SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from .................... to .........................
Commission file number 1-3427
HILTON HOTELS CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 36-2058176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
9336 CIVIC CENTER DRIVE, BEVERLY HILLS, CALIFORNIA 90210
(Address of principal executive offices) (Zip code)
(310) 278-4321
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding twelve months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of July 31, 1997 --- Common Stock,
$2.50 par value --- 250,054,019 shares.
PART I FINANCIAL INFORMATION
Company or group of companies for which report is filed:
HILTON HOTELS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(in millions, except per share amounts)
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
- - ------------------------------------------------------------------------------------------------- ----------------
Revenue Rooms $ 502 450 962 876
Food and beverage 256 221 500 436
Casino 448 203 898 403
Franchise fees 15 12 27 22
Other products and services 139 118 276 224
----------------------------------------------------------------------- ----------------
1,360 1,004 2,663 1,961
- - ------------------------------------------------------------------------------------------------- ----------------
Expenses Rooms 132 128 260 251
Food and beverage 195 170 385 335
Casino 242 106 484 218
Other expenses, including
remittances to owners 566 474 1,139 943
Corporate expense 22 13 35 22
----------------------------------------------------------------------- ----------------
1,157 891 2,303 1,769
- - ------------------------------------------------------------------------------------------------- ----------------
Operating income 203 113 360 192
Interest and dividend income 10 9 23 16
Interest expense (45) (18) (88) (39)
Interest expense, net, from equity investments (5) (4) (9) (7)
- - ------------------------------------------------------------------------------------------------- ----------------
Income before income taxes
and minority interest 163 100 286 162
Provision for income taxes 67 39 118 63
Minority interest, net 3 2 7 3
- - ------------------------------------------------------------------------------------------------- ----------------
Net income $ 93 59 161 96
- - ------------------------------------------------------------------------------------------------- ----------------
- - ------------------------------------------------------------------------------------------------- ----------------
Net income available to
common stockholders $ 90 59 155 96
- - ------------------------------------------------------------------------------------------------- ----------------
- - ------------------------------------------------------------------------------------------------- ----------------
Net income per share $ .36 .30 .62 .49
- - ------------------------------------------------------------------------------------------------- ----------------
- - ------------------------------------------------------------------------------------------------- ----------------
Average number
of shares 251 197 251 195
- - ------------------------------------------------------------------------------------------------- ----------------
- - ------------------------------------------------------------------------------------------------- ----------------
1
HILTON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in millions)
June 30, December 31,
1997 1996
- - --------------------------------------------------------------------------------------------------------
Assets Current assets
Cash and equivalents $ 297 388
Temporary investments 28 50
Other current assets 602 713
------------------------------------------------------------------------------
Total current assets 927 1,151
Investments 441 373
Property and equipment, net 4,952 4,698
Goodwill 1,279 1,295
Other assets 77 60
------------------------------------------------------------------------------
Total assets $7,676 7,577
- - --------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------
Liabilities and Current liabilities
stockholders' equity Accounts payable and accrued expenses $ 799 894
Current maturities of long-term debt 30 101
Income taxes payable 33 3
------------------------------------------------------------------------------
Total current liabilities 862 998
Long-term debt 2,745 2,606
Deferred income taxes and other liabilities 715 762
Stockholders' equity 3,354 3,211
------------------------------------------------------------------------------
Total liabilities and stockholders' equity $7,676 7,577
- - --------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------
2
HILTON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in millions)
Six months ended
June 30,
1997 1996
- - --------------------------------------------------------------------------------------------------------
Operating activities Net income $ 161 96
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 140 74
Amortization of debt issue costs 1 -
Change in working capital components:
Other current assets 82 42
Accounts payable and accrued expenses (53) (27)
Income taxes payable 30 10
Change in deferred income taxes (58) 1
Change in other liabilities (75) (10)
Distributions from equity investments
in excess of earnings 12 8
Other (12) (1)
-------------------------------------------------------------------------------
Net cash provided by operating activities 228 193
- - --------------------------------------------------------------------------------------------------------
Investing activities Capital expenditures (309) (81)
Additional investments (98) (37)
Change in temporary investments (3) 18
Proceeds from property transactions 100 -
Payments on notes and other investments 25 1
Acquisitions, net of cash acquired (69) -
-------------------------------------------------------------------------------
Net cash used in investing activities (354) (99)
- - --------------------------------------------------------------------------------------------------------
Financing activities Change in commercial paper borrowings
and revolving loans (527) (457)
Long-term borrowings 670 490
Reduction of long-term debt (76) (162)
Issuance of common stock 15 22
Cash dividends (47) (29)
-------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 35 (136)
- - --------------------------------------------------------------------------------------------------------
Decrease in cash and equivalents (91) (42)
Cash and equivalents at beginning of year 388 433
- - --------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 297 391
- - --------------------------------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------------------------------
3
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SUMMARY OF OPERATIONS
(dollars in millions, except average rate amounts)
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
- - --------------------------------------------------------------------------------
Revenue Hotels $ 722 657 1,389 1,273
Gaming 638 347 1,274 688
----------------------------------------------------------------
Total $ 1,360 1,004 2,663 1,961
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Operating Hotels $ 140 83 225 138
income Gaming 85 43 170 76
Corporate expense (22) (13) (35) (22)
----------------------------------------------------------------
Total 203 113 360 192
Net interest expense (40) (13) (74) (30)
Provision for income taxes (67) (39) (118) (63)
Minority interest, net (3) (2) (7) (3)
- - --------------------------------------------------------------------------------
Net income $ 93 59 161 96
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Occupancy Hotels 78.5 % 77.0 75.2 74.3
Gaming 87.8 91.3 87.5 90.0
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Average rate Hotels $144.43 133.27 145.49 134.77
Gaming 80.10 73.45 78.75 73.91
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
June 30, 1997 June 30, 1996
--------------------------------- --------------------------------
Number of Available Casino Number of Available Casino
Properties Rooms Sq. ft. Properties Rooms Sq. ft.
- - ----------------------------------------------------------------------------------------------------------------
Hotels Owned and partially owned 32 23,798 - 32 23,566 -
Managed 28 16,659 - 26 15,849 -
Franchised 178 45,184 - 167 42,788 -
- - ----------------------------------------------------------------------------------------------------------------
Total hotels 238 85,641 - 225 82,203 -
Gaming Owned, partially owned and
managed casinos and
hotel-casinos 16 16,992 963,000 10 12,782 626,000
- - ----------------------------------------------------------------------------------------------------------------
Total 254 102,633 963,000 235 94,985 626,000
- - ----------------------------------------------------------------------------------------------------------------
- - ----------------------------------------------------------------------------------------------------------------
4
NET INCOME PER SHARE
The calculations of common and equivalent shares, net income available to common
stockholders and net income per share are as follows:
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
Shares outstanding
beginning of period 249,380,062 195,139,216 248,717,746 193,348,712
Net common shares issued/
issuable upon exercise
of certain stock
options 2,016,800 1,805,617 1,782,482 1,737,491
----------- ----------- ----------- -----------
Common and equivalent
shares 251,396,862 196,944,833 250,500,228 195,086,203
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Net income (in millions) $ 93 $ 59 $ 161 $ 96
---- ----- ----- ------
---- ----- ----- ------
Preferred dividend
requirement (in millions) $ 3 $ - $ 6 $ -
---- ----- ----- ------
---- ----- ----- ------
Net income available to
common stockholders (in millions) $ 90 $ 59 $ 155 $ 96
---- ----- ----- ------
---- ----- ----- ------
Net income per share $.36 $ .30 $ .62 $ .49
---- ----- ----- ------
---- ----- ----- ------
Dividends declared per share $.08 $.075 $ .16 $ .15
---- ----- ----- ------
---- ----- ----- ------
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: GENERAL
The consolidated financial statements presented herein have been prepared by
Hilton Hotels Corporation and subsidiaries (the Company) in accordance with the
accounting policies described in its 1996 Annual Report to Stockholders and
should be read in conjunction with the Notes to Consolidated Financial
Statements which appear in that report.
The statements for the three and six months ended June 30, 1997 and 1996 are
unaudited; however, in the opinion of management, all adjustments (which include
only normal recurring accruals) have been made which are considered necessary to
present fairly the operating results and financial position for the unaudited
periods.
The consolidated financial statements for the 1996 period reflect certain
reclassifications to conform with classifications adopted in 1997. These
classifications have no effect on net income.
NOTE 2: BASIS OF PRESENTATION
During 1996, the Company elected to change the presentation in its consolidated
financial statements to include the operating results and working capital of
properties operated under long-term management agreements. These agreements
effectively convey to the Company the right to use the properties in exchange
for payments to the property owners, which are based primarily on the
properties' profitability. All periods presented reflect this change in
presentation which the Company believes is preferable. The consolidated
financial statements include the following amounts related to managed hotels:
current assets and current liabilities of $293 million and $344 million at June
30, 1997 and December 31, 1996, respectively, including cash and equivalents of
$115 million for both periods; revenue of $478 million and $579 million for the
three-month periods ended June 30, 1997 and 1996, respectively; revenue of $971
million and $1.1 billion for the six-month periods ended June 30, 1997 and
1996, respectively; operating expenses, including remittances to owners, of $442
million and $534 million for the three-month periods ended June 30, 1997 and
1996, respectively; and operating expenses, including remittances to owners, of
$902 million and $1.1 billion for the six-month periods ended June 30, 1997
and 1996, respectively.
NOTE 3: ACQUISITION
Effective December 18, 1996, the Company completed the merger of Bally
Entertainment Corporation (Bally) with and into the Company pursuant to an
agreement dated June 6, 1996. The Company's consolidated results of operations
have incorporated Bally's activity from the effective date of the merger. The
following unaudited pro forma information has been prepared assuming that this
acquisition had taken place on January 1, 1996. This pro forma information does
not purport to be indicative of future results or what would have occurred had
the acquisition been made as of that date.
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(in millions, except per share amounts) (pro forma) (pro forma)
Revenue $1,360 1,297 2,663 2,536
Operating income 203 178 360 310
Net income 93 85 161 140
Net income per share .36 .32 .62 .53
6
NOTE 4: ITT OFFER
In January 1997, the Company commenced an offer to acquire ITT Corporation (ITT)
in a combination cash and stock transaction. The Company offered a price of $55
for each ITT share, for a consideration of approximately $6.5 billion. The
total transaction, including assumption of ITT's outstanding debt, would be
valued at approximately $10.5 billion. The Company's offer consists of a cash
tender offer of $55 per share for a majority of the outstanding ITT shares (the
ITT Tender Offer), to be followed by a merger whereby ITT shareholders would
receive shares of the Company's common stock, par value $2.50 per share, with a
value of $55 in exchange for each remaining ITT share, subject to appropriate
collar provisions. The Company plans to fund the ITT Tender Offer from a
combination of its available cash, working capital, existing credit facilities,
borrowings under credit facilities that the Company will seek to obtain from
commercial banks and/or the issuance of public debt. The acquisition would be
subject to regulatory approvals and other conditions, and therefore there can be
no assurance that the Company would be successful in acquiring ITT, or if
successful, what effect such acquisition would have on the Company's financial
condition or results of operations.
On February 11, 1997, the board of directors of ITT recommended that the ITT
shareholders reject the Company's offer as inadequate and not in the best
interests of ITT shareholders. In response, the Company expressed its
continuing commitment to the transaction, including pursuing the transaction by
taking the matter directly to ITT shareholders.
On July 16, 1997, ITT made an announcement that its board of directors had
approved a corporate restructuring of ITT.
On August 6, 1997, the Company increased its cash tender offer to acquire ITT
shares from $55 per share to $70 per share for a consideration of approximately
$8.3 billion. The total transaction, including assumption of ITT's outstanding
debt, would be valued at approximately $11.5 billion.
NOTE 5: SUPPLEMENTAL CASH FLOW INFORMATION
Six months ended
June 30,
1997 1996
---- ----
(in millions)
Cash paid during the period for the following:
Interest, net of amounts capitalized $ 81 41
Income taxes 75 46
NOTE 6: INVESTMENTS
Summarized operating results of the Company's equity investments are as follows:
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(in millions) (in millions)
Revenue $ 247 359 483 712
Expenses 200 304 390 595
Net income 44 48 86 101
7
NOTE 7: SUPPLEMENTAL SEGMENT DATA
Supplemental hotel segment data for the three and six months ended June 30, 1997
and 1996 are as follows:
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(in millions) (in millions)
Revenue
Rooms $ 416 382 797 741
Food and beverage 193 173 371 339
Franchise fees 15 12 27 22
Other products and services 98 90 194 171
------ ------ ------ ------
722 657 1,389 1,273
------ ------ ------ ------
Expenses
Rooms 104 105 203 206
Food and beverage 140 129 274 254
Other expenses, including
remittances to owners 338 340 687 675
------ ------ ------ ------
582 574 1,164 1,135
------ ------ ------ ------
Hotel operating income $ 140 83 225 138
------ ------ ------ ------
------ ------ ------ ------
Supplemental gaming segment data for the three and six months ended June 30,
1997 and 1996 are as follows:
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(in millions) (in millions)
Revenue
Rooms $ 86 68 165 135
Food and beverage 63 48 129 97
Casino 448 203 898 403
Other products and services 41 28 82 53
------ ------ ------ ------
638 347 1,274 688
------ ------ ------ ------
Expenses
Rooms 28 23 57 45
Food and beverage 55 41 111 81
Casino 242 106 484 218
Other expenses, including
remittances to owners 228 134 452 268
------ ------ ------ ------
553 304 1,104 612
------ ------ ------ ------
Gaming operating income $ 85 43 170 76
------ ------ ------ ------
------ ------ ------ ------
NOTE 8: LITIGATION
On June 13, 1997, Bally's Grand, Inc. (BGI), a subsidiary of the Company,
announced that it had reached an agreement to settle the IN RE: BALLY'S
GRAND, INC. SHAREHOLDERS LITIGATION presently pending in the Delaware Court
of Chancery. Prior to the settlement, the Company indirectly owned
approximately 84% of the common stock of BGI. Under the terms of the
settlement, BGI has repurchased 966,747 shares of its common stock and
102,698 warrants to purchase shares of its common stock from certain
plaintiffs at a price of $52.75 per share in cash for the common stock and
$52.75 less the exercise price per warrant in cash for the warrants. At June
30, 1997, the Company indirectly owned approximately 95% of the outstanding
common stock of BGI.
8
Following receipt of court approval of the settlement agreement, BGI would merge
with the Company or a subsidiary of the Company, and the remaining 408,862
outstanding shares of BGI's common stock not currently owned by Company would be
converted into the right to receive $52.75 (less certain attorneys' fees) per
share in cash, and the 491,784 outstanding warrants to purchase BGI common stock
not currently owned by the Company would be converted into the right to receive
the difference between $52.75 (less certain attorneys' fees) and the exercise
price per warrant in cash. Shareholders will be entitled to appraisal rights
under Delaware law in connection with any such merger.
NOTE 9: SUBSEQUENT EVENTS
On July 22, 1997, the Company issued $325 million aggregate principal amount of
7-year senior unsecured notes. The notes will mature on July 15, 2004 and carry
an interest rate of 7%. The Company used the proceeds to repay its outstanding
revolving credit facility and a portion of its commercial paper borrowings.
Such outstanding indebtedness was incurred primarily to fund the cash tender
offers to purchase the outstanding debt securities of certain former Bally
subsidiaries and the related consent solicitations.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION
LIQUIDITY
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
---- ---- ---- ----
(in millions) (in millions)
EBITDA (1)
Hotels $ 162 105 273 184
Gaming 136 66 269 120
Corporate expense (20) (13) (33) (19)
------ ------ ------ ------
Total $ 278 158 509 285
------ ------ ------ ------
------ ------ ------ ------
Net cash provided by operating activities $ 228 193
Net cash used in investing activities (354) (99)
Net cash provided by (used in) financing activities 35 (136)
Capital expenditures 309 81
Additional investments 98 37
(1) EBITDA is earnings before interest, taxes, depreciation, amortization
and non-cash items. EBITDA is presented supplementally because
management believes it allows for a more complete analysis of results of
operations. This information should not be considered as an alternative
to any measure of performance or liquidity as promulgated under
generally accepted accounting principles (such as net income or cash
provided by or used in operating, investing and financing activities)
nor should it be considered as an indicator of the overall financial
performance of the Company. The Company's calculation of EBITDA may be
different from the calculation used by other companies and therefore
comparability may be limited.
EBITDA for the 1997 second quarter was $278 million, an increase of $120 million
over the 1996 quarter. The increase was attributable to continued improvement
in revenue per available room (REVPAR) and EBITDA at the Company's owned and
equity hotels, as well as the 1996 acquisitions of Bally Entertainment
Corporation (Bally) and the majority of The Prudential Insurance Company of
America's (Prudential) interests in six full-service hotel properties.
CAPITAL SPENDING
New developments and refurbishment programs are continually underway at the
Company's hotel and casino properties. The Company completed its new
western-themed casino, "Wild Wild West," which
10
opened on July 1, 1997. This $110 million project is located on
approximately four acres of boardwalk property adjacent to Bally's Park Place
and features a 75,000 square foot casino complex. In late July 1997,
construction was completed on the new 300-room tower at The Atlantic City
Hilton. This $50 million project increases the property's room capacity by
nearly 60 percent.
Construction continues on "Star Trek: The Experience at the Las Vegas Hilton,"
an adult-oriented attraction being developed in collaboration with Paramount
Parks, Inc. This project will include the addition of a new 22,000 square foot
themed casino and is scheduled to open in late 1997. The Company's share of
costs for this project will total approximately $70 million.
Construction also continues on schedule at the approximately 43% owned Conrad
International Punta del Este Resort and Casino in Punta del Este, Uruguay. This
approximately $200 million project includes a 38,000 square foot casino, which
opened in January 1997, and a 300-room luxury hotel which is scheduled to open
in late 1997. As of June 30, 1997, the Company has provided $77 million in debt
financing for this project.
In April 1997, the Company began construction on the $760 million, 2,900-room
Paris Casino-Resort which will feature an 85,000 square foot casino, nine themed
restaurants, 130,000 square feet of convention space and a retail shopping
complex with a French influence. In addition to a 50-story replica of the
Eiffel Tower, the resort will also feature replications of some of the French
city's most recognized landmarks including the Arc de Triomphe, the Paris Opera
House, The Louvre and rue de la Paix. This project, which is adjacent to
Bally's Las Vegas, is expected to be completed in mid-1999.
In addition to an estimated $380 million in 1997 expenditures related to the
aforementioned gaming projects, the Company anticipates spending approximately
$100 million in the gaming segment in 1997 on normal capital replacements,
approximately $30 million on structural and technology upgrades and
11
ADA/safety compliance projects and approximately $20 million on improvement
projects that are evaluated on a ROI basis.
Growth in the hotel segment continues through selective acquisition of large
full-service hotels in major market locations. In February 1997, the Company
acquired the 591-room Anchorage Hilton hotel in Anchorage, Alaska for
approximately $67 million. The Company expects to invest an additional $3
million to renovate certain areas of the hotel.
Also in February 1997, the Company sold its 30 percent interest in the 510-room
Conrad International Hong Kong for approximately $100 million plus the
assumption of $12 million of existing debt. The transaction resulted in a $70
million gain which is being amortized over the remaining life of the existing
management contract.
In July 1997, the Company's Board of Directors approved a renovation of the
New York Hilton & Towers, including a new main entrance, redesigned lobby and
guest registration area, new conference and business center and a new health
club. This $58 million project is expected to be completed in late 1999.
The Company is working on a number of hotel acquisitions. The Company intends
to spend approximately $75 million in the hotel segment on normal capital
replacements, upgrades and compliance projects. Improvement projects, which are
subject to strict ROI analysis, are expected to total approximately $10 million.
The estimated 1997 expenditures required to complete the aforementioned projects
and capital spending programs will be financed through available cash flows and
general corporate borrowings.
12
SIGNIFICANT NEW DEVELOPMENTS
In January 1997, the Company commenced an offer to acquire ITT Corporation (ITT)
in a combination cash and stock transaction. The Company offered a price of $55
for each ITT share, for a consideration of approximately $6.5 billion. The
total transaction, including assumption of ITT's outstanding debt, would be
valued at approximately $10.5 billion. The Company's offer consists of a cash
tender offer of $55 per share for a majority of the outstanding ITT shares (the
ITT Tender Offer), to be followed by a merger whereby ITT shareholders would
receive shares of the Company's common stock, par value $2.50 per share, with a
value of $55 in exchange for each remaining ITT share, subject to appropriate
collar provisions. The Company plans to fund the ITT Tender Offer from a
combination of its available cash, working capital, existing credit facilities,
borrowings under credit facilities that the Company will seek to obtain from
commercial banks and/or the issuance of public debt. The acquisition would be
subject to regulatory approvals and other conditions, and therefore there can be
no assurance that the Company would be successful in acquiring ITT, or if
successful, what effect such acquisition would have on the Company's financial
condition or results of operations.
On February 11, 1997, the board of directors of ITT recommended that the ITT
shareholders reject the Company's offer as inadequate and not in the best
interests of ITT shareholders. In response, the Company expressed its
continuing commitment to the transaction, including pursuing the transaction by
taking the matter directly to ITT shareholders.
On July 16, 1997, ITT made an announcement that its board of directors had
approved a corporate restructuring of ITT.
On August 6, 1997, the Company increased its cash tender offer to acquire ITT
shares from $55 per share to $70 per share for a consideration of approximately
$8.3 billion. The total transaction, including assumption of ITT's outstanding
debt, would be valued at approximately $11.5 billion.
13
In January 1997, the Company finalized agreements with Ladbroke Group PLC, whose
wholly owned subsidiary, Hilton International Co. (HI), owns the rights to the
Hilton name outside the United States. The agreements provide for the
reunification of the Hilton brand worldwide through a strategic alliance between
the companies, including cooperation on sales and marketing, loyalty programs
and other operational matters. The Company and HI have integrated their
reservation systems, launched the Hilton HHonors-Registered Trademark- Worldwide
loyalty program and continue the integration of worldwide sales offices and
development of joint marketing initiatives.
LONG-TERM DEBT
Long-term debt at June 30, 1997 totaled $2.7 billion, compared with $2.6 billion
at December 31, 1996. In February 1997, the Company redeemed its 6% Convertible
Subordinated Notes due 1998 and its 10% Convertible Subordinated Notes due 2006.
These notes, formerly obligations of Bally, had outstanding principal balances
of $1 million and $70 million, respectively.
At June 30, 1997, approximately $724 million of the aggregate commitment of the
Company's five year $1.75 billion revolving credit facility supported the
issuance of commercial paper and $250 million was outstanding, leaving
approximately $776 million of the revolving bank debt facility available to the
Company at such date.
During April 1997, the Company issued $375 million of 7.95%, 10-year senior
unsecured notes due April 15, 2007, under an effective shelf registration
statement (the Shelf) on file with the Securities and Exchange Commission
registering up to $1 billion in debt or equity securities. In June 1997, the
Company issued $300 million of 7.375%, 5-year senior unsecured notes due June
1, 2002, under the Shelf. On July 22, 1997, the Company issued $325 million
of 7-year senior unsecured notes, the remaining balance under the Shelf. The
7-year notes will mature on July 15, 2004 and carry an interest rate of 7%.
The Company used the proceeds from these offerings to repay its revolving
credit facility and a portion of its commercial paper borrowings. Such
outstanding indebtedness was incurred primarily to fund the cash
14
tender offers to purchase the outstanding debt securities of certain former
Bally subsidiaries and the related consent solicitations.
RESULTS OF OPERATIONS
COMPARISON OF FISCAL QUARTERS ENDED JUNE 30, 1997 AND 1996
OVERVIEW
A summary of the Company's consolidated revenue and earnings for the three
months ended June 30, 1997 and 1996 is as follows:
(in millions, except per share amounts) 1997 1996 % Change
---- ---- --------
Revenue $ 1,360 1,004 35%
EBITDA 278 158 76%
Operating income 203 113 80%
Net income 93 59 58%
Net income per share .36 .30 20%
HOTELS
Hotel revenue for the 1997 second quarter was $722 million, an increase of 10
percent over 1996. EBITDA from the hotel division was $162 million for the
1997 second quarter, a 54 percent increase, compared to $105 million a year
ago, while hotel operating income increased 69 percent to $140 million from
$83 million last year. The Company continues to benefit from favorable
supply-demand dynamics at all of its major full-service properties. In
addition, the Company's ongoing emphasis on yield management has resulted in
dramatic margin improvements at most of its owned and equity properties. The
hotel division also benefited from increased ownership interests in six
full-service hotels in Chicago, New York, San Francisco and Washington D.C.
acquired from Prudential in the 1996 fourth quarter, as well as the
acquisition of the Anchorage Hilton in the first quarter of 1997. Occupancy
for hotels owned or managed was 78.5 percent in the 1997 second quarter
compared to 77.0 percent in 1996. The average room rate increased eight
percent to $144.43 from $133.27 in the prior year and REVPAR increased 11
percent from a year ago.
15
EBITDA from the Company's ten major full-service properties increased $38
million over the prior year quarter. Of this increase, approximately $21
million resulted from the increased ownership interests acquired from Prudential
and the balance was due to improved operations. These properties continue to
benefit from strong demand and a lack of new supply in their respective markets.
Combined EBITDA margin from these ten properties increased nearly three points
over the 1996 quarter. Combined EBITDA from the Waldorf=Astoria and the New
York Hilton & Towers increased $7 million over the 1996 second quarter. Strong
individual business traveler (IBT) volume combined with increases in IBT average
room rates contributed to a double digit REVPAR increase at each of these two
properties over the 1996 second quarter. The Company's properties in Chicago
benefited from strong IBT and company meeting volume and significant room rate
increases which led to a combined EBITDA increase of $4 million at the Chicago
Hilton & Towers, the O'Hare Hilton and the Palmer House Hilton in the 1997
second quarter. Double digit percentage gains in convention volume and average
room rates in the second quarter of 1997 led the New Orleans Hilton Riverside &
Towers to a $2 million increase in EBITDA compared to last year. Occupancy for
these ten major full-service hotels (which also includes properties in San
Francisco, Honolulu and Washington D.C.) was 84.3 percent versus 82.8 percent in
the 1996 quarter. The average room rate increased to $164.71 in the 1997 second
quarter from $150.70 and REVPAR improved 11 percent between periods.
Continuing strong demand and limited new competition led to an 11 percent
increase in REVPAR at the Company's other full-service domestic owned and equity
properties. These properties, typically located in large secondary markets and
suburban locations, generated an $8 million increase in EBITDA over the prior
year second quarter. The 1997 results include a $4 million increase in EBITDA
from the Anchorage Hilton which was acquired in February 1997.
Depreciation and amortization for the hotel division, including the Company's
proportionate share of depreciation and amortization from its equity
investments, increased $4 million to $26 million in the second quarter of 1997.
16
Although the supply-demand balance generally remains favorable, future operating
results could be adversely impacted by increased capacity and weak demand.
These conditions could limit the Company's ability to pass through inflationary
increases in operating costs in the form of higher rates. Increases in
transportation and fuel costs or sustained recessionary periods could also
unfavorably impact future results. However, the Company believes that its
financial strength, market presence and diverse product line will enable it to
remain extremely competitive.
GAMING
Total gaming revenue increased 84 percent in the 1997 second quarter to $638
million from $347 million in 1996. Casino revenue, a component of gaming
revenue, increased 121 percent to $448 million in 1997 compared to $203 million
in the prior year. EBITDA from the gaming division was $136 million compared to
$66 million in the prior year second quarter and gaming operating income
increased 98 percent to $85 million from $43 million in the 1996 quarter. The
Company's gaming division benefited from the addition of the Bally properties in
Las Vegas, Atlantic City, Mississippi and New Orleans. Gaming revenue, casino
revenue, EBITDA and operating income increased $279 million, $201 million, $71
million and $52 million, respectively, as a result of the Bally acquisition.
The completion of a number of room expansion projects and the opening of a new
hotel-casino led to a 12 percent increase in room supply in Las Vegas in the
first quarter of 1997. This supply increase coupled with reduced convention
volume contributed to a 10.5 point decline in occupancy at the Las Vegas Hilton
in the 1997 second quarter. New casino marketing and entertainment strategies
are being implemented which the Company believes will broaden the customer base
and create additional volume at this property. The impact of the decreased
occupancy in the second quarter was offset by a win percentage of 29 percent on
its premium play baccarat business, which is eight points above the prior year's
win percentage and slightly above historical averages. EBITDA at the Las Vegas
Hilton totaled $10 million in the 1997 second quarter, which was comparable to
last year. Results at the Las Vegas Hilton are more
17
volatile than the Company's other casinos because this property caters to the
premium play segment of the market. Future fluctuations in premium play
volume and win percentage could result in continued volatility in the results
at this property.
The new capacity additions also resulted in a five point decrease in occupancy
at the Flamingo Hilton - Las Vegas. EBITDA at this property remained consistent
compared to the prior year quarter as the decrease in occupancy was offset by a
six percent increase in average room rate. Bally's Las Vegas generated EBITDA
of $23 million in the second quarter of 1997, an increase of 10 percent from
1996. Despite the increased competition in the Las Vegas market, occupancy at
Bally's Las Vegas remained consistent with the prior year while average room
rates increased seven percent. This property's results were not included in the
1996 second quarter.
Soft market conditions continue to affect the Flamingo Hilton - Laughlin, which
posted a $1 million decrease in EBITDA. EBITDA from the Reno Hilton increased
$2 million from the 1996 second quarter, benefiting from the city's major
bowling convention.
Occupancy for the Nevada hotel-casinos was 88.3 percent in the 1997 quarter
compared to 93.2 percent last year. The average room rate for the Nevada
properties was $77.99 compared to $73.41 in the 1996 second quarter. The 1996
statistical information includes the results of Bally's Las Vegas for
comparison.
In Atlantic City, Bally's Park Place and The Atlantic City Hilton generated
EBITDA of $35 million and $7 million, respectively, in the 1997 second quarter.
While not included in the Company's results last year, EBITDA at these
properties totaled $37 million and $15 million, respectively, in the 1996 second
quarter. The decrease at The Atlantic City Hilton was due primarily to declines
in boardwalk pedestrian traffic due to disruptions from construction of its new
300-room tower combined with a lower than normal table game win percentage.
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Occupancy and average room rate for the Atlantic City hotel-casinos was 94.0
percent and $92.83, respectively, in the 1997 second quarter. Although not
included in the Company's 1996 second quarter, occupancy and average room rate
was 94.9 percent and $89.81, respectively.
Operating results from the Company's New Orleans river casino operations
remained flat, reflecting continued market softness. In October 1996, the
Company was granted general approval from Louisiana regulators to relocate
the Flamingo Casino-New Orleans to Shreveport, Louisiana by October 1, 1997.
The Company is currently negotiating with its 50% partner regarding the joint
venture's options with respect to this property.
The approximately 43% owned Conrad International Punta del Este Resort and
Casino in Punta del Este, Uruguay, which opened its casino in January 1997,
contributed $1 million to gaming division EBITDA in the second quarter of 1997.
Combined EBITDA from the Company's approximately 20% owned casinos in the Gold
Coast and Brisbane, Australia increased $2 million from the 1996 second quarter.
Depreciation and amortization for the gaming division, including the Company's
proportionate share of depreciation and amortization from its equity
investments, increased $28 million to $51 million in the second quarter of 1997
compared to prior year. This increase primarily resulted from the addition of
the Bally properties.
The gaming industry continues to experience growth primarily in existing
markets. The Las Vegas and Atlantic City markets are becoming increasingly
competitive due to new developments and expansion projects which challenge the
Company's existing market share. These projects could adversely impact the
Company's future gaming income.
CORPORATE EXPENSE
Corporate expense increased $9 million to $22 million in the 1997 second
quarter. The 1997 period includes a $5 million non-recurring accrual for
certain litigation costs.
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FINANCING ACTIVITIES
Interest and dividend income totaled $10 million in the 1997 period compared to
$9 million in 1996. Consolidated interest expense increased $27 million to $45
million primarily due to additional debt resulting from the Bally acquisition.
INCOME TAXES
The effective income tax rate for the 1997 period increased to 41 percent
compared to 39 percent for the 1996 period due primarily to the additional
goodwill recorded as a result of the Bally acquisition which is not deductible
for tax purposes. The Company's effective income tax rate is determined by the
level and composition of pretax income subject to varying foreign, state and
local taxes.
MINORITY INTEREST
The minority interest primarily results from the consolidation of the
majority-owned Bally's Las Vegas and New Orleans Hilton Riverside & Towers.
20
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND 1996
OVERVIEW
A summary of the Company's consolidated revenue and earnings for the six months
ended June 30, 1997 and 1996 is as follows:
(in millions, except per share amounts) 1997 1996 % Change
---- ---- --------
Revenue $ 2,663 1,961 36%
EBITDA 509 285 79%
Operating income 360 192 88%
Net income 161 96 68%
Net income per share .62 .49 27%
HOTELS
Hotel revenue for the 1997 six-month period was $1.4 billion, an increase of
nine percent over 1996. EBITDA from the hotel division was $273 million for the
1997 period, a 48 percent increase, compared to $184 million a year ago, while
hotel operating income increased 63 percent to $225 million from $138 million
last year. Occupancy for hotels owned or managed was 75.2 percent in 1997
compared to 74.3 percent in 1996. The average room rate increased eight percent
to $145.49 from $134.77 in the prior year contributing to a 10 percent increase
in REVPAR.
EBITDA from the Company's ten major full-service properties increased $57
million over the prior year six-month period. Of this increase,
approximately $31 million resulted from the increased ownership interests
acquired from Prudential and the balance was due to improved operations.
Continued strength in IBT volume and average room rate coupled with double
digit growth in leisure guest volume drove a $9 million combined EBITDA
increase at the Waldorf=Astoria and the New York Hilton & Towers compared to
the 1996 period. REVPAR increased seven percent, 12 percent and 13 percent
at the Chicago Hilton & Towers, the O'Hare Hilton and the Palmer House
Hilton, respectively, leading to a combined EBITDA increase of $5 million in
the 1997 period. Each of these properties maintained strong volume and
achieved double digit room rate growth from individual business travelers.
Double digit REVPAR gains also led the New Orleans Hilton Riverside & Towers
to a $3 million increase in EBITDA compared to last year. EBITDA at
21
the San Francisco Hilton & Towers increased $5 million due primarily to
increases in convention and leisure guest volume and a 15 percent increase in
average room rate. Occupancy for these ten major full-service hotels (which
also includes properties in Honolulu and Washington D.C.) was 79.1 percent
versus 77.1 percent in the 1996 period. The average room rate increased to
$162.89 in 1997 from $150.52 and REVPAR improved 11 percent between periods.
The Company's other full-service domestic owned and equity properties generated
a $12 million increase in EBITDA over the prior year period, reflecting strong
industry fundamentals and a $4 million EBITDA contribution from the addition of
the Anchorage Hilton in February 1997.
Depreciation and amortization for the hotel division, including the Company's
proportionate share of depreciation and amortization from its equity
investments, increased $6 million to $52 million in the 1997 period compared to
prior year.
GAMING
Total gaming revenue increased 85 percent in the 1997 six-month period to
$1.3 billion from $688 million in 1996. Casino revenue increased 123 percent
to $898 million in 1997 compared to $403 million in the prior year. EBITDA
from the gaming division was $269 million compared to $120 million in the
prior year six-month period and gaming operating income increased 124 percent
to $170 million from $76 million in 1996. The Company's gaming division
benefited from the addition of the Bally properties in Las Vegas, Atlantic
City, Mississippi and New Orleans along with improved results at the Las
Vegas Hilton. Gaming revenue, casino revenue, EBITDA and operating income
increased $556 million, $396 million, $140 million and $99 million,
respectively, as a result of the Bally acquisition.
The impact of supply growth in the Las Vegas market led to a five point decrease
in occupancy at the Las Vegas Hilton in the six-month period of 1997. However,
the impact of this decrease was more than offset by a significant increase in
volume of its premium play baccarat business coupled with a normalized win
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percentage resulting in an EBITDA increase of $20 million in 1997 compared to
the 1996 period. Baccarat drop increased 34 percent over the 1996 period and
the baccarat win percentage increased 12 points from a lower than normal win
percentage last year.
The highly competitive market conditions in Las Vegas also contributed to lower
table game and slot volume in the casino and a four point decrease in hotel
occupancy at the Flamingo Hilton - Las Vegas. As a result, EBITDA at this
property decreased $4 million from the prior year six-month period. Bally's Las
Vegas experienced an EBITDA increase of $2 million compared to the six-month
period in 1996, which was not included in the Company's results, due mainly to a
13 percent increase in slot revenue.
A generally soft market continues to affect the Flamingo Hilton - Laughlin,
which posted a $3 million decrease in EBITDA. Combined EBITDA from the Reno
Hilton and the Flamingo Hilton - Reno decreased $3 million from the 1996 period.
Both Reno properties recorded significantly lower occupancy primarily due to the
effects of adverse weather conditions in the 1997 first quarter.
Occupancy for the Nevada hotel-casinos was 88.4 percent in the 1997 period
compared to 92.5 percent last year. The average room rate for the Nevada
properties was $77.28 compared to $75.06 in the 1996 six-month period. The 1996
statistical information includes the results of Bally's Las Vegas for
comparison.
In Atlantic City, Bally's Park Place and The Atlantic City Hilton generated
EBITDA of $65 million and $11 million, respectively, in 1997. While not
included in the Company's results last year, EBITDA at these properties totaled
$66 million and $25 million, respectively, in the 1996 period. The Atlantic
City Hilton's EBITDA continues to be impacted by lower table game volume and
slot handle resulting from the effect of its tower construction on pedestrian
traffic combined with lower than normal table game win.
23
Occupancy and average room rate for the Atlantic City hotel-casinos was 92.0
percent and $85.90, respectively, in 1997. Although not included in the
Company's 1996 period, occupancy and average room rate was 92.4 percent and
$84.76, respectively.
The approximately 43% owned Conrad International Punta del Este Resort and
Casino in Punta del Este, Uruguay, which opened its casino in January 1997,
contributed $5 million to gaming division EBITDA in 1997.
Depreciation and amortization for the gaming division, including the Company's
proportionate share of depreciation and amortization from its equity
investments, increased $55 million to $99 million in the 1997 period compared to
prior year. This increase primarily resulted from the addition of the Bally
properties.
CORPORATE EXPENSE
Corporate expense increased $13 million to $35 million in the 1997 six-month
period. The 1997 period includes a $5 million non-recurring accrual for certain
litigation costs.
FINANCING ACTIVITIES
Interest and dividend income totaled $23 million in the 1997 period compared to
$16 million in 1996. The 1997 period includes approximately $4 million in
interest income on the Company's investment in the 11.75% First Mortgage Notes
due 2002 of Claridge Hotel and Casino Corporation. Consolidated interest
expense increased $49 million to $88 million primarily due to additional debt
resulting from the Bally acquisition.
INCOME TAXES
The effective income tax rate for the 1997 period increased to 41 percent
compared to 39 percent for the 1996 period due primarily to the additional
goodwill recorded as a result of the Bally acquisition which is not deductible
for tax purposes.
24
ACCOUNTING CHANGES
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard (SFAS) No. 128, "Earnings per Share." This
statement establishes standards for computing and presenting earnings per share.
SFAS No. 128 is effective for financial statements issued for periods ending
after December 15, 1997 and earlier application is not permitted. The Company's
adoption of SFAS No. 128 is not expected to have a material impact on its
earnings per share presentation.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including without limitation,
statements relating to the Company's plans, strategies, objectives,
expectations, intentions and adequacy of resources, are made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements reflect the Company's current views with
respect to future events and financial performance, and are subject to certain
risks and uncertainties which could cause actual results to differ materially
from historical results or those anticipated. Although the Company believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
25
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Two derivative actions purportedly brought on behalf of Bally's Grand,
Inc. (BGI) against its directors and Bally Entertainment Corporation
(Bally), one commenced in October 1995 and the other in September 1996,
have been consolidated under the caption IN RE: BALLY'S GRAND DERIVATIVE
LITIGATION in the Court of Chancery of the State of Delaware, New Castle
County. Bally merged with and into the Company on December 18, 1996.
The consolidated complaint alleges breaches of fiduciary duty and waste
of corporate assets in connection with certain actions including the sale
by BGI to Bally of the capital stock of BGI's subsidiary that owns the
land and development rights with respect to the Paris Casino-Resort in
Las Vegas (the Paris Transaction), alleged improper delegation of duties
by BGI's board of directors by virtue of a management agreement (the
Management Agreement) between BGI and Bally's Grand Management Co., Inc.,
a wholly owned subsidiary of Bally (BGM), BGM's designation pursuant to
the Management Agreement of recipients awarded BGI stock options, stock
repurchases by BGI and Bally, and a consulting agreement entered into by
BGI with Arveron Investments L.P. in connection with BGI's repurchases of
securities. The plaintiffs seek, among other things: (i) rescission of
the Paris Transaction; (ii) a declaration that the Management Agreement
is unlawful; (iii) an accounting of damages to BGI and profits to
defendants as a result of the transactions complained of; (iv) an
accounting for purchases of BGI stock by BGI and Bally; and (v) costs and
expenses, including reasonable attorneys' fees. A third derivative action
purportedly brought on behalf of BGI against its directors, Bally, BGM
and the Company was commenced in November 1996 under the caption TOWER
INVESTMENT GROUP, INC., ET AL. V. BALLY'S GRAND, INC., ET AL. in the
Court of Chancery of the State of Delaware, New Castle County. The
complaint alleges breach of fiduciary duty and waste of corporate assets
by BGI's directors and Bally in connection with the Paris Transaction,
aiding and abetting by the Company of the breaches of fiduciary duty and
waste by BGI's directors and Bally, fraud, willful misconduct or gross
negligence by Bally and BGM in connection with the Management Agreement,
breach of fiduciary duty by BGI's directors in connection with the stock
purchases by Bally while in possession of material inside information
concerning BGI's earnings, breach of fiduciary duty by Bally in
connection with alleged threats to abuse its controlling interest in BGI,
and violation by BGI's directors and Bally of Section 203 of the Delaware
General Corporation Law in connection with the Paris Transaction. The
plaintiffs seek, among other things: (i) rescission of the Paris
Transaction; (ii) termination of the Management Agreement;
(iii) appointment of a custodian to manage BGI's affairs;
(iv) compensatory damages; (v) an order enjoining Bally and the Company
from conveying the Paris Casino-Resort; (vi) disgorgement by Bally and
the Company of the profits of the Paris Casino-Resort; (vii) disgorgement
by Arthur M. Goldberg of all payments, warrants and interests received in
connection with the Bally Merger; and (viii) disgorgement by Bally of
profits earned from any transactions in shares of BGI's stock based upon
material inside information. This action has been consolidated with the
IN RE: BALLY'S GRAND DERIVATIVE LITIGATION action under the caption IN
RE: BALLY'S GRAND, INC. SHAREHOLDERS LITIGATION.
On June 13, 1997, BGI announced that it had reached an agreement to
settle the IN RE: BALLY'S GRAND, INC. SHAREHOLDERS LITIGATION. Prior
to the settlement, the Company indirectly owned approximately 84% of
the common stock of BGI. Under the terms of the settlement, BGI has
repurchased 966,747 shares of its common stock and 102,698 warrants to
purchase shares of its common stock from certain plaintiffs at a price
of $52.75 per share in cash for the common stock and $52.75 less the
exercise price per warrant in cash for the warrants.
26
Following receipt of court approval of the settlement agreement, BGI
would merge with the Company or a subsidiary of the Company, and the
remaining 408,862 outstanding shares of BGI's common stock not currently
owned by the Company would be converted into the right to receive $52.75
(less certain attorneys' fees) per share in cash, and the 491,784
outstanding warrants to purchase BGI common stock not currently owned by
the Company would be converted into the right to receive the difference
between $52.75 (less certain attorneys' fees) and the exercise price per
warrant in cash. Shareholders will be entitled to appraisal rights under
Delaware law in connection with any such merger.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
3.1 Restated Certificate of Incorporation, as amended.
27. Financial data schedule for the six-month period ended June 30,
1997.
(b) REPORTS ON FORM 8-K
The Company filed a Report on Form 8-K dated June 4, 1997, under Item 5
Other Events, to report that the Company entered into a Underwriting
Agreement with Donaldson, Lufkin & Jenrette Securities Corporation and
other underwriters named therein, with respect to the issuance and sale
of the $300,000,000 aggregate principal amount 7.375% Senior Notes due
2002.
The Company filed a Report on Form 8-K dated July 21, 1997, under Item 5
Other Events, to report that the Company entered into a Purchase
Agreement with Merrill Lynch, Pierce, Fenner & Smith Incorporated and
other underwriters named therein, with respect to the issuance and sale
of the $325,000,000 aggregate principal amount 7% Senior Notes due 2004.
The Company filed a Report on Form 8-K dated July 22, 1997, under Item 5
Other Events, to report results for its second fiscal quarter ended
June 30, 1997.
27
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 thereunto duly authorized.
HILTON HOTELS CORPORATION
(Registrant)
Date: August 8, 1997 /s/ MATTHEW J. HART
------------------------------
Matthew J. Hart
Executive Vice President and
Chief Financial Officer
Date: August 8, 1997 /s/ THOMAS E. GALLAGHER
----------------------------------------
Thomas E. Gallagher
Executive Vice President and
General Counsel
28