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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 11-K
(Mark One)
[x] ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the plan year ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to
Commission File No. 1-11463
A. Full title of the plan and address of the plan, if different from
that of the issuer named below:
THE PROMUS HOTEL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
B. Name of issuer of the securities held pursuant to the plan and the
address of its principal executive office:
Promus Hotel Corporation
755 Crossover Lane
Memphis, Tennessee 38117
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
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To the Trustees of The Promus Hotel Corporation
Employee Stock Ownership Plan:
We have audited the accompanying statements of net assets available for plan
benefits of THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN as of
December 31, 1997 and 1996, and the related statements of changes in net
assets available for plan benefits for the years then ended. These financial
statements and the schedule referred to below are the responsibility of the
Plan Administrator. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for plan benefits of The
Promus Hotel Corporation Employee Stock Ownership Plan as of December 31,
1997 and 1996, and the changes in its net assets available for plan benefits
for the years then ended, in conformity with generally accepted accounting
principles.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The supplemental schedule of
reportable transactions for the year ended December 31, 1997 (Exhibit I) is
presented for purposes of additional analysis and is not a required part of
the basic financial statements but is supplementary information required by
the Department of Labor's Rules and Regulations for Reporting and Disclosure
under the Employee Retirement Income Security Act of 1974. Such schedule has
been subjected to the auditing procedures applied in the audits of the basic
financial statements and, in our opinion, is fairly stated in all material
respects, in relation to the basic financial statements taken as a whole.
As further discussed in Note 4 to the financial statements, the Board of
Directors of the Promus Hotel Corporation elected to terminate the Plan. Plan
assets were distributed in 1997 in accordance with the Plan document.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 10, 1998.
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THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR PLAN BENEFITS
AS OF DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
Net assets available for plan benefits
Investments at fair value:
Promus Hotel Corporation Pooled Stock Fund $ - $1,854,293
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
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THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS
FOR THE YEARS ENDED DECEMBER 31
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Additions to net assets attributed to:
Transfers from prior plan $ 8,896 $1,493,096
Net appreciation in fair value of investments 806,759 475,338
---------- ----------
Total additions 815,655 1,968,434
Deductions from net assets attributed to:
Benefits paid to participants 2,636,718 114,141
Administrative expenses 33,230 -
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Net (decrease) increase (1,854,293) 1,854,293
Net assets available for plan benefits:
Beginning of year 1,854,293 -
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End of year $ - $1,854,293
---------- ----------
---------- ----------
</TABLE>
The accompanying notes to financial statements are an integral part of
these statements.
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THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
NOTE 1 - SUMMARY DESCRIPTION OF THE PLAN
The following description of The Promus Hotel Corporation Employee Stock
Ownership Plan (the Plan) is provided for general information purposes
only. Reference should be made to the Plan Document for a more complete
description of the Plan's provisions.
Plan Inception
Prior to January 1, 1996, Promus Hotel Corporation (Promus or the Company)
was the plan sponsor of The Promus Hotel Corporation Savings and Retirement
Plan (the Predecessor Plan). Effective December 31, 1995, the Plan was
created by splitting the Predecessor Plan into three plans: The Promus
Hotel Corporation Savings and Retirement Plan A, The Promus Hotel
Corporation Savings and Retirement Plan B (collectively referred to as the
Savings Plans), and the Plan. The participant accounts of the Predecessor
Plan were transferred in early 1996 at fair value to these new plans.
The Plan
The Plan was intended to be an "employee stock ownership plan" and was
designed to comply with Section 4975 (e)(7) and the regulations thereunder
of the Internal Revenue Code (IRC), and was subject to the provisions of
the Employee Retirement Income Security Act of 1974. The Plan was designed
to invest in the qualifying common stock securities of the Company.
Payment of Benefits
No distributions were to have been made from the Plan to participants until
retirement, death (in which case, payment would have been made to
beneficiaries or legal representatives), or otherwise termination of
employment with the Company, or termination of the Plan. As discussed more
fully in Note 4, the plan was terminated on February 21, 1996, and its
assets were distributed to qualified participants in the fourth quarter of
1997.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Administrative Expenses
Administrative expenses charged by American Express in 1997 for the
distribution of assets were paid by the Plan. All other administrative
expenses were paid by the Company.
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NOTE 3 - INVESTMENT
The assets of the Plan represented an investment in the Promus Hotel
Corporation Pooled Stock Fund (the Pooled Stock Fund). The Pooled Stock
Fund invests in units of a pooled fund shared between the Plan and the
Savings Plans, which in turn owns the Company's common stock securities and
certain money market instruments. As of December 31, 1996, the Plan owned
140,679.245 units out of the total 1,943,809.923 units of the Pooled Stock
Fund.
As of December 31, 1996, the investments in the Pooled Stock Fund were
stated at fair value based on the quoted market price of the underlying
common stock securities as of the last business day of the Plan year.
The fair value of individual investments that represented 5% or more of the
Plan's net assets available for plan benefits as of December 31, 1996 is as
follows:
<TABLE>
<CAPTION>
<S> <C>
Promus Hotel Corporation Pooled
Stock Fund $1,854,293
----------
----------
</TABLE>
Due to the termination of the Plan, as discussed in Note 4, all assets were
distributed in 1997, thus no investments were held as of December 31, 1997.
NOTE 4 - PLAN TERMINATION
On February 21, 1996, the Board of Directors of the Company elected to
terminate the Plan upon receipt of a favorable tax-exempt determination
from the Internal Revenue Service (IRS). The IRS issued a determination
letter dated April 17, 1997, stating that the Plan was designed in
accordance with the applicable requirements of the IRC. Based on the
favorable letter received, management terminated the Plan and participant
balances were distributed in the fourth quarter of 1997. Participants were
given the following options for the distribution of their plan assets: (1)
balances could be rolled into an IRA, (2) balances could be distributed in
cash or (3) balances could be distributed in stock. Active participants
could also roll-over their balances to the Savings Plans of the Company.
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EXHIBIT I
THE PROMUS HOTEL CORPORATION EMPLOYEE STOCK OWNERSHIP PLAN
LINE 27D-SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
Purchase Selling Cost of Net
Identity of Issuer Description of Assets Price Price Assets Gain
- - ------------------ --------------------- -------- ------- ------- ----
<S> <C> <C> <C> <C> <C>
Single Transactions:
*Promus Hotel Corporation Pooled Stock Fund $ - $647,212 $393,747 $253,465
*Promus Hotel Corporation Pooled Stock Fund - 867,008 540,477 326,531
Series of Transactions:
*Promus Hotel Corporation Pooled Stock Fund 52,899 1,754,840 1,099,294 655,546
</TABLE>
*Represents a Party-In-Interest.
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Signature
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Pursuant to the requirements of the Securities Exchange Act of 1934, the
trustees have duly caused this annual report to be signed on its behalf by
the undersigned hereunto duly authorized.
THE PROMUS HOTEL CORPORATION
EMPLOYEE STOCK OWNERSHIP PLAN
DATED: JUNE 29, 1998 By /s/ WILLIAM L. PEROCCHI
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(William L. Perocchi, Authorized
Trustee of the Plan, Executive Vice
President and Chief Financial Officer of
Promus Hotel Corporation)
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EXHIBIT INDEX
Exhibit No. Description Submission Media
- - ---------- ------------------------------- ----------------
Ex 23 Consent of Arthur Andersen LLP, Electronic
Independent Public Accountants,
dated June 29, 1998
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Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report dated June 10, 1998, included in this Form 11-K for the plan year
ended December 31, 1997, into Promus Hotel Corporation's previously filed
Registration Statement on Form S-8, File No. 33-59997. It should be noted
that we have not audited any financial statements of the Plan subsequent to
December 31, 1997 or performed any audit procedures subsequent to the date of
our report.
/s/ Arthur Andersen LLP
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Arthur Andersen LLP
Memphis, Tennessee,
June 29, 1998.
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