0000077597-12-000020.txt : 20120614 0000077597-12-000020.hdr.sgml : 20120614 20120613180535 ACCESSION NUMBER: 0000077597-12-000020 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20120613 ITEM INFORMATION: Other Events FILED AS OF DATE: 20120614 DATE AS OF CHANGE: 20120613 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SPARTECH CORP CENTRAL INDEX KEY: 0000077597 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS PLASTIC PRODUCTS [3080] IRS NUMBER: 430761773 STATE OF INCORPORATION: DE FISCAL YEAR END: 1028 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05911 FILM NUMBER: 12905940 BUSINESS ADDRESS: STREET 1: 120 S CENTRAL AVE STREET 2: STE 1700 CITY: CLAYTON STATE: MO ZIP: 63105 BUSINESS PHONE: 3147214242 MAIL ADDRESS: STREET 1: 120 S CENTRAL AVE STREET 2: STE 1700 CITY: CLAYTON STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: SPARTAN MANUFACTURING CORP DATE OF NAME CHANGE: 19830621 FORMER COMPANY: FORMER CONFORMED NAME: PERMANEER CORP DATE OF NAME CHANGE: 19781019 8-K 1 a8kq22012earningsrelease.htm FORM 8-K 8K Q2 2012 Earnings Release


UNITED STATES

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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):

June 13, 2012
SPARTECH CORPORATION
(Exact name of Registrant as specified in its charter)
 
 
 
 
 
 
Delaware
1-5911
43-0761773
(State or other jurisdiction
of incorporation)
(Commission File Number)
(I.R.S. Employer
Identification No.)
120 S. Central Avenue, Suite 1700

Clayton, Missouri 63105
(Address of principal executive offices) (Zip Code)
(314) 721-4242
(Registrant’s telephone number, including area code)
Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o      Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o      Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240-14a-12)
o      Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240-14d-2(b))
o     Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240-13e-4(c))





SPARTECH CORPORATION
FORM 8-K

Item 2.02.
Results of Operations and Financial Condition.
On June 13, 2012, Spartech Corporation issued a press release relating to its earnings results for its second quarter ended May 5, 2012. A copy of the press release is furnished with this Current Report on Form 8-K as Exhibit 99.1.

Item 9.01.
Financial Statements and Exhibits.
(d) Exhibits
Exhibit
 
 
Number
 
Description
 
 
 
99.1
 
Press release of Spartech Corporation dated June 13, 2012

The Registrant will post this Form 8-K on its Internet website at www.spartech.com. References to the Registrant's website address are included in this Form 8-K and the press release only as inactive textual references and the Registrant does not intend them to be active links to its website. Information contained on the Registrant's website does not constitute part of this Form 8-K or the press release.





SIGNATURES
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.
 
SPARTECH CORPORATION
 
Date: June 13, 2012   
By:  
/s/ Randy C. Martin  
 
 
Randy C. Martin  
 
 
Executive Vice President and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) 



EX-99.1 2 ex991q2.htm PRESS RELEASE EX 99.1 Q2


Company Contacts:

Victoria M. Holt
Randy C. Martin
President and Chief Executive Officer
Executive Vice President and Chief Financial Officer    
(314) 721-4242
(314) 721-4242

For Immediate Release Wednesday, June 13, 2012

SPARTECH ANNOUNCES SECOND QUARTER RESULTS
_________________________________

St. Louis, Missouri, June 13, 2012 - Spartech Corporation (NYSE:SEH), a leading producer of plastic sheet, compounds, and packaging solutions, announced today operating results for the second quarter of 2012.

Highlights for the Second Quarter 2012

Net sales increased by 6% to $298.3 million over the prior year quarter.
Operating earnings excluding special items increased to $8.5 million from $7.6 million in the prior year period, reflecting improved operating margins and increased volume.
Diluted earnings per share from continuing operations, excluding special items, were $0.12 per share, an increase of $0.02 per share over the prior year period.
Generated $15.5 million of cash flow from operations.
Segment results reflect higher margin product mix shift and continued efforts to increase operating efficiencies.

Vicki Holt, Spartech's President and Chief Executive Officer, said, "We achieved solid results in the second quarter that exceeded the comparable period in the prior year. Driven by the continued execution of our strategic plan, our results reflect sales growth, improved margins and our ongoing efforts to manage costs. We achieved a margin increase in our Custom Sheet and Rollstock segment, improved volume in the Color and Specialty Compounds segment, and operational efficiencies across the Company."

Holt added, “Our focus in the second half of the year remains on executing our strategic initiatives. This includes implementing operational improvements to enhance margins, accelerating growth in our specialty products and continuing to reduce our cost structure. Two actions that we are undertaking in support of these priorities are the consolidation of two Custom Sheet and Rollstock operating facilities in Canada into one by the end of the year and the expansion of our operations in Muncie, Indiana to support our growth initiatives in higher margin packaging product lines and new customer programs. We expect these actions, will drive additional improvement in our financial results and enhance shareholder value."

Consolidated Results
Net sales were $298.3 million for the second quarter of 2012, representing a 6% increase over the prior year. This reflects a 4% increase at Custom Sheet and Rollstock, a 2% decrease at Packaging Technologies and a 15% increase at Color and Specialty Compounding. The increase reflects a 5% favorable price/mix and a 1% increase in underlying volume. The increase in underlying volume is primarily attributed to the higher volume related to the construction and transportation end markets, coupled with increased sales for custom thermoformed applications. These were offset by decreased volume to the appliance and electronics market, graphic arts sales, and the lawn and garden segment.

Gross margin per pound sold increased from 11.5 cents for the three months ended April 30, 2011 to 12.6 cents for the three months ended May 5, 2012. The increase primarily reflects improved material margin from an improved mix of high material margin products and operating improvements such as increased production yield and regrind material usage, which was somewhat offset by increased costs. Cost increases compared to last year are the result of increases in repairs and maintenance, labor and benefit expenses, including health care and training costs.




Selling, general and administrative expenses were $20.9 million in the second quarter of 2012 compared to $19.0 million in the prior year. The increase of $1.9 million is primarily attributed to higher consulting and legal costs, travel expenses and compensation costs. These were slightly offset by lower bad debt expense. Additionally, $0.9 million of the increase reflects a change in foreign currency. Foreign currency losses were $0.4 million for the second quarter of 2012 compared to foreign currency gains of $0.5 million in same period last year.

Interest expense, net of interest income, was $2.9 million in the second quarter of 2012 compared to $2.7 million in the same period of the prior year. The increase was primarily due to an increase in interest rates on existing debt.

Income tax expense was $1.9 million in the second quarter of 2012 compared to an expense of $1.6 million in the second quarter of 2011.

Net earnings from continuing operations were $3.7 million or $0.12 per diluted share for the second quarter of 2012, compared to net earnings from continuing operations of $2.8 million or $0.09 per diluted share in the prior year. Excluding special items (restructuring and exit costs), net earnings from continuing operations were $3.7 million or $0.12 per diluted share for the second quarter of 2012, compared to a net earnings of $3.2 million or $0.10 per diluted share in the prior year.

Cash flows from operations in the second quarter of 2012 were $15.5 million. These cash flows reduced debt and funded $4.5 million in capital expenditures focused on building capacity for new specialty product lines including the Muncie, Indiana plant expansion.
 
Segment Results
The results of Spartech's three operating segments are discussed below. A table is presented at the end of this release to reconcile amounts excluding special items to comparable GAAP measures.

Custom Sheet and Rollstock - Net sales were $156.0 million for the three months ended May 5, 2012, representing a 7% increase from price/mix offset by a decrease in underlying volume of 3% when compared to 2011. The underlying sales volume primarily reflects a decrease in sales volume to the appliance and electronics end market, somewhat offset by an increase in sales to the automotive sector and for custom thermoformed applications. The price/mix increase was mostly caused by a product mix that included a greater percentage of higher priced products. Operating earnings excluding special items were $8.6 million for the three months ended May 5, 2012 compared to $8.0 million for the three months ended April 30, 2011. The increase in earnings can be attributed to an increased mix of higher margin products and operating improvements such as increased production yield and regrind material usage, which were offset by increased costs related to compensation, repairs and maintenance and travel costs.

Packaging Technologies - Net sales were $61.3 million for the three months ended May 5, 2012, representing a 3% increase from price/mix and a decrease in underlying volume of 5% when compared to 2011. Underlying sales volume in this segment was down due to a significant decrease in volume to the graphic arts market, coupled with a decrease in sales to the food packaging market. The price/mix increase was primarily related to a product mix that included a greater percentage of higher priced products. Operating earnings excluding special items were $5.2 million for the three months ended May 5, 2012 compared to $6.5 million for the three months ended April 30, 2011. The decrease in earnings can be attributed to the decrease in volume, which was somewhat offset by a greater mix of high margin product compared to the prior year.

Color and Specialty Compounds - Net sales were $81.0 million for the three months ended May 5, 2012, representing a 7% increase from price/mix and an increase in underlying volume of 8% when compared to 2011. Underlying sales volume for this segment was up due to an increase in sales to the commercial construction, transportation and agriculture markets, somewhat offset by a decrease in sales to the lawn and garden end market. The price/mix increase was mostly caused by a product mix that included a greater percentage of higher priced products. Operating earnings excluding special items were $2.7 million for the three months ended May 5, 2012 compared to operating earnings of $0.4 million in the same period of the prior year. The significant increase in operating earnings was due to the increase in sales volume, benefits from improvements on key operating metrics and greater mix of high margin product compared to the prior year, which more than offset the impact of cost increases related to repairs and maintenance, compensation and legal costs.





Outlook
As indicated by the earnings increase in the second quarter, Spartech is achieving positive momentum that the Company believes will lead to measurable improvement in its annual earnings per share in 2012 over the prior year. In the second half of the year, Spartech intends to build on its foundation from the turnaround efforts in the Custom Sheet and Rollstock and Color and Specialty Compounds segments over the last several quarters to improve margins. Despite the impact of uncertain demand, direct and indirect exposure to European markets, and dynamic raw materials pricing, the Company is continuing to shift its product mix toward more specialized and higher margin products. Spartech continues its focus on providing innovative and sustainable plastics solutions and executing further operating improvements and cost reductions to provide enhanced value to its investors.

Special Items and Discontinued Operations
The Company completed its previously announced restructuring efforts and therefore did not record any restructuring and exit costs in the second quarter of 2012 compared to $0.5 million in the prior year. Restructuring and exit costs were comprised of employee severance, facility consolidation and shut-down costs and fixed asset valuation adjustments for assets related to restructured facilities.

Discontinued operations include the former marine business, sheet business in Donchery, France, and toll compounding business in Arlington, Texas, which were all shutdown in 2009 and the wheels and profiles businesses that were divested in 2009.

**********

Spartech will hold a conference call with investors and financial analysts at 11:00 a.m. EST on Thursday, June 14, 2012, to discuss Spartech's second quarter 2012 financial results. Prior to this call, the Company will provide supplemental slides on its website at www.spartech.com (under Presentations in the Investor Relations menu). Investors can listen to the call live via webcast by logging onto www.spartech.com, or via phone by dialing (877) 724-7545 and providing the Conference ID #: 40098648. International callers may dial (832) 900-4628.

Spartech Corporation is a leading producer of plastic products including polymeric compounds, concentrates, custom extruded sheet and rollstock products and packaging technologies for a wide spectrum of customers.  The Company's three business segments, which operate facilities in the United States, Mexico, Canada, and France, annually process approximately one billion pounds of plastic resins, specialty plastic alloys, and color and specialty compounds.



Cautionary Statements Concerning Forward-Looking Statements

Statements in this Form 10-Q that are not purely historical, including statements that express the Company’s belief, anticipation or expectation about future events, are forward-looking statements. “Forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995 relate to future events and expectations and include statements containing such words as “anticipates,” “believes,” “estimates,” “expects,” “would,” “should,” “will,” “will likely result,” “forecast,” “outlook,” “projects,” and similar expressions. Forward-looking statements are based on management’s current expectations and include known and unknown risks, uncertainties and other factors, many of which management is unable to predict or control, that may cause actual results, performance or achievements to differ materially from those expressed or implied in the forward-looking statements. Important factors that could cause actual results to differ from our forward-looking statements are as follows:
(a)
Adverse changes in economic or industry conditions, including global supply and demand conditions and prices for products of the types we produce
(b)
Restrictions imposed on us by instruments governing our indebtedness, the possible inability to comply with requirements of those instruments and inability to access capital markets
(c)
Our ability to compete effectively on product performance, quality, price, availability, product development, and customer service
(d)
Adverse changes in the markets we serve, including the packaging, transportation, building and construction, recreation and leisure, and other markets, some of which tend to be cyclical
(e)
Volatility of prices and availability of supply of energy and raw materials that are critical to the manufacture of our products, particularly plastic resins derived from oil and natural gas, including future impacts of natural disasters
(f)
Our inability to manage or pass through to customers an adequate level of increases in the costs of materials, freight, utilities, or other conversion costs
(g)
Our inability to achieve and sustain the level of cost savings, productivity improvements, gross margin enhancements, growth or other benefits anticipated from our improvement initiatives
(h)
Our inability to collect all or a portion of our receivables with large customers or a number of customers
(i)
Loss of business with a limited number of customers that represent a significant percentage of our revenues
(j)
Possible asset impairments
(k)
Our inability to predict accurately the costs to be incurred, time taken to complete, operating disruptions therefrom, potential loss of business or savings to be achieved in connection with announced production plant consolidations and line moves
(l)
Adverse findings in significant legal or environmental proceedings or our inability to comply with applicable environmental laws and regulations
(m)
Our inability to develop and launch new products successfully
(n)
Possible weaknesses in internal controls
We assume no responsibility to update our forward-looking statements.






Spartech Corporation and Subsidiaries
Consolidated Condensed Statements of Operations

 
Three Months Ended
 
Six Months Ended
 
 
May 5,

 
April 30,

 
May 5,

 
April 30,

 
(Unaudited and dollars in thousands, except per share data)
2012

 
2011

 
2012

 
2011

 
Net sales
$
298,323

 
$
282,551

 
$
580,104

 
$
517,334

 
Costs and expenses
 
 
 
 
 
 
 
 
Cost of sales
268,500

 
255,474

 
528,609

 
471,851

 
Selling, general and administrative expenses
20,852

 
19,010

 
42,628

 
37,984

 
Amortization of intangibles
422

 
422

 
845

 
845

 
Restructuring and exit costs

 
548

 

 
1,377

 
Total costs and expenses
289,774

 
275,454

 
572,082

 
512,057

 
Operating earnings
8,549

 
7,097

 
8,022

 
5,277

 
Interest expense, net of interest income
2,929

 
2,686

 
5,949

 
5,257

 
Earnings from continuing operations before income taxes
5,620

 
4,411

 
2,073

 
20

 
Income tax expense (benefit)
1,946

 
1,564

 
670

 
(987
)
 
Net earnings from continuing operations
3,674

 
2,847

 
1,403

 
1,007

 
Net (loss) earnings from discontinued operations, net of tax
(3
)
 
(225
)
 
18

 
2,646

 
Net earnings
3,671

 
2,622

 
1,421

 
3,653

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Basic earnings (loss) per share:
 
 
 
 
 
 
 
 
 Earnings from continuing operations
$
0.12

 
$
0.09

 
$
0.05

 
$
0.03

 
 (Loss) earnings from discontinued operations, net of tax

 
(0.01
)
 

 
0.09

 
   Net earnings per share
$
0.12

 
$
0.08

 
$
0.05

 
$
0.12

 
Diluted earnings (loss) per share:
 

 
 

 
 

 
 

 
Earnings from continuing operations
$
0.12

 
$
0.09

 
$
0.05

 
$
0.03

 
(Loss) earnings from discontinued operations, net of tax

 
(0.01
)
 

 
0.09

 
Net earnings per share
$
0.12

 
$
0.08

 
$
0.05

 
$
0.12

 


Note: The Company's fiscal year ends on the Saturday closest to October 31st and fiscal years generally contain 52 weeks. However, because of this accounting convention, every fifth or sixth fiscal year has an additional week, and 2012 will be reported as a 53-week fiscal year. The Company's first six months ended May 5, 2012 included 27 weeks compared to 26 weeks in the first six months of the prior year.






Spartech Corporation and Subsidiaries
Consolidated Condensed Balance Sheets

 
(Unaudited)

 
 
 
May 5,

 
October 29,

(Dollars in thousands, except share data)
2012

 
2011

Assets
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
1,491

 
$
877

Trade receivables, net of allowances of $2,548 and $2,437, respectively
153,915

 
156,432

Inventories, net of inventory reserves of $10,470 and $9,152, respectively
107,121

 
91,186

Prepaid expenses and other current assets, net
30,922

 
26,367

Assets held for sale
2,624

 
2,744

Total current assets
296,073

 
277,606

Property, plant and equipment, net
200,687

 
208,074

Goodwill
47,466

 
47,466

Other intangible assets, net
12,027

 
12,872

Other long-term assets
4,692

 
3,684

 
 
 
 
Total assets
$
560,945

 
$
549,702

Liabilities and shareholders’ equity
 
 
 
Current liabilities:
 
 
 
Current maturities of long-term debt
$
22,661

 
$
25,211

Accounts payable
148,085

 
140,628

Accrued liabilities
32,350

 
30,919

Total current liabilities
203,096

 
196,758

 
 
 
 
Long-term debt, less current maturities
134,950

 
132,000

 
 
 
 
Other long-term liabilities:
 
 
 
Deferred taxes
41,672

 
41,676

Other long-term liabilities
6,121

 
6,336

Total liabilities
385,839

 
376,770

Shareholders’ equity
 
 
 
Preferred stock (authorized: 4,000,000 shares, par value $1.00)
Issued: None

 

Common stock (authorized: 55,000,000 shares, par value $0.75)
Issued: 33,131,846 shares; outstanding: 30,796,685 and 30,831,919 shares, respectively
24,849

 
24,849

Contributed capital
201,707

 
201,945

Accumulated loss
(9,609
)
 
(11,031
)
Treasury stock, at cost, 2,335,161 and 2,299,927 shares, respectively
(48,233
)
 
(49,286
)
Accumulated other comprehensive income
6,392

 
6,455

Total shareholders’ equity
175,106

 
172,932

 
 
 
 
Total liabilities and shareholders’ equity
$
560,945

 
$
549,702






Spartech Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows

 
Six Months Ended
 
May 5,

 
April 30,

(Unaudited and dollars in thousands)
2012

 
2011

Cash flows from operating activities
 
 
 
Net earnings
$
1,421

 
$
3,653

Adjustments to reconcile net earnings to net cash provided by operating activities:
 
 
 
Depreciation and amortization
16,425

 
16,137

Stock-based compensation expense
917

 
1,541

Restructuring and exit costs

 
299

Loss on disposition of assets, net
53

 
192

Provision for bad debt expense
331

 
774

Change in current assets and liabilities
(10,178
)
 
(13,434
)
Other, net
(176
)
 
(673
)
Net cash provided by operating activities
8,793

 
8,489

Cash flows from investing activities
 
 
 
Capital expenditures
(8,382
)
 
(14,201
)
Proceeds from the disposition of assets
115

 

Net cash used by investing activities
(8,267
)
 
(14,201
)
Cash flows from financing activities
 
 
 
Bank credit facility borrowings, net
3,388

 
6,000

Payments on notes and bank term loan
(2,467
)
 
(378
)
Payments on bonds and leases
(250
)
 
(255
)
Debt issuance costs
(485
)
 
(1,561
)
Sale of treasury stock
2

 

Stock-based compensation exercised
(102
)
 
(294
)
Net cash provided by financing activities
86

 
3,512

Effect of exchange rates on cash and cash equivalents
2

 
7

Increase (decrease) in cash and cash equivalents
614

 
(2,193
)
Cash and cash equivalents at beginning of period
877

 
4,900

Cash and cash equivalents at end of period
$
1,491

 
$
2,707







Non-GAAP Reconciliations


Within this press release we have included operating earnings (GAAP) to operating earnings excluding special items (Non-GAAP), net earnings from continuing operations (GAAP) to net earnings from continuing operations excluding special items (Non-GAAP) and net earnings from continuing operations per diluted share (GAAP) to net earnings from continuing operations per diluted share excluding special items (Non-GAAP). We have also excluded the operations of our discontinued wheels, profiles, marine, Donchery sheet and Arlington, Texas compounding operations throughout this press release and in the presentation below.

We use these measurements to assess our ongoing operating results without the effect of these adjustments and compare such results to our historical and planned operating results. We believe these measurements are useful to help investors to compare our results to previous periods and provide an indication of underlying trends in the business. Such non-GAAP measurements are not recognized in accordance with generally accepted accounting principles (GAAP) and should not be viewed as an alternative to GAAP measures of performance.

The following tables reconcile (GAAP) to (Non-GAAP) measures:

 
Three Months Ended
 
Six Months Ended
 
May 5,

 
April 30,

 
May 5,

 
April 30,

(unaudited and in thousands, except per share data)
2012

 
2011

 
2012

 
2011

Operating earnings (GAAP)
$
8,549

 
$
7,097

 
$
8,022

 
$
5,277

  Restructuring and exit costs

 
548

 

 
1,377

Operating earnings excluding special items (Non-GAAP)
$
8,549

 
$
7,645

 
$
8,022

 
$
6,654

Net earnings from continuing operations (GAAP)
$
3,674

 
$
2,847

 
$
1,403

 
$
1,007

   Restructuring and exit costs, net of tax

 
345

 

 
868

Net earnings from continuing operations excluding special items (Non-GAAP)
$
3,674

 
$
3,192

 
$
1,403

 
$
1,875

Net earnings from continuing operations per diluted share (GAAP)
$
0.12

 
$
0.09

 
$
0.05

 
$
0.03

   Restructuring and exit costs, net of tax

 
0.01

 

 
0.03

Net earnings from continuing operations per diluted share excluding special items (Non-GAAP)
$
0.12

 
$
0.10

 
$
0.05

 
$
0.06


The following table reconciles operating earnings (loss) (GAAP) to operating earnings (loss) excluding special items (Non-GAAP) by segment (in thousands):

 
Three Months Ended
 
Three Months Ended
 
May 5, 2012
 
April 30, 2011
 
Operating
Earnings (Loss)
(GAAP)
 
Special
Items
 
Operating Earnings
(Loss)
Excluding
(Non-GAAP)
Special Items
 
Operating
Earnings (Loss)
(GAAP)
 
Special
Items
 
Operating Earnings
(Loss)
Excluding
(Non-GAAP)
Special Items
Segment
 
 
 
 
 
Custom Sheet and Rollstock
$
8,595

 
$

 
$
8,595

 
$
7,915

 
$
109

 
$
8,024

Packaging Technologies
5,174

 

 
5,174

 
6,358

 
131

 
6,489

Color and Specialty Compounds
2,677

 

 
2,677

 
121

 
308

 
429

Corporate
(7,897
)
 

 
(7,897
)
 
(7,297
)
 

 
(7,297
)
Total
$
8,549

 
$

 
$
8,549

 
$
7,097

 
$
548

 
$
7,645





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