<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
- --------------------------------------------------------------------------------
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, 1998
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
Savings and Retirement Plan B
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 38117-4900
<PAGE> 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To the Trustees of The Promus Hotel Corporation
Savings and Retirement Plan B:
We have audited the accompanying statements of net assets available for
plan benefits, with fund information, of THE PROMUS HOTEL CORPORATION
SAVINGS AND RETIREMENT PLAN B as of December 31, 1998 and 1997, and the
related statements of changes in net assets available for plan benefits,
with fund information, for the years then ended. These financial
statements and the schedules referred to below are the responsibility of
the Plan Administrator. Our responsibility is to express an opinion on
these financial statements and schedules 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 Savings and Retirement Plan B as of December
31, 1998 and 1997, and the changes in 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 schedules of
assets held for investment purposes as of December 31, 1998 (Exhibit I)
and reportable transactions for the year ended December 31, 1998 (Exhibit
II) are presented for purposes of additional analysis and are not a
required part of the basic financial statements but are 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. The fund information in the statements of net assets
available for plan benefits and in the statements of changes in net assets
available for plan benefits is presented for purposes of additional
analysis rather than to present the net assets available for plan benefits
and changes in net assets available for plan benefits of each fund. The
supplemental schedules and fund information have been subjected to the
auditing procedures applied in our audits of the basic financial
statements and, in our opinion, are fairly stated in all material respects
in relation to the basic financial statements taken as a whole.
/S/ ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 24, 1999.
2
<PAGE> 3
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
FUND INFORMATION
-------------------------------------------------------------------------
Participant Directed Funds
-------------------------------------------------------------------------
Promus Foreign Aggressive Growth S&P 500 Equity
Stock Fund Equity Fund Equity Fund Fund Index Fund Income Fund
---------- ----------- ----------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at fair value:
Pooled common stock $359 $ - $ - $ - $ - $ -
Mutual funds - 4 36 17 - 10
Common/collective trust funds - - - - 193 -
Interest bearing cash - - - - - -
Loans to participants - - - - - -
---- ---- ---- ---- ---- ----
Total investments 359 4 36 17 193 10
---- ---- ---- ---- ---- ----
Receivables:
Interest and dividends - - - - - -
Employer's contributions 1 - - - 1 -
Participants' contributions 2 - 1 - 1 -
---- ---- ---- ---- ---- ----
Total receivables 3 - 1 - 2 -
---- ---- ---- ---- ---- ----
Uninvested cash - - - - - -
---- ---- ---- ---- ---- ----
Total assets 362 4 37 17 195 10
---- ---- ---- ---- ---- ----
LIABILITIES
Accrued expenses and other 1 - - - - -
---- ---- ---- ---- ---- ----
Total liabilities 1 - - - - -
---- ---- ---- ---- ---- ----
Net assets available for plan benefits $ 361 $ 4 $ 37 $ 17 $195 $ 10
===== ==== ==== ==== ==== ====
<CAPTION>
FUND INFORMATION
-----------------------------------------------------------------------
Participant Directed Funds
------------------------------------------------------------------------
Long-Term Intermediate Money Executive Participant Total
Bond Fund Bond Fund Market Fund Life Fund Loan Fund Funds
--------- ------------ ----------- --------- ----------- -----
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at fair value:
Pooled common stock $ - $ - $ - $ - $ - $ 359
Mutual funds 33 419 - - - 519
Common/collective trust funds - - - - - 193
Interest bearing cash - - 224 - - 224
Loans to participants - - - - 110 110
---- ----- ---- ---- ---- ------
Total investments 33 419 224 - 110 1,405
---- ----- ---- ---- ---- ------
Receivables:
Interest and dividends - 2 1 - - 3
Employer's contributions 1 1 1 - - 5
Participants' contributions - 1 1 - - 6
---- ----- ---- ---- ---- ------
Total receivables 1 4 3 - - 14
---- ----- ---- ---- ---- ------
Uninvested cash - - - 3 - 3
---- ---- ---- ---- ---- ------
Total assets 34 423 227 3 110 1,422
---- ---- ---- ---- ---- ------
LIABILITIES
Accrued expenses and other - 1 1 - - 3
---- ---- ---- ---- ---- ------
Total liabilities - 1 1 - - 3
---- ---- ---- ---- ---- ------
Net assets available for plan benefits $ 34 $422 $226 $ 3 $110 $1,419
==== ==== ==== ==== ==== ======
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
3
<PAGE> 4
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
STATEMENT OF NET ASSETS AVAILABLE FOR PLAN BENEFITS, WITH FUND INFORMATION
AS OF DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FUND INFORMATION
------------------------------------------------------------------------
Participant Directed Funds
------------------------------------------------------------------------
Promus Foreign Aggressive Growth S&P 500 Equity
Stock Fund Equity Fund Equity Fund Fund Index Fund Income Fund
---------- ----------- ----------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at fair value:
Pooled common stock $450 $ - $ - $ - $ - $ -
Mutual funds - 1 16 3 - 3
Common/collective trust funds - - - - 146 -
Interest bearing cash - - - - - -
Loans to participants - - - - - -
---- ---- ---- ---- ---- ----
Total investments 450 1 16 3 146 3
---- ---- ---- ---- ---- ----
Receivables:
Interest and dividends - - - - - -
Employer's contributions 2 - - - 1 -
Participants' contributions 2 - - - 1 -
Other - - - - - -
---- ---- ---- ---- ---- ----
Total receivables 4 - - - 2 -
---- ---- ---- ---- ---- ----
Total assets 454 1 16 3 148 3
---- ---- ---- ---- ---- ----
LIABILITIES
Accrued expenses and other 2 - - - - -
---- ---- ---- ---- ---- ----
Total liabilities 2 - - - - -
---- ---- ---- ---- ---- ----
Net assets available for plan benefits $452 $ 1 $ 16 $ 3 $148 $ 3
==== ==== ==== ==== ==== ====
<CAPTION>
FUND INFORMATION
----------------------------------------------------------------------
Participant Directed Funds
----------------------------------------------------------------------
Long-Term Intermediate Money Executive Participant Total
Bond Fund Bond Fund Market Fund Life Fund Loan Fund Funds
--------- ------------ ----------- ---------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments at fair value:
Pooled common stock $ - $ - $ - $ - $ - $ 450
Mutual funds 18 350 - - - 391
Common/collective trust funds - - - - - 146
Interest bearing cash - - 186 - - 186
Loans to participants - - - - 93 93
---- ----- ---- ---- ---- ------
Total investments 18 350 186 - 93 1,266
---- ----- ---- ---- ---- ------
Receivables:
Interest and dividends - 11 1 - - 12
Employer's contributions - 1 1 - - 5
Participants' contributions - 1 1 - - 5
Other - - - 3 1 4
---- ----- ---- ---- ---- ------
Total receivables - 13 3 3 1 26
---- ----- ---- ---- ---- ------
Total assets 18 363 189 3 94 1,292
---- ----- ---- ---- ---- ------
LIABILITIES
Accrued expenses and other - 1 - - - 3
---- ----- ---- ---- ---- ------
Total liabilities - 1 - - - 3
---- ----- ---- ---- ---- ------
Net assets available for plan benefits $ 18 $ 362 $189 $ 3 $ 94 $1,289
==== ===== ==== ==== ==== ======
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
4
<PAGE> 5
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
FUND INFORMATION
----------------------------------------------------------------------------
Participant Directed Funds
----------------------------------------------------------------------------
Promus Foreign Aggressive Growth S&P 500 Equity
Stock Fund Equity Fund Equity Fund Fund Index Fund Income Fund
---------- ----------- ----------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value
of investments $(103) $ - $ 4 $ 2 $ 44 $ -
Interest - - - - - -
Dividends - - 1 1 - 1
----- ---- ---- ---- ----- ----
(103) - 5 3 44 1
----- ---- ---- ---- ----- ----
Contributions:
Employer's 47 1 6 4 18 3
Participants' 54 2 8 5 22 4
----- ---- ---- ---- ----- ----
101 3 14 9 40 7
----- ---- ---- ---- ----- ----
Total additions (2) 3 19 12 84 8
----- ---- ---- ---- ----- ----
Deductions from net assets attributed to:
Benefits paid 63 - 3 1 24 -
Administrative expenses 4 - - - 2 -
----- ---- ---- ---- ----- ----
Total deductions 67 - 3 1 26 -
----- ---- ---- ---- ----- ----
Net increase (decrease) prior to transfers (69) 3 16 11 58 8
Net transfers (22) - 5 3 (11) (1)
----- ---- ---- ---- ----- ----
Net increase (decrease) (91) 3 21 14 47 7
Net assets available for plan benefits:
Beginning of year 452 1 16 3 148 3
----- ---- ---- ---- ----- ----
End of year $ 361 $ 4 $ 37 $ 17 $ 195 $ 10
===== ==== ==== ==== ===== ====
<CAPTION>
FUND INFORMATION
------------------------------------------------------------------------
Participant Directed Funds
------------------------------------------------------------------------
Long-Term Intermediate Money Executive Participant Total
Bond Fund Bond Fund Market Fund Life Fund Loan Fund Funds
--------- ----------- ----------- --------- ---------- -----
<S> <S> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value
of investments $ - $ (2) $ - $ - $ - $ (55)
Interest - - 10 - 8 18
Dividends 2 39 - - - 44
---- ----- ----- ---- ---- ------
2 37 10 - 8 7
---- ----- ----- ---- ---- ------
Contributions:
Employer's 7 31 29 - - 146
Participants' 8 35 40 - 3 181
---- ----- ----- ---- ---- ------
15 66 69 - 3 327
---- ----- ----- ---- ---- ------
Total additions 17 103 79 - 11 334
---- ----- ----- ---- ---- ------
Deductions from net assets attributed to:
Benefits paid 2 31 29 - 6 159
Administrative expenses - 6 2 - - 14
---- ----- ----- ---- ---- ------
Total deductions 2 37 31 - 6 173
---- ----- ----- ---- ---- ------
Net increase (decrease) prior to transfers 15 66 48 - 5 161
Net transfers 1 (6) (11) - 11 (31)
---- ----- ----- ---- ---- ------
Net increase (decrease) 16 60 37 - 16 130
Net assets available for plan benefits:
Beginning of year 18 362 189 3 94 1,289
---- ----- ----- ---- ---- ------
End of year $ 34 $ 422 $ 226 $ 3 $110 $1,419
==== ===== ===== ==== ==== ======
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
5
<PAGE> 6
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR PLAN BENEFITS,
WITH FUND INFORMATION FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
FUND INFORMATION
-----------------------------------------------------------------------------
Participant Directed Funds
-----------------------------------------------------------------------------
Promus Foreign Aggressive Growth S&P 500 Equity
Stock Fund Equity Fund Equity Fund Fund Index Fund Income Fund
---------- ----------- ----------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value
of investments $ 103 $ - $ 1 $ - $ 36 $ -
Interest - - - - - -
Dividends - - 1 - - -
----- ---- ---- ---- ---- ----
103 - 2 - 36 -
----- ---- ---- ---- ---- ----
Contributions:
Employer's 44 1 5 1 15 1
Participants' 81 1 6 1 18 2
----- ---- ---- ---- ---- ----
125 2 11 2 33 3
----- ---- ---- ---- ---- ----
Total additions 228 2 13 2 69 3
----- ---- ---- ---- ---- ----
Deductions from net assets attributed to:
Benefits paid 79 - 3 - 22 -
Administrative expenses 5 1 - - 2 -
----- ---- ---- ---- ---- ----
Total deductions 84 1 3 - 24 -
----- ---- ---- ---- ---- ----
Net increase (decrease) prior to transfers 144 1 10 2 45 3
Net transfers (22) - (4) - (10) -
----- ---- ---- ---- ---- ----
Net increase (decrease) 122 1 6 2 35 3
Net assets available for plan benefits:
Beginning of year 330 - 10 1 113 -
----- ---- ---- ---- ---- ----
End of year $ 452 $ 1 $ 16 $ 3 $148 $ 3
===== ==== ==== ==== ==== ====
<CAPTION>
FUND INFORMATION
---------------------------------------------------------------------------
Participant Directed Funds
---------------------------------------------------------------------------
Long-Term Intermediate Money Executive Participant Total
Bond Fund Bond Fund Market Fund Life Fund Loan Fund Funds
--------- ------------- ------------ --------- ----------- ------
<S> <C> <C> <C> <C> <C> <C>
Additions to net assets attributed to:
Investment income:
Net appreciation in fair value
of investments $ - $ 5 $ - $ - $ - $ 145
Interest - - 10 - 6 16
Dividends 1 30 - - - 32
---- ---- ---- ---- ---- ------
1 35 10 - 6 193
---- ---- ---- ---- ---- ------
Contributions:
Employer's 5 35 26 - - 133
Participants' 6 38 30 - - 183
---- ---- ---- ---- ---- ------
11 73 56 - - 316
---- ---- ---- ---- ---- ------
Total additions 12 108 66 - 6 509
---- ---- ---- ---- ---- ------
Deductions from net assets attributed to:
Benefits paid 2 51 38 1 14 210
Administrative expenses - 4 2 - - 14
---- ---- ---- ---- ---- ------
Total deductions 2 55 40 1 14 224
---- ---- ---- ---- ---- ------
Net increase (decrease) prior to transfers 10 53 26 (1) (8) 285
Net transfers (17) (32) 1 - 20 (64)
---- ---- ---- ---- ---- ------
Net increase (decrease) (7) 21 27 (1) 12 221
Net assets available for plan benefits:
Beginning of year 25 341 162 4 82 1,068
---- ---- ---- ---- ---- ------
End of year $ 18 $ 362 $189 $ 3 $ 94 $1,289
==== ===== ==== ==== ==== ======
</TABLE>
The accompanying notes to financial statements are an integral
part of this statement.
6
<PAGE> 7
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
NOTE 1 - SUMMARY DESCRIPTION OF THE PLAN
The following description of The Promus Hotel Corporation Savings and Retirement
Plan B (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.
The Plan
Prior to January 1, 1996, Promus Hotel Corporation was the plan sponsor of The
Promus Hotel Corporation Savings and Retirement Plan (the Predecessor Plan).
Effective December 31, 1996, the Plan was created by splitting the Predecessor
Plan into three plans: The Promus Hotel Corporation Savings and Retirement Plan
A (Plan A), The Promus Hotel Corporation Savings and Retirement Plan B, and The
Promus Hotel Corporation Employee Stock Ownership Plan (ESOP), (collectively
referred to as the S&RPs). The participant accounts of the Predecessor Plan were
transferred at fair value to these new plans.
On February 21, 1996, the Board of Directors of Promus Hotel Corporation elected
to terminate the ESOP 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 ESOP was designed in accordance with the
applicable requirements of the Internal Revenue Code (IRC). In the fourth
quarter of 1997, participant balances were distributed and approximately $32,000
was transferred to the Plan.
Effective December 19, 1997, Promus Hotel Corporation completed a merger with
Doubletree Corporation. The new parent company was named Promus Hotel
Corporation. The former Promus Hotel Corporation became a wholly owned
subsidiary of the parent company and was renamed Promus Operating Company, Inc.
Effective as of the merger date, the Plan was amended to define "Company" as
Promus Operating Company, Inc. (the Company).
The Plan is a defined contribution plan which was established to allow eligible
employees of the Company or its designated affiliates to accumulate capital for
their retirement. Participants can contribute either pre-tax payroll dollars
(i.e., temporary deferral of federal and/or state income taxes) or after-tax
payroll dollars to the Plan, as provided for under Sections 401(k) and 401(m) of
the IRC. The Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974 (ERISA).
Plan Investment Funds
By election of each participant, account balances (contributions, Company
matching funds and accumulated earnings) can be invested in one or in a
combination of up to nine separate funds of the Plan in one percent increments
as follows:
I. Promus Stock Fund - invests in units of a pooled fund shared between the
S&RPs, which in turn owns the Company's common stock and certain money
market instruments. The Plan owns 26,984.021 units of the total
1,738,697.101 units owned by the S&RPs at December 31, 1998, and
26,122.664 units of the total 2,177,995.485 units owned by the S&RPs at
December 31, 1997. The fund's return is based on the change in market
value of the Company's common stock, including any dividends declared
thereon;
II. Foreign Equity Fund - invests in the Templeton Foreign Fund comprised
primarily of stocks of companies outside the United States;
III. Aggressive Equity Fund - invests in the AIM Constellation Fund comprised
of stocks of small to medium sized companies with strong earnings growth
expectations;
7
<PAGE> 8
NOTE 1 - SUMMARY DESCRIPTION OF THE PLAN (CONTINUED)
IV. Growth Fund - invests in the IDS New Dimensions Fund comprised
primarily of stocks of large and medium sized companies considered to
be growth oriented;
V. S & P 500 Index Fund - invests in the American Express Trust Equity
Index Fund II, which is comprised primarily of the same securities upon
which the S & P 500 Stock Index is based;
VI. Equity Income Fund - invests in the IDS Diversified Equity Income Fund
comprised of medium to large "blue-chip" companies, utility stocks,
value stocks and foreign issues;
VII. Long-Term Bond Fund - invests in the IDS Selective Fund comprised of
the four highest investment grades of marketable debt securities in
order to provide current income and preservation of capital;
VIII. Intermediate Bond Fund - invests in the Pacific Investment Management
Company (PIMCO) Total Return Fund comprised of fixed income securities
with varying maturities, designed to realize maximum return while
preserving capital;
IX. Money Market Fund - invests in the American Express Trust U.S.
Government Securities Fund II, a collective fund that invests in
short-term debt securities of the United States Government.
The Plan also includes two other special purpose funds as follows:
I. Executive Life Fund - segregates the assets and participants' equity
accounts related to the investment in Executive Life Insurance
Company's guaranteed investment contract. See Note 4 - Executive Life
Investment for further details;
II. Participant Loan Fund - separately tracks loans to participants as
provided for under the Plan.
Plan Administration
General administration of the Plan is the responsibility of the Company, through
its operating subsidiary Promus Hotels, Inc., which acts as the Plan
Administrator. The Trustees, who are appointed by the Company's Board of
Directors, perform the duties and exercise the authority set forth in the Plan
and the Promus Hotel Corporation Master Retirement Plan Trust Agreement. The
Company has delegated certain aspects of its authority for purposes of
day-to-day administration. Effective January 2, 1996, American Express Trust
Company (American Express) began administering the Plan. American Express
provides recordkeeping, accounting, daily trading and investment management
services. Additionally, American Express and IDS, an American Express affiliate,
manage five of the nine investment funds discussed above.
8
<PAGE> 9
NOTE 1 - SUMMARY DESCRIPTION OF THE PLAN (CONTINUED)
Employee Eligibility, Vesting and Termination
The Plan is available to all employees of the Company or its direct and indirect
subsidiaries who serve as suitekeepers and room attendants (other employees are
covered under Plan A). Eligible employees may join the Plan on or after the
first entry date (January 1 or July 1) following completion of 12 months during
which they are credited with at least 1,000 hours of service. Employees must
also be at least 21 years of age to join the Plan. In accordance with the
November 13, 1996 Plan amendment, participants vest in the Company's matching
contributions after two calendar years of credited service as follows:
<TABLE>
<CAPTION>
Years of Vested
Credited Service Percentage
------------------- ----------
<S> <C>
Less than two years 0%
Two years or more 100%
</TABLE>
However, employees who were partially vested in the Predecessor Plan as of this
amendment date will remain partially vested until they obtain two years of
credited service. An employee's active participation in the Plan ceases upon
separation of service, at which time the vested account balance can either be
withdrawn or remain in the Plan according to the Plan Document.
Plan Expenses
Administrative expenses charged by American Express are paid by the Plan.
Currently, at the Company's discretion, other administrative expenses are paid
by the Company.
Participants' Contributions and Withdrawals
Participants may elect to make basic contributions ranging from two to six
percent of eligible earnings, as defined. If a non-highly compensated
participant makes basic pre-tax contributions of six percent of earnings to the
Plan, the participant may elect to make supplemental contributions of up to an
additional ten percent, of which eight percent qualifies as pre-tax
contributions. Highly compensated employees may contribute up to six percent of
eligible earnings, as defined. The Company will match the first six percent of
all participants' contributions.
Participants' contributions, vested matching Company contributions and related
income may be withdrawn by giving 30 days written notice subject to Plan and IRS
rules. In-service withdrawals of pre-tax contributions, basic after-tax and
matching contributions are subject to hardship rules if the withdrawal occurs
before age 59 1/2. Withdrawal of those contributions will not prohibit
participants from making further contributions; however, if these contributions
or any other funds are withdrawn, the Company will not match subsequent
contributions for six months. Supplemental after-tax contributions and any
earnings thereon may be withdrawn without this penalty.
Benefit Payments
On termination of service, a participant may elect to receive his or her vested
account balance as either a lump-sum amount or equal installments over a term
not to exceed fifteen years.
9
<PAGE> 10
NOTE 1 - SUMMARY DESCRIPTION OF THE PLAN (CONTINUED)
Allocation of Forfeitures and Plan Net Income
The Plan provides for amounts attributed to non-vested Company matching
contributions of terminated employees to be forfeited at the earlier of (1)
distribution of vested account balances or (2) a five year break in service.
Forfeitures are reallocated to remaining participants quarterly.
The Predecessor Plan provided for the allocation on a monthly basis of Plan net
income (i.e., unrealized appreciation/depreciation of investments, dividend and
interest income and realized gains or losses on the sale of investments, net of
administrative expenses). Effective January 2, 1996, participants' accounts are
valued daily based on the market value of the participants' respective
investment funds at the close of each trading day.
Loans
Loans may be made to participants upon written application to the Plan
Administrator. All loans, other than those used to acquire or construct the
principal residence of a participant, shall be repaid within five years. The
minimum amount that may be borrowed is $500. Participants may have up to two
loans outstanding at any one time. The balance of loans outstanding under the
Plan to a participant may not exceed $50,000 (which is subject to reduction if
another loan is outstanding) or one-half of the vested balance of the
participant's account, whichever is less. Loans bear fixed interest at the prime
lending rate as published in the Wall Street Journal on the date of each loan.
At December 31, 1998 and 1997, rates on outstanding loans ranged from 7.50% to
9.25% and 7.50% to 8.50%, respectively. Principal and interest paid by a
participant are credited to the participant's account.
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.
NOTE 2 - VALUATION OF INVESTMENTS
Investments in securities and mutual funds are stated at fair value on the last
business day of the Plan year.
10
<PAGE> 11
NOTE 3 - INVESTMENTS
As of December 31, the fair value of individual investments that represent 5% or
more of the Plan's total net assets are as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Promus Hotel Corporation Pooled Stock Fund $359 $450
PIMCO Total Return Fund 419 350
American Express U.S. Govt. Securities Fund II 224 186
American Express Trust Equity Index Fund II 193 146
Participant Promissory Notes 110 93
</TABLE>
NOTE 4 - EXECUTIVE LIFE INVESTMENT
The former Promus Hotel Corporation was formed as a result of a June 30, 1995
spin-off (the Spin-Off) by The Promus Companies Incorporated (PCI), which was
renamed Harrah's Entertainment, Inc. On May 1, 1991, PCI's savings and
retirement plan (PCI Plan) was amended to provide that approximately $12.9
million attributable to a guaranteed investment contract issued by Executive
Life Insurance Company (Executive Life) and held in the PCI Plan's Income
Investment Fund would be frozen until such time as the contract is finally paid
out. The $12.9 million represented the book value of this contract as of March
31, 1991. The action was taken by PCI due to the conservatorship imposed on
Executive Life by the State of California Insurance Commissioner. PCI agreed to
pay to the PCI Plan any deficiency between the $12.9 million and amounts finally
received from the contract. On September 3, 1993, substantially all Executive
Life assets and restructured liabilities were transferred to Aurora National
Life Insurance Company (Aurora). On February 4, 1994, the PCI Plan elected to
participate in the ongoing rehabilitation plan offered by Aurora. This plan
provides for recovery of at least 77.7% of the $12.9 million book value of the
Executive Life contract.
Effective with the formation of the Predecessor Plan, the Plan Administrator
recorded a receivable for the remaining book value of participants' investments
in the Executive Life Fund. The receivable was supported by a guaranteed
investment contract that was maintained by the Harrah's Entertainment Savings
and Retirement Plan, formerly the PCI Plan. The guaranteed investment contract
was due to mature in September 1998.
The contract was settled in September 1998 and the principal was received from
Harrah's Entertainment Savings and Retirement Plan in November 1998. At December
31, 1998, the principal due to participants is recorded as uninvested cash. The
Plan expects to receive interest earned on the principal in 1999. At December
31, 1998, the interest to be received is not readily determinable and as such is
not accrued for in the financial statements.
NOTE 5 - PLAN TERMINATION
Although it has not expressed any intent to do so, the Company has the right
under the Plan to discontinue its contributions at any time and to terminate the
Plan subject to the provisions of ERISA. In the event of Plan termination,
participants will become 100% vested in their accounts.
NOTE 6 - TAX STATUS
The Plan is intended to satisfy the tax qualification requirements under Section
401(a) of the IRC; therefore, the trust funds of the Plan are intended to be
exempt from federal income taxes under Section 501(a). A favorable determination
letter regarding the Plan's status, dated April 17, 1997, was received from the
IRS.
11
<PAGE> 12
NOTE 7 - SUBSEQUENT EVENTS
Effective April 1, 1999, GE Investment Retirement Services (GE) replaced
American Express as administrator of the Plan. GE will provide recordkeeping,
accounting, daily trading, trustee, custodial, and investment management
services.
On March 16, 1999, the Trustees of the Plan voted to amend the Plan Document
effective June 7, 1999. These amendments change the entry date of eligible
participants from semi-annual to quarterly entry dates, increase pre-tax
contributions to 16% and eliminate after-tax contributions, increase the minimum
loan withdrawal from $500 to $1,000, suspend contributions and Company match for
hardship withdrawals and change other administrative procedures.
12
<PAGE> 13
EXHIBIT I
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
LINE 27A-SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
AS OF DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Historical Current
Identity of Issuer or Borrower Description of Investment Cost Value
- ------------------------------------- ----------------------------------- ---------- -------
<S> <C> <C> <C>
*Promus Hotel Corporation Pooled Stock Fund $ 387 $ 359
*American Express Trust Company Equity Index Fund II 130 193
*American Express Trust Company U.S. Govt. Securities Fund II 224 224
AIM Equity Funds, Inc. Constellation Fund 32 36
*IDS New Dimensions Fund, Inc. New Dimensions Fund 15 17
*IDS Selective Fund, Inc. Selective Fund 33 33
*IDS Investment Series, Inc. Diversified Equity Income Fund 10 10
Pacific Investment Management Company Total Return Fund 420 419
Franklin Templeton Foreign Fund 4 4
*Promus participants Loans to participants, 7.50% to 9.25% 110 110
-------- -------
Total investments $1,365 $1,405
======== =======
</TABLE>
*Represents a Party-In-Interest.
13
<PAGE> 14
EXHIBIT II
THE PROMUS HOTEL CORPORATION SAVINGS AND RETIREMENT PLAN B
LINE 27D-SCHEDULE OF REPORTABLE TRANSACTIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
Identity of Issuer or Description of Purchase Selling Cost of Net
Borrower Investment Price Price Assets Gain
- ------------------------------- ------------------------------ -------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
Series of Transactions:
*Promus Hotel Corporation Pooled Stock Fund $147 $135 $114 $21
*American Express Trust Company U.S. Govt. Securities Fund II 108 85 85 -
Pacific Investment Management Company Total Return Fund 156 85 82 3
*Promus Participants Loans to participants 92 66 66 -
</TABLE>
*Represents a Party-In-Interest.
14
<PAGE> 15
Signature
---------
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
SAVINGS AND RETIREMENT PLAN B
DATED: JUNE 25, 1999 By /s/ STEVEN J. MARTIN
----------------------------------
(Steven J. Martin, Senior Vice
President and Controller of
Promus Hotel Corporation)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Submission Media
- ---------- ------------------------------- ----------------
<S> <C> <C>
Ex 23 Consent of Arthur Andersen LLP, Electronic
Independent Public Accountants,
dated June 24, 1999
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of our
report dated June 24, 1999, included in this Form 11-K for the plan year ended
December 31, 1998, 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, 1998 or
performed any audit procedures subsequent to the date of our report.
/S/ ARTHUR ANDERSEN LLP
-----------------------
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
June 24, 1999.
