Kentucky (State of incorporation) | 001-33998 (Commission file number) | 61-0156015 (IRS Employer Identification No.) | ||
o | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o | Soliciting material pursuant to Rule l4a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) 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 | o | |
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. | o |
(d) | Exhibits | |
Press Release dated April 25, 2018 issued by Churchill Downs Incorporated |
CHURCHILL DOWNS INCORPORATED | ||
April 25, 2018 | /s/ Marcia A. Dall | |
By: Marcia A. Dall | ||
Title: Executive Vice President and Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
• | Net revenue of $189.3 million, 13% increase over the prior year |
• | Net income of $182.0 million compared to $7.3 million in the prior year |
◦ | Adjusted net income of $15.8 million compared to $2.2 million in the prior year |
• | Diluted earnings per share ("EPS") of $12.55 compared to $0.44 in the prior year |
◦ | Adjusted diluted EPS of $1.09 compared to $0.13 in the prior year |
• | Adjusted EBITDA of $49.2 million, 36% increase over the prior year |
CONSOLIDATED RESULTS | First Quarter | ||||||
(in millions, except per share data): | 2018 | 2017 | |||||
Net revenue | $ | 189.3 | $ | 167.5 | |||
Net income | $ | 182.0 | $ | 7.3 | |||
Adjusted net income(a) | $ | 15.8 | $ | 2.2 | |||
Diluted EPS | $ | 12.55 | $ | 0.44 | |||
Adjusted diluted EPS(a) | $ | 1.09 | $ | 0.13 | |||
Adjusted EBITDA(a) | $ | 49.2 | $ | 36.3 | |||
(a) This is a non-GAAP measure. See explanation of non-GAAP measures below. |
• | $11.2 million increase in operating income primarily driven by our Casino and TwinSpires segments; |
• | $2.2 million decrease in net interest expense associated with lower outstanding debt balances; and |
• | $0.5 million increase in equity income of our casino equity investments and miscellaneous income, net of tax. |
• | Partially offsetting these increases was a $2.0 million increase in our income tax provision. |
Racing | First Quarter | ||||||
(in millions): | 2018 | 2017 | |||||
Net revenue | $ | 26.2 | $ | 26.1 | |||
Adjusted EBITDA | (9.4 | ) | (9.7 | ) |
TwinSpires | First Quarter | ||||||
(in millions): | 2018 | 2017 | |||||
Net revenue | $ | 63.6 | $ | 52.3 | |||
Adjusted EBITDA | 16.5 | 13.2 |
Casino | First Quarter | ||||||
(in millions): | 2018 | 2017 | |||||
Net revenue | $ | 98.1 | $ | 87.5 | |||
Adjusted EBITDA | 44.3 | 35.3 |
• | $7.8 million increase from our wholly-owned Casino properties, including a $3.4 million increase at our Mississippi properties, a $2.1 million increase at Calder, a $1.3 million increase at Oxford, and a $1.0 million increase at our Louisiana properties, and |
• | $1.2 million increase in our Casino equity investments, driven by solid performance at Ocean Downs and Miami Valley Gaming. |
• | Transaction expense, net which includes: |
◦ | Acquisition and disposition related charges, including fair value adjustments related to earnouts and deferred payments; and |
◦ | Other transaction expense, including legal, accounting, and other deal-related expense; |
• | Stock-based compensation expense; |
• | Asset impairments; |
• | Gain on Calder land sale; |
• | Calder exit costs; |
• | Loss on extinguishment of debt; and |
• | Other charges, recoveries and expenses |
Three Months Ended March, 31 | |||||||
(in millions, except per common share data) | 2018 | 2017 | |||||
Net revenue: | |||||||
Racing | $ | 23.7 | $ | 23.9 | |||
TwinSpires | 63.2 | 52.0 | |||||
Casino | 98.1 | 87.5 | |||||
Other Investments | 4.3 | 4.1 | |||||
Total net revenue | 189.3 | 167.5 | |||||
Operating expense: | |||||||
Racing | 35.9 | 36.4 | |||||
TwinSpires | 44.0 | 36.4 | |||||
Casinos | 64.8 | 62.7 | |||||
Other Investments | 4.6 | 3.9 | |||||
Corporate | 0.5 | 0.6 | |||||
Selling, general and administrative expense | 18.4 | 18.6 | |||||
Calder exit costs | — | 0.4 | |||||
Transaction expense, net | 1.4 | — | |||||
Total operating expense | 169.6 | 159.0 | |||||
Operating income | 19.7 | 8.5 | |||||
Other income (expense): | |||||||
Interest expense, net | (9.6 | ) | (11.8 | ) | |||
Equity in income of unconsolidated investments | 6.5 | 6.1 | |||||
Miscellaneous, net | 0.1 | — | |||||
Total other expense | (3.0 | ) | (5.7 | ) | |||
Income from continuing operations before provision for income taxes | 16.7 | 2.8 | |||||
Income tax provision | (2.6 | ) | (0.6 | ) | |||
Income from continuing operations, net of tax | 14.1 | 2.2 | |||||
Income from discontinued operations, net of tax | 167.9 | 5.1 | |||||
Net income | $ | 182.0 | $ | 7.3 | |||
Net income per common share data - basic: | |||||||
Continuing operations | $ | 0.98 | $ | 0.13 | |||
Discontinued operations | $ | 11.63 | $ | 0.31 | |||
Net income per common share data - basic: | $ | 12.61 | $ | 0.44 | |||
Net income per common share data - diluted: | |||||||
Continuing operations | $ | 0.97 | $ | 0.13 | |||
Discontinued operations | $ | 11.58 | $ | 0.31 | |||
Net income per common share data - diluted: | $ | 12.55 | $ | 0.44 | |||
Weighted average shares outstanding: | |||||||
Basic | 14.4 | 16.3 | |||||
Diluted | 14.5 | 16.8 | |||||
Other comprehensive income (loss): | |||||||
Foreign currency translation, net of tax | — | (0.1 | ) | ||||
Other comprehensive income (loss) | — | (0.1 | ) | ||||
Comprehensive income | $ | 182.0 | $ | 7.2 |
(in millions) | March 31, 2018 | December 31, 2017 | |||||
ASSETS | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 202.7 | $ | 51.7 | |||
Restricted cash | 31.5 | 31.2 | |||||
Accounts receivable, net | 34.6 | 49.6 | |||||
Income taxes receivable | — | 35.6 | |||||
Other current assets | 26.0 | 18.9 | |||||
Current assets of discontinued operations held for sale | — | 69.1 | |||||
Total current assets | 294.8 | 256.1 | |||||
Property and equipment, net | 634.9 | 608.0 | |||||
Investment in and advances to unconsolidated affiliates | 173.4 | 171.3 | |||||
Goodwill | 317.6 | 317.6 | |||||
Other intangible assets, net | 167.8 | 169.4 | |||||
Other assets | 12.5 | 13.6 | |||||
Long-term assets of discontinued operations held for sale | — | 823.4 | |||||
Total assets | $ | 1,601.0 | $ | 2,359.4 | |||
LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 59.8 | $ | 54.1 | |||
Purses payable | 8.4 | 12.5 | |||||
Account wagering deposit liabilities | 28.7 | 24.0 | |||||
Accrued expense | 75.6 | 75.8 | |||||
Income taxes payable | 21.4 | — | |||||
Current deferred revenue | 91.5 | 70.9 | |||||
Current maturities of long-term debt | 4.0 | 4.0 | |||||
Dividends payable | — | 23.7 | |||||
Current liabilities of discontinued operations held for sale | — | 188.2 | |||||
Total current liabilities | 289.4 | 453.2 | |||||
Long-term debt, net of current maturities and loan origination fees | 390.1 | 632.9 | |||||
Notes payable, net of debt issuance costs | 492.5 | 492.3 | |||||
Non-current deferred revenue | 25.0 | 29.3 | |||||
Deferred income taxes | 43.8 | 40.6 | |||||
Other liabilities | 16.6 | 16.0 | |||||
Non-current liabilities of discontinued operations held for sale | — | 54.8 | |||||
Total liabilities | 1,257.4 | 1,719.1 | |||||
Commitments and contingencies | |||||||
Shareholders' equity: | |||||||
Preferred stock, no par value; 0.3 shares authorized; no shares issued or outstanding | — | — | |||||
Common stock, no par value; 50.0 shares authorized; 13.5 shares issued and outstanding at March 31, 2018 and 15.4 shares at December 31, 2017 | — | 7.3 | |||||
Retained earnings | 344.5 | 634.3 | |||||
Accumulated other comprehensive loss | (0.9 | ) | (1.3 | ) | |||
Total shareholders' equity | 343.6 | 640.3 | |||||
Total liabilities and shareholders' equity | $ | 1,601.0 | $ | 2,359.4 |
CHURCHILL DOWNS INCORPORATED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW (unaudited) | |||||||
Three Months Ended March, 31 | |||||||
(in millions) | 2018 | 2017 | |||||
Cash flows from operating activities: | |||||||
Net income | $ | 182.0 | $ | 7.3 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 13.8 | 24.5 | |||||
Game software development amortization | 0.4 | 4.4 | |||||
Gain on sale of Big Fish Games | (219.5 | ) | — | ||||
Distributed earnings from equity investments | 4.5 | 4.3 | |||||
Earnings from equity investments, net | (6.5 | ) | (6.1 | ) | |||
Stock-based compensation | 6.1 | 4.9 | |||||
Deferred income taxes | 2.1 | — | |||||
Big Fish Games earnout payment | (2.4 | ) | (2.5 | ) | |||
Big Fish Games deferred payment | (2.0 | ) | — | ||||
Other | 0.9 | 0.5 | |||||
Increase (decrease) in cash resulting from changes in operating assets and liabilities, net of business acquisitions and dispositions: | |||||||
Game software development | (0.3 | ) | (5.3 | ) | |||
Income taxes | 52.4 | 6.6 | |||||
Deferred revenue | 35.8 | 42.4 | |||||
Other assets and liabilities | (11.4 | ) | (15.7 | ) | |||
Net cash provided by operating activities | 55.9 | 65.3 | |||||
Cash flows from investing activities: | |||||||
Capital maintenance expenditures | (7.5 | ) | (10.2 | ) | |||
Capital project expenditures | (26.5 | ) | (27.3 | ) | |||
Proceeds from sale of Big Fish Games | 970.7 | — | |||||
Receivable from escrow | — | 10.1 | |||||
Investment in unconsolidated affiliates | — | (24.0 | ) | ||||
Net cash provided by (used in) investing activities | 936.7 | (51.4 | ) | ||||
Cash flows from financing activities: | |||||||
Borrowings on bank line of credit | 100.9 | 239.1 | |||||
Repayments of bank line of credit | (343.9 | ) | (192.7 | ) | |||
Big Fish Games earnout payment | (31.8 | ) | (31.7 | ) | |||
Big Fish Games deferred payment | (26.4 | ) | — | ||||
Payment of dividends | (23.7 | ) | (21.8 | ) | |||
Repurchase of common stock | (514.4 | ) | (8.6 | ) | |||
Common stock issued | — | 0.1 | |||||
Other | (4.5 | ) | (1.4 | ) | |||
Net cash used in financing activities | (843.8 | ) | (17.0 | ) | |||
Net increase (decrease) in cash, cash equivalents and restricted cash | 148.8 | (3.1 | ) | ||||
Effect of exchange rate changes on cash | (0.1 | ) | — | ||||
Cash, cash equivalents and restricted cash, beginning of period | 85.5 | 83.0 | |||||
Cash, cash equivalents and restricted cash, end of period | $ | 234.2 | $ | 79.9 |
Three Months Ended March, 31 | |||||||
2018 | 2017 | ||||||
GAAP net income | $ | 182.0 | $ | 7.3 | |||
Adjustments, continuing operations: | |||||||
Transaction expense, net | 1.4 | — | |||||
Pre-opening expense included in other investments | 0.6 | — | |||||
Income tax impact on net income adjustments(b) | (0.3 | ) | — | ||||
Total adjustments, continuing operations | 1.7 | — | |||||
Gain on Big Fish Transaction, net of tax(c) | (168.3 | ) | — | ||||
Big Fish Games net income(c) | 0.4 | (5.1 | ) | ||||
Total adjustments | (166.2 | ) | (5.1 | ) | |||
Adjusted net income | $ | 15.8 | $ | 2.2 | |||
Adjusted diluted EPS | $ | 1.09 | $ | 0.13 | |||
Weighted average shares outstanding - Diluted | 14.5 | 16.8 |
Three Months Ended March, 31 | |||||||
(in millions) | 2018 | 2017 | |||||
Net revenue from external customers: | |||||||
Racing: | |||||||
Churchill Downs | $ | 2.0 | $ | 2.3 | |||
Arlington | 8.3 | 8.5 | |||||
Fair Grounds | 12.8 | 12.5 | |||||
Calder | 0.6 | 0.6 | |||||
Total Racing | 23.7 | 23.9 | |||||
TwinSpires | 63.2 | 52.0 | |||||
Casino: | |||||||
Oxford Casino | 24.2 | 20.9 | |||||
Riverwalk Casino | 14.4 | 11.5 | |||||
Harlow’s Casino | 13.3 | 13.5 | |||||
Calder Casino | 24.3 | 21.4 | |||||
Fair Grounds Slots | 10.6 | 10.2 | |||||
VSI | 11.0 | 9.7 | |||||
Saratoga | 0.3 | 0.3 | |||||
Total Casino | 98.1 | 87.5 | |||||
Other Investments | 4.3 | 4.1 | |||||
Net revenue from external customers | $ | 189.3 | $ | 167.5 | |||
Intercompany net revenue: | |||||||
Racing: | |||||||
Churchill Downs | $ | 0.3 | $ | 0.3 | |||
Arlington | 1.2 | 1.0 | |||||
Fair Grounds | 1.0 | 0.9 | |||||
Total Racing | 2.5 | 2.2 | |||||
TwinSpires | 0.4 | 0.3 | |||||
Other Investments | 1.2 | 1.4 | |||||
Eliminations | (4.1 | ) | (3.9 | ) | |||
Intercompany net revenue | $ | — | $ | — |
Three Months Ended March 31, 2018 | |||||||||||||||||||||||||||
(in millions) | Racing | TwinSpires | Casino | Other Investments | Corporate | Eliminations | Total | ||||||||||||||||||||
Net revenue | $ | 26.2 | $ | 63.6 | $ | 98.1 | $ | 5.5 | $ | — | $ | (4.1 | ) | $ | 189.3 | ||||||||||||
Taxes & purses | (10.3 | ) | (3.4 | ) | (32.4 | ) | — | — | — | (46.1 | ) | ||||||||||||||||
Marketing & advertising | (0.8 | ) | (0.8 | ) | (3.2 | ) | — | — | 0.1 | (4.7 | ) | ||||||||||||||||
Salaries & benefits | (8.6 | ) | (2.1 | ) | (13.5 | ) | (3.2 | ) | — | — | (27.4 | ) | |||||||||||||||
Content expense | (3.1 | ) | (32.2 | ) | — | — | — | 3.3 | (32.0 | ) | |||||||||||||||||
Selling, general & administrative expense | (4.0 | ) | (2.8 | ) | (5.4 | ) | (0.7 | ) | (2.4 | ) | 0.3 | (15.0 | ) | ||||||||||||||
Other operating expense | (8.8 | ) | (5.8 | ) | (10.1 | ) | (1.3 | ) | (0.2 | ) | 0.4 | (25.8 | ) | ||||||||||||||
Other income | — | — | 10.8 | — | 0.1 | — | 10.9 | ||||||||||||||||||||
Adjusted EBITDA | $ | (9.4 | ) | $ | 16.5 | $ | 44.3 | $ | 0.3 | $ | (2.5 | ) | $ | — | $ | 49.2 |
Three Months Ended March 31, 2017 | |||||||||||||||||||||||||||
(in millions) | Racing | TwinSpires | Casino | Other Investments | Corporate(d) | Eliminations | Total | ||||||||||||||||||||
Net revenue | $ | 26.1 | $ | 52.3 | $ | 87.5 | $ | 5.5 | $ | — | $ | (3.9 | ) | $ | 167.5 | ||||||||||||
Taxes & purses | (10.2 | ) | (3.0 | ) | (29.1 | ) | — | — | — | (42.3 | ) | ||||||||||||||||
Marketing & advertising | (0.7 | ) | (1.0 | ) | (3.0 | ) | — | — | 0.1 | (4.6 | ) | ||||||||||||||||
Salaries & benefits | (8.6 | ) | (2.2 | ) | (13.1 | ) | (2.9 | ) | — | — | (26.8 | ) | |||||||||||||||
Content expense | (3.2 | ) | (25.4 | ) | — | — | — | 2.8 | (25.8 | ) | |||||||||||||||||
Selling, general & administrative expense | (3.8 | ) | (2.7 | ) | (5.2 | ) | (0.8 | ) | (2.9 | ) | 0.3 | (15.1 | ) | ||||||||||||||
Other operating expense | (9.3 | ) | (4.8 | ) | (11.4 | ) | (1.3 | ) | (0.2 | ) | 0.7 | (26.3 | ) | ||||||||||||||
Other income | — | — | 9.6 | 0.1 | — | — | 9.7 | ||||||||||||||||||||
Adjusted EBITDA | $ | (9.7 | ) | $ | 13.2 | $ | 35.3 | $ | 0.6 | $ | (3.1 | ) | $ | — | $ | 36.3 |
Three Months Ended March, 31 | |||||||
(in millions) | 2018 | 2017 | |||||
Reconciliation of Comprehensive Income to Adjusted EBITDA: | |||||||
Comprehensive income | $ | 182.0 | $ | 7.2 | |||
Foreign currency translation, net of tax | — | 0.1 | |||||
Net income | 182.0 | 7.3 | |||||
Income from discontinued operations, net of tax | (167.9 | ) | (5.1 | ) | |||
Income from continuing operations, net of tax | 14.1 | 2.2 | |||||
Additions: | |||||||
Depreciation and amortization | 13.8 | 14.2 | |||||
Interest expense | 9.6 | 11.8 | |||||
Income tax provision | 2.6 | 0.6 | |||||
EBITDA | $ | 40.1 | $ | 28.8 | |||
Adjustments to EBITDA: | |||||||
Selling, general and administrative: | |||||||
Stock-based compensation expense | 2.8 | 3.4 | |||||
Other charges | — | 0.2 | |||||
Pre-opening expense | 0.6 | — | |||||
Other income, expense: | |||||||
Interest, depreciation and amortization expense related to equity investments | 4.3 | 3.5 | |||||
Transaction expense, net | 1.4 | — | |||||
Calder exit costs | — | 0.4 | |||||
Total adjustments to EBITDA | 9.1 | 7.5 | |||||
Adjusted EBITDA | $ | 49.2 | $ | 36.3 | |||
Adjusted EBITDA by segment: | |||||||
Racing | $ | (9.4 | ) | $ | (9.7 | ) | |
TwinSpires | 16.5 | 13.2 | |||||
Casinos | 44.3 | 35.3 | |||||
Other Investments | 0.3 | 0.6 | |||||
Corporate(d) | (2.5 | ) | (3.1 | ) | |||
Adjusted EBITDA | $ | 49.2 | $ | 36.3 |
Three Months Ended March, 31 | |||||||
(in millions) | 2018 | 2017 | |||||
Corporate allocated expense: | |||||||
Racing | $ | (1.5 | ) | $ | (1.4 | ) | |
TwinSpires | (1.4 | ) | (1.2 | ) | |||
Casinos | (2.0 | ) | (1.7 | ) | |||
Other Investments | (0.3 | ) | (0.3 | ) | |||
Corporate allocated expense | 5.2 | 4.6 | |||||
Total Corporate allocated expense | $ | — | $ | — |
Three Months Ended March, 31 | |||||||
(in millions) | 2018 | 2017 | |||||
Net revenue | $ | 77.0 | $ | 72.2 | |||
Operating and SG&A expense | 53.6 | 49.8 | |||||
Depreciation and amortization | 6.6 | 5.7 | |||||
Total operating expense | 60.2 | 55.5 | |||||
Operating income | 16.8 | 16.7 | |||||
Interest and other expense, net | (2.9 | ) | (3.5 | ) | |||
Net income | $ | 13.9 | $ | 13.2 |
(in millions) | March 31, 2018 | December 31, 2017 | |||||
Assets | |||||||
Current assets | $ | 74.5 | $ | 64.5 | |||
Property and equipment, net | 233.9 | 234.6 | |||||
Other assets, net | 237.1 | 236.5 | |||||
Total assets | $ | 545.5 | $ | 535.6 | |||
Liabilities and Members' Equity | |||||||
Current liabilities | $ | 101.2 | $ | 100.3 | |||
Long-term debt, excluding current portion | 114.7 | 110.1 | |||||
Other liabilities | — | 0.1 | |||||
Members' equity | 329.6 | 325.1 | |||||
Total liabilities and members' equity | $ | 545.5 | $ | 535.6 |
Three Months Ended March, 31 | |||||||
(in millions) | 2018 | 2017 | |||||
Net revenue | $ | 43.3 | $ | 41.4 | |||
Operating and SG&A expense | 29.7 | 28.6 | |||||
Depreciation and amortization | 3.4 | 3.1 | |||||
Total operating expense | 33.1 | 31.7 | |||||
Operating income | 10.2 | 9.7 | |||||
Interest and other expense, net | (0.5 | ) | (0.7 | ) | |||
Net income | $ | 9.7 | $ | 9.0 |
(in millions) | March 31, 2018 | December 31, 2017 | |||||
Assets | |||||||
Current assets | $ | 19.6 | $ | 18.1 | |||
Property and equipment, net | 102.0 | 103.5 | |||||
Other assets, net | 107.2 | 106.6 | |||||
Total assets | $ | 228.8 | $ | 228.2 | |||
Liabilities and Members' Equity | |||||||
Current liabilities | $ | 20.7 | $ | 19.0 | |||
Long-term debt | 5.4 | 7.1 | |||||
Other liabilities | — | 0.1 | |||||
Members' equity | 202.7 | 202.0 | |||||
Total liabilities and members' equity | $ | 228.8 | $ | 228.2 |
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