
|
|
|
|||||
Effect of exchange rate changes on cash and cash equivalents |
146 | (157 | ) | |||||
|
|
|
|
|||||
Net (decrease) increase in cash and cash equivalents |
(10,433 | ) | 68,403 | |||||
Cash and cash equivalents at beginning of period |
292,656 | 224,253 | ||||||
|
|
|
|
|||||
Cash and cash equivalents at end of period |
$ | 282,223 | $ | 292,656 | ||||
|
|
|
|
|||||
Supplemental schedule of non-cash investing activities: |
||||||||
Accruals related to property, plant and equipment |
5,411 | |
9
Blue Buffalo Pet Products, Inc.
Reconciliation of GAAP to Adjusted Results*
(dollars in millions, except for share data)
Three Months Ended December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||
Gross Profit |
% of Sales |
SG&A | % of Sales |
Operating Income |
% of Sales |
Income Taxes |
% of Sales |
Net Income |
% of Sales |
Diluted EPS |
||||||||||||||||||||||||||||||||||
As reported (GAAP) |
$ | 151.9 | 45.1 | % | $ | 75.0 | 22.3 | % | $ | 76.8 | 22.8 | % | $ | 21.5 | 6.4 | % | $ | 53.6 | 15.9 | % | $ | 0.27 | ||||||||||||||||||||||
Litigation expenses (a) |
| (0.2 | ) | | % | (0.2 | ) | | % | | | % | (0.1 | ) | | % | | |||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
As adjusted |
$ | 151.9 | 45.1 | % | $ | 75.2 | 22.3 | % | $ | 76.7 | 22.7 | % | $ | 21.5 | 6.4 | % | $ | 53.5 | 15.9 | % | $ | 0.27 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Three Months Ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||
Gross Profit |
% of Sales |
SG&A | % of Sales |
Operating Income |
% of Sales |
Income Taxes |
% of Sales |
Net Income |
% of Sales |
Diluted EPS |
||||||||||||||||||||||||||||||||||
As reported (GAAP) |
$ | 131.9 | 44.7 | % | $ | 71.9 | 24.4 | % | $ | 60.0 | 20.3 | % | $ | 22.0 | 7.4 | % | $ | 34.8 | 11.8 | % | $ | 0.17 | ||||||||||||||||||||||
Litigation expenses (a) |
| 1.3 | 0.4 | % | 1.3 | 0.4 | % | 0.5 | 0.2 | % | 0.8 | 0.3 | % | | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
As adjusted |
$ | 131.9 | 44.7 | % | $ | 70.6 | 23.9 | % | $ | 61.3 | 20.8 | % | $ | 22.5 | 7.6 | % | $ | 35.6 | 12.1 | % | $ | 0.18 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
Twelve Months Ended December 31, 2017 | ||||||||||||||||||||||||||||||||||||||||||||
Gross Profit |
% of Sales |
SG&A | % of Sales |
Operating Income |
% of Sales |
Income Taxes |
% of Sales |
Net Income |
% of Sales |
Diluted EPS |
||||||||||||||||||||||||||||||||||
As reported (GAAP) |
$ | 589.1 | 46.2 | % | $ | 285.8 | 22.4 | % | $ | 303.2 | 23.8 | % | $ | 99.8 | 7.8 | % | $ | 193.5 | 15.2 | % | $ | 0.97 | ||||||||||||||||||||||
Litigation expenses (a) |
| 1.9 | 0.2 | % | 1.9 | 0.2 | % | 0.7 | 0.1 | % | 1.3 | 0.1 | % | 0.01 | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
As adjusted |
$ | 589.1 | 46.2 | % | $ | 283.9 | 22.3 | % | $ | 305.2 | 23.9 | % | $ | 100.5 | 7.9 | % | $ | 194.8 | 15.3 | % | $ | 0.98 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
Twelve Months Ended December 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||
Gross Profit |
% of Sales |
SG&A | % of Sales |
Operating Income |
% of Sales |
Income Taxes |
% of Sales |
Net Income |
% of Sales |
Diluted EPS |
||||||||||||||||||||||||||||||||||
As reported (GAAP) |
$ | 515.7 | 44.9 | % | $ | 262.8 | 22.9 | % | $ | 220.9 | 19.2 | % | $ | 76.6 | 6.7 | % | $ | 130.2 | 11.3 | % | $ | 0.65 | ||||||||||||||||||||||
Litigation expenses (a) |
| 6.7 | 0.6 | % | 6.7 | 0.6 | % | 2.5 | 0.2 | % | 4.2 | 0.4 | % | 0.02 | ||||||||||||||||||||||||||||||
Public offering costs (b) |
| 2.1 | 0.2 | % | 2.1 | 0.2 | % | | | % | 2.1 | 0.2 | % | 0.01 | ||||||||||||||||||||||||||||||
Provision for legal settlement (c) |
| | 32.0 | 2.8 | % | 11.8 | 1.0 | % | 20.2 | 1.8 | % | 0.10 | ||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||||
As adjusted |
$ | 515.7 | 44.9 | % | $ | 253.9 | 22.1 | % | $ | 261.8 | 22.8 | % | $ | 90.9 | 7.9 | % | $ | 156.8 | 13.6 | % | $ | 0.79 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
* | Amounts may not be additive due to rounding. |
(a) | Represents costs, net of insurance primarily related to the litigation with Nestlé Purina PetCare Company. |
(b) | Represents costs incurred for our public offerings. |
(c) | Represents a provision related to a settlement agreement with respect to Nestlé Purina PetCare Company lawsuit entered into in November 2016. |
10
Blue Buffalo Pet Products, Inc.
Reconciliation of GAAP to Adjusted Results*
(dollars in millions, except for share data)
Three Months Ended | Twelve Months Ended | |||||||||||||||
December 31, 2017 |
December 31, 2016 |
December 31, 2017 |
December 31, 2016 |
|||||||||||||
Net income |
$ | 53.6 | $ | 34.8 | $ | 193.5 | $ | 130.2 | ||||||||
Interest expense |
2.2 | 3.4 | 11.1 | 14.6 | ||||||||||||
Interest income |
(0.7 | ) | (0.1 | ) | (1.4 | ) | (0.5 | ) | ||||||||
Provision for income taxes |
21.5 | 22.0 | 99.8 | 76.6 | ||||||||||||
Depreciation and amortization |
$ | 2.7 | $ | 2.4 | 10.5 | 9.2 | ||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA (a) |
$ | 79.4 | $ | 62.5 | $ | 313.5 | $ | 230.1 | ||||||||
Litigation expenses (b) |
(0.2 | ) | 1.3 | 1.9 | 6.7 | |||||||||||
Public offering costs (c) |
| | | 2.1 | ||||||||||||
Provision for legal settlements (d) |
| | | 32.0 | ||||||||||||
Stock-based compensation (e) |
0.7 | 1.6 | 3.7 | 4.6 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 79.9 | $ | 65.3 | $ | 319.2 | $ | 275.6 | ||||||||
|
|
|
|
|
|
|
|
* | Amounts may not be additive due to rounding. |
(a) | EBITDA represents net income plus interest expense, interest income, provision for income taxes and depreciation and amortization. |
(b) | Represents costs, net of insurance primarily related to the litigation with Nestlé Purina PetCare Company. |
(c) | Represents costs incurred for our public offerings. |
(d) | Represents a provision related to the Settlement Agreement entered into in November 2016. |
(e) | Represents non-cash, stock-based compensation expense. |
11
Exhibit 99.2
GENERAL MILLS ACCELERATES PORTFOLIO RESHAPING WITH ACQUISITION OF BLUE BUFFALO PET PRODUCTS
Acquisition Establishes General Mills as the U.S. Leader in Wholesome Natural Pet Food
Combined Capabilities Will Drive Growth and Shareholder Value Creation
MINNEAPOLIS, Minn. and WILTON, Conn., Feb. 23, 2018 General Mills, Inc. (NYSE: GIS) and Blue Buffalo Pet Products, Inc. (NASDAQ: BUFF) today announced that they have entered into a definitive agreement under which General Mills will acquire Blue Buffalo for $40.00 per share in cash, representing an enterprise value of approximately $8.0 billion. The transaction establishes General Mills as the leader in the U.S. Wholesome Natural pet food category, the fastest growing portion of the overall pet food market, and accelerates its portfolio reshaping strategy.
Founded in 2002, Blue Buffalo is the fastest growing major pet food company making natural foods and treats for dogs and cats under the BLUE brand, which includes BLUE Life Protection Formula, BLUE Wilderness, BLUE Basics, BLUE Freedom and BLUE Natural Veterinary Diet. BLUE is the #1 Wholesome Natural pet food brand in the U.S. with $1.275 billion in net sales and $319 million in Adjusted EBITDA for fiscal year 2017, representing an Adjusted EBITDA margin of 25%. Over the past three years, Blue Buffalo has delivered compound annual net sales growth of 12% and Adjusted EBITDA growth of 18%.
The addition of BLUE to our family of well-loved brands provides General Mills with the leading position in the large and growing Wholesome Natural pet food category and represents a significant milestone as we reshape our portfolio to drive additional growth and value creation for our shareholders, said General Mills Chairman and Chief Executive Officer, Jeff Harmening.
We are competing more effectively in our existing categories by really listening to consumers and providing a variety of options that meet their needs, Harmening continued. In pet food, as in human food, consumers are seeking more natural and premium products and we have tremendous respect for how attentive Blue Buffalo has been to the needs of their consumers, pet parents and pets, as they have built their brand. As we have done with Annies, Lärabar and EPIC, we expect to help Blue Buffalo by leveraging our extensive supply chain, R&D and sales & marketing resources. We will in turn benefit from their experience building one of the strongest pull brands in the CPG world.
I have been impressed by General Mills strong track record of accelerating growth for its natural and organic brands, while giving them the freedom to maintain their own unique culture and identity. General Mills will be a tremendous home for our BLUE brand as our talented team of over 1,700 Buffs joins this new extended family, said Billy Bishop, Blue Buffalo Chief Executive Officer. From the first meeting Jeff and I had, I felt a strong cultural fit between our two companies and believe they will be a great partner in our mission to reach more pet parents and feed more pets. This transaction creates significant, immediate value for our shareholders, as it recognizes the strength of our competitively advantaged business model. Along with our leadership team, we look forward to working with General Mills to continue growing the BLUE brand for many years to come.
Compelling Strategic and Financial Benefits
| Addition of Attractive Growth Category. The $30 billion U.S. pet food market is generating consistent 3-4% growth and is highly attractive for retailers based on continued market growth, premiumization and subscription-like purchase patterns that drive traffic and repeat purchases. Blue Buffalo is the leader in the fastest-growing Wholesome Natural category with double-digit growth over each of the last three years. The Wholesome Natural market represents approximately 10% of the pet food market in volume and approximately 20% in value.1 Based on the strong consumer tailwinds, the Wholesome Natural market is poised to continue to grow, propelling BLUEs growth. |
| Leading Brand with Loyal Consumer Base in Early Innings of its Growth. BLUE has one of the strongest brand equities in the pet food market and is the #1 brand in the Wholesome Natural category with retail sales of four-times the next largest Wholesome Natural pet food brand. Blue Buffalo has built a loyal consumer base, particularly amongst millennials, and is well positioned to capitalize on the pet humanization and the pet food premiumization trends, which are poised to continue for the foreseeable future. With all its success, BLUE still feeds only 3% of pets in the U.S. and has significant opportunities to convert more pets to BLUE. |
| Proven Success in Existing and Emerging Channels. BLUE is the #1 pet food brand in the pet specialty channel at approximately twice the size of the next largest brand. BLUE is also the #1 pet food brand in the rapidly growing E-Commerce channel, where Blue Buffalo generated over $250 million of net revenues in 2017 growing over 75% versus prior year. BLUE has generated early success in the food, drug and mass (FDM) channel which, in conjunction with General Mills capabilities, represents a significant growth opportunity through strengthening BLUEs distribution. |
| Scaled Platform with Strong Growth and Operational Efficiency Poised to Benefit from the Transaction. General Mills scale and decades of experience will support greater effectiveness and efficiency for Blue Buffalo across key business areas, including: sales, marketing, advertising, supply chain, R&D, innovation, and environmental stewardship. These capabilities are expected to contribute to meaningful revenue synergies over time, in addition to $50 million in anticipated cost savings opportunities. |
| Meaningful Improvement to General Mills Growth and Margin Profile. The transaction will be immediately accretive to General Mills net sales growth and operating margin profile, and is expected to be neutral to cash EPS in fiscal 2019 and accretive in fiscal 2020.2 |
General Mills is the third-largest natural and organic food producer in the U.S. with leading brands including Annies, Lärabar, Liberté, Cascadian Farm, Muir Glen, and EPIC. Upon completion of the transaction, General Mills will operate Blue Buffalo as a new Pet operating segment alongside its four current operating segments: North American Retail, Convenience Stores & Foodservice, Europe & Australia, and Asia & Latin America. General Mills expects to maintain Blue Buffalos Wilton, Connecticut headquarters and its Joplin, Missouri and Richmond, Indiana manufacturing and R&D facilities. Blue Buffalos CEO, Billy Bishop, will continue to lead the business and report to Jeff Harmening.
1 | Source: Nielsen, Profitero and management estimates |
2 | Excludes one-time transaction costs |
2
Transaction Details
The all-cash purchase price of $40.00 per share represents a 23% premium to Blue Buffalos 60-day volume weighted average price (VWAP), and a 2017 Adjusted EBITDA multiple of approximately 22x, including synergies.3 General Mills expects to finance the transaction with a combination of debt, cash on hand and approximately $1.0 billion in equity.
Following the transaction, General Mills pro forma net debt-to-EBITDA ratio is expected to be approximately 4.2x. General Mills is committed to maintaining an investment grade rating and expects to deleverage to approximately 3.5x by the end of fiscal 2020. General Mills expects to maintain its $0.49/share quarterly dividend and suspend its current share repurchase program while it prioritizes achieving its leverage target.
The transaction, which has been approved by the Boards of Directors of General Mills and Blue Buffalo, is subject to regulatory approvals and other customary closing conditions, and is expected to close by the end of General Mills fiscal 2018. Invus, LP (Invus) and founding Bishop family shareholders, representing more than 50% of Blue Buffalos outstanding shares, have approved the transaction and no other approval of Blue Buffalos Board of Directors or shareholders is required to complete the transaction.
Advisors
Goldman Sachs & Co. LLC acted as financial advisor to General Mills and Cleary Gottlieb Steen & Hamilton LLP acted as legal counsel. J.P. Morgan Securities LLC and Centerview Partners LLC acted as financial advisors to Blue Buffalo and Simpson Thacher & Bartlett LLP acted as legal counsel to Blue Buffalo.
Conference Call
General Mills and Blue Buffalo will host a joint conference call to discuss the transaction today at 8:00 a.m. ET. Participants in the call will include, General Mills Chairman and Chief Executive Officer, Jeff Harmening, General Mills Chief Financial Officer Don Mulligan, and Blue Buffalo Chief Executive Officer, Billy Bishop. To access the conference call, please dial +1 800-732-8470 or +1 212-231-2911. Access to a live webcast of the call, along with accompanying slides, will be available at www.generalmills.com/investors.
About General Mills
General Mills is a leading global food company that serves the world by making food people love. Its brands include Cheerios, Annies, Yoplait, Nature Valley, Fiber One, Häagen-Dazs, Betty Crocker, Pillsbury, Old El Paso, Wanchai Ferry, Yoki and more. Headquartered in Minneapolis, Minnesota, USA, General Mills generated fiscal 2017 consolidated net sales of US $15.6 billion, as well as another US $1.0 billion from its proportionate share of joint-venture net sales.
About Blue Buffalo
Blue Buffalo based in Wilton, CT, is the nations leading natural pet food company, providing natural foods and treats for dogs and cats under its BLUE Life Protection Formula, BLUE Wilderness, BLUE Basics, BLUE Freedom and BLUE Natural Veterinary Diet lines. Paying tribute to its founding mission, the Company, through the Blue Buffalo Foundation, is a leading sponsor of pet cancer awareness and of critical research studies of pet cancer, including causes, treatments and the role of nutrition, at leading veterinary medical schools and clinics across the United States. For more information about Blue Buffalo, visit the Companys website at ir.bluebuffalo.com.
3 | Includes anticipated $50 million cost synergies |
3
Invus has been Blue Buffalos principal financial backer since its initial investment in 2006. Invus is a private investment firm based in New York. Invus benefits from an evergreen investment structure managing family capital with a long-term strategic perspective. Invus and its affiliates have been investing in companies that seek to transform their industries since 1985.
Forward Looking Statements
Certain information contained in this release that are not statements of historical or current fact constitute forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These statements may be identified by the use of words such as may, will, expect, should, anticipate, intend, believe and plan. The forward-looking statements contained in this release include, without limitation, statements related to: the planned acquisition of Blue Buffalo and the timing and financing thereof; the ability to obtain regulatory approvals and meet other closing conditions for the planned acquisition; the expected impact of the planned acquisition, including among others, on General Mills net sales, expected trends in net sales, earnings performance, profitability and other financial measures; expectations regarding growth potential in various products, geographies and market categories, including the impact from a more diversified portfolio of brands and business mix; expectations regarding growth in the pet food category; the realization of anticipated cost synergies, margin expansion and adjusted earnings per share accretion from the acquisition; the ability to retain key personnel; and the anticipated sufficiency of future cash flows to enable the payment of interest and repayment of short- and long-term debt as well as quarterly dividends.
These and other forward-looking statements are based on each partys respective managements current views and assumptions and involve risks and uncertainties that could significantly affect expected results. Results may be materially affected by factors such as: risks associated with transactions generally, such as the inability to obtain, or delays in obtaining, required approvals under applicable anti-trust legislation and other regulatory and third party consents and approvals; the occurrence of any event, change or other circumstances that could give rise to the termination of the merger agreement; the outcome of any legal proceedings that may be instituted following announcement of the transaction; potential volatility in the capital markets and the impact on the ability to complete the proposed debt and equity financing necessary to consummate the acquisition of Blue Buffalo; failure to retain key management and employees of Blue Buffalo; General Mills level of indebtedness as a result of the transactions and its ability to achieve its objective of reducing indebtedness; issues or delays in the successful integration of Blue Buffalos operations with those of General Mills, including incurring or experiencing unanticipated costs and/or delays or difficulties; difficulties or delays in the successful transition from the information technology systems of Blue Buffalo to those of General Mills as well as risks associated with other integration or transition of the operations, systems and personnel of Blue Buffalo; failure or inability to implement growth strategies in a timely manner; unfavorable reaction to the transaction by customers, competitors, suppliers and employees; future levels of revenues being lower than expected and costs being higher than expected; conditions affecting the industry generally; local and global political and economic conditions; conditions in the securities market that are less favorable than expected; and changes in the level of capital investment, and other risks described in General Mills filings with the Securities and Exchange Commission, including General Mills Annual Report
4
on Form 10-K for the fiscal year ended May 28, 2017 and in Blue Buffalos filings with the Securities and Exchange Commission, including Blue Buffalos Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Actual results could differ materially from those projected in the forward-looking statements. Neither General Mills, nor Blue Buffalo undertakes any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law.
Additional Information and Where to Find It
Blue Buffalo will prepare an information statement on Schedule 14C for its stockholders with respect to the approval of the transaction described herein. When completed, the information statement will be mailed to Blue Buffalos stockholders. You may obtain copies of all documents filed by Blue Buffalo with the SEC regarding this transaction, free of charge, at the SECs website, www.sec.gov or from Blue Buffalos website at ir.bluebuffalo.com.
Non-GAAP Measures
This press release includes measures that are not defined by GAAP. For each of these non-GAAP financial measures, we have included below a reconciliation of the differences between the non-GAAP measure and the most directly comparable GAAP measure. These non-GAAP measures should be viewed in addition to, and not in lieu of, the comparable GAAP measure.
Blue Buffalo Pet Products, Inc.
Reconciliation of Net Income to Adjusted EBITDA
(dollars in millions)
Twelve Months Ended | ||||||||||||||||
December 31, 2017 |
December 31, 2016 |
December 31, 2015 |
December 31, 2014 |
|||||||||||||
Net sales |
$ | 1,274.6 | $ | 1,149.8 | $ | 1,027.4 | $ | 917.8 | ||||||||
Net income |
$ | 193.5 | $ | 130.2 | $ | 89.4 | $ | 101.9 | ||||||||
Interest expense |
11.1 | 14.6 | 15.1 | 13.9 | ||||||||||||
Interest income |
(1.4 | ) | (0.5 | ) | (0.3 | ) | (0.2 | ) | ||||||||
Provision for income taxes |
99.8 | 76.6 | 55.9 | 63.4 | ||||||||||||
Depreciation and amortization |
10.5 | 9.2 | 8.2 | 4.9 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
EBITDA |
313.5 | 230.1 | 168.3 | 183.9 | ||||||||||||
Litigation expenses (a) |
1.9 | 6.7 | 10.1 | 4.6 | ||||||||||||
Public offering costs (b) |
0.0 | 2.1 | 0.0 | 0.0 | ||||||||||||
Initial public offering costs (c) |
0.0 | 0.0 | 8.5 | 2.9 | ||||||||||||
Provision for legal settlements (d) |
0.0 | 32.0 | 32.0 | 0.0 | ||||||||||||
Stock-based compensation (e) |
3.7 | 4.6 | 2.8 | 1.8 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA |
$ | 319.2 | $ | 275.6 | $ | 221.7 | $ | 193.2 | ||||||||
|
|
|
|
|
|
|
|
|||||||||
Adjusted EBITDA margin |
25 | % | 24 | % | 22 | % | 21 | % | ||||||||
Adjusted EBITDA 3-year CGR |
18 | % |
5
* | Amounts may not be additive due to rounding. |
(a) | Represents costs primarily related to the litigation with Nestlé Purina PetCare Company. |
(b) | Represents costs incurred for public offerings. |
(c) | Represents costs incurred for initial public offering. |
(d) | Represents a provision related to settlement agreements with respect to U.S. consumer class action lawsuits and the Nestlé Purina PetCare Company lawsuit entered into in December 2015 and November 2016, respectively. |
(e) | Represents non-cash, stock-based compensation expense. |
(f) | Represents the loss on extinguishment of debt associated with the repricing of senior secure credit facilities in December 2013. |
This press release also includes an outlook concerning future growth on a cash EPS basis. Cash EPS is a non-GAAP measure defined as proforma adjusted EPS which excludes the impacts of purchase accounting, transaction and integration costs, and other items affecting comparability.
Contacts
General Mills: (analysts) Jeff Siemon: 763-764-2301; (media) Bridget Christenson: 763-764-6364
6
#(RC.">!USQD\FNS\%>#K>=M-O+NQN%F\S M+$EAC#8Z54IJ,>:1BXWGRK47P;X'N9[2X^UV-M*ZR@@L5;"X]_H:]?BT?3UA M0-8VVX* ?W8J2QTRUTU7%LA4/C.3GI_^NK=>/7Q$JDM-CV\+@XTHWEJV%%%% MO ]>\/'P_'# OXUVX;$N#Y9;'F8S"7_>4]^OF>0^ M&]8M-4:."\MS]IM[0Q%T??)-$#EDB0\*[ DNP.X@';R:R4NTM-0O[C2+%[K1 MM@6_MR&: J3CANH7/*,<,OX MPAT1(/)N DA#",/&WRDM(5^\\FS<@3E2=O Q7 .J.*$W-J,M&C*U#3K> MXM()X+@RV XM()X+@RV< MIV6EY)PT;?\ /"?T8=FZ$<].FD9+;H9S@T^9+^O\BI_:'AS_ *%VX_\ !DW_ M ,11_:'AS_H7;C_P9-_\16-+%)!*T4J,DB'#*PY!IE7R+^FR/:2\ON1N?VCX M<_Z%VX_\&3?_ !%1SWV@O!(L.A3Q2LI"2'4"P4]CC9S]*QZM6=F)PTTSF*UC M/[R3&23V51W8^E'(E_P[#VC_ *2"SLQ.&FF 0#))[*H[L?2NEEF.@- M !;J=:.!9V8&X6 ;HS#^*=N, _=ZGG "7$X\.K"3$HUC;_HMI]Y=/!_C?^], M>H!^[U/. +]GX;GT59-1U"XMQ?*YWO N,X!P"1C/-=EX+\$WY@NC/;VLW[Q2#E6P.?6EI!<\]Q3FV_9T MU_P1W@SP2%U,N+YOWD'\47'.#ZUZ]IED=.T^.U,GF;,_-C& :M5Y=>NZC\CUL)A517,]PHHHKG.P**** "BBB@#E_%'AF MRO\ 2[MC;232RD$JI)S\PSTKQ3Q+X;NM-U2(6&G7,2+&')56R&R> +2S:X)8%)&PY4G/[TY49/1!QR*]"44O>CL<-.ISJSWZ%74-/M[BTAG@G,M ME*?+M+R3AHV_YX3^C#LW0CGITYN6*2"5HI4*2(<,K#D&ND6-/#ULUW9W<>J: M9-,;*]MY(FC25E&[ SU ZJXP0>PSRFH65G)9P7?GS3::YVV]VJ;I8R.3;RC^ M^!]T]#VXZ7&5C.<.J,.SLQ.&FF 0#))[*H[L?2NEEE.@F%5M]VM$ 6 MEF%WBP!Z.P_BG/! _AZGG #;BY'AM8F:)%U@+_HMJ?F73U/\;_WICUP?N]3S M@"VO@V:TM9;F_P!0%MJ&\2B[,I MY,@_O.Y5BP E7(##'O42FGOM^?\ 7]>= MTZ;6V_Y?\'\B/3?#EK>>'YKBZFCDOKH&5)Y)0%P/O#>W"NI.Z0$%MH&T')-8 MUSJFJZG;KI$4QO88/D66.(B2:-#\@8GYBJY) /3/TP[Q#X@;4!):1>0UOYPF MEN$A\IKN4+M\QER0#R>F,YR>:[3P3X,B.JP3F\D_>P'@QC RN?7VI7Y(\\PG M*[4*?73U(_!W@Z.>+3KJ[TN?S1,"[D,,?/\ ETKV2QTVVTY76V4J'QG)S_GK M1IMBNG6:VRN7"G.2,5;KRZ]=U'Y'JX3"*DN:7Q?D%%%% GM7AOB3PW?:9?7^H&:)5 MBG+ 1L0RG=@8XZYKZ2KE_$WA:QO],N MD9997W, S<\YZ9]:[<-B7!\LMCS, M9@[WJ0WZ_P# /GC4=8U#5FC:_NGG\L$(" N3DG &2>IZFI-'U?4])GD?39 M&5I$^==@<''(;!XRIY![&MCQ3X6O-.U0I;:9-' L(8X4XSSD\U:\&7&G);RI MQ'>X+2-(?O)['T'<5Z=XN&BT/) (ZD#L*[ MGP=X*,]G9W=YI,OG+,26;<#@'CI1.<8J\AQYF[1ZD_@GP9?*+P.;:3YD/KCK MZBO7K.RAMH(0((DE5 I94 YQSS266F6FG%S:Q;-^-WS$YQ]?K5NO'KUW4?D> MYA<(J*O+<****YSL"BBB@ HHHH **** "BBB@ HHHH **** .=\1>'H]3CN+ MA[ADQ RX"Y['WKP/Q)H$6AM;K#)-)YF[.\#C&/3ZU]/$ C!&0:X_QI%&K66V M-!D/T4?[-=V$Q$D^1GE8_#1475CIW\S@? _@VWGO;*[^TS+)+!N(*@J,KFO8 M]-L!IMDMLKEPI)SC%1Z1'&-)LV"*&\A.0OM5^L<17E4=NAT83"QI1YGJV%%% 2%