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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1993
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 (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
9336 CIVIC CENTER DRIVE 90210
BEVERLY HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (310) 278-4321
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $2.50 per share New York, Pacific
Securities registered pursuant to Section 12(g) of the Act:
None
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 12 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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Based upon the February 28, 1994 New York Stock Exchange closing price of
$72.625 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $2.3 billion.
On that date, there were 47,952,194 shares of Common Stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1993 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
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PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation and its majority and wholly-owned subsidiaries
are collectively referred to as "Hilton" or the "Company," unless the context
indicates otherwise. The Company is primarily engaged in the ownership and
management of hotels and hotel-casinos. All of these properties are located in
the United States, with the exception of six international hotels and two
hotel-casinos operated by the Company's wholly-owned subsidiary, Conrad
International Hotels Corporation and its subsidiaries ("Conrad").
On February 1, 1994, Hilton owned or leased and operated 23 hotels and
managed 43 hotels partially or wholly-owned by others. In addition, 170 hotels
were operated under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names
by others pursuant to franchises granted by a subsidiary of Hilton.
Seven of the hotels have substantial gaming operations, five of which are
wholly-owned by the Company and are located in Nevada and the other two hotels
are partially owned by the Company and are located in Australia and Turkey. The
Company's hotel-casinos accounted for approximately 62%, 70% and 71% of its
total operating income in 1991, 1992 and 1993, respectively. For additional
information, see the Ten Year Summary on pages 50 and 51 in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1993 (the "1993
Stockholders Report"), which report is included as Exhibit 13 hereto and, to the
extent specific references are made thereto, incorporated herein by such
references.
The Company, through a wholly-owned subsidiary, is also engaged in the sale
of furniture, furnishings, equipment and supplies to hotels, motels and inns
throughout the United States and, through a 51%-owned company, is engaged in the
operation of a computerized reservation system for use by Hilton and others.
Hilton was organized in the State of Delaware on May 29, 1946. Its
principal executive offices are located at 9336 Civic Center Drive, Beverly
Hills, California 90210, and its telephone number is (310) 278-4321.
RECENT DEVELOPMENTS
Since January 1, 1993, the Company took advantage of various opportunities
to expand its business, the most significant of which included the selection of
Conrad and its partners to develop a hotel-casino in Windsor, Ontario, Canada,
the opening of a riverboat casino in New Orleans, Louisiana, development of
riverboat casinos in Kansas City, Missouri, the acquisition of a resort on the
Big Island of Hawaii, the development of two new vacation ownership resorts and
the addition of three managed Hilton hotels and two Conrad hotels.
In December 1993, the government of Ontario, Canada selected a consortium,
of which Conrad owns a 33% interest, to develop and operate a 300-room
hotel-casino in Windsor, Ontario. Hilton, through Conrad, will co-manage the
property, which will feature a 75,000 square foot casino. The Windsor project
will open on a permanent basis in early 1996, with a temporary 60,000 square
foot casino scheduled to open in spring 1994.
In February 1994, the Company commenced operation of the "Hilton Queen of
New Orleans," a riverboat casino located adjacent to the New Orleans Hilton
Riverside & Towers. The initial 1,500 passenger vessel has a 20,000 square foot
casino and is wholly-owned by the Company. This interim riverboat is being
leased to a joint venture, of which the Company owns a 50% interest, until the
permanent riverboat is completed. In late 1994, the interim riverboat will be
replaced with a permanent vessel owned by the joint venture that will have a
30,000 square foot casino and accommodate 2,400 passengers.
In 1993, the Company was named the exclusive developer of two riverboat
casinos within the city limits of Kansas City, Missouri on the Missouri River.
The Company will own a 90% interest in these riverboats. The first vessel will
feature a 20,000 square foot casino and accommodate 1,500 passengers. Subject to
voter approval in April 1994 of a constitutional amendment authorizing games of
chance in Missouri and a city-wide riverboat gaming proposal in Kansas City, and
the receipt of all required gaming licenses, this vessel is scheduled to open in
late summer 1994. The second vessel is scheduled to commence operation in
mid-1995 and will feature a 30,000 square foot casino and carry 2,000
passengers.
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During 1993, Hilton and its partners acquired the 1,241-room Hyatt Regency
Waikoloa resort on the Big Island of Hawaii, which sits on a 62-acre site.
Hilton manages and owns a 13.3% interest in this property, which has been
renamed the Hilton Waikoloa Village.
Also in 1993, the Company, through its 50% owned Hilton Grand Vacations
Company, commenced development of a 200-unit vacation ownership resort adjacent
to the Flamingo Hilton-Las Vegas and a 360-unit resort at Sea World Village in
Orlando, Florida. The Las Vegas property is scheduled for completion in early
1995 and the first phase of the Orlando project is anticipated to be completed
in summer 1995.
During 1993, Hilton became the manager of three additional domestic
properties, the 1,000-suite Innisbrook Hilton Resort in Tarpon Springs, Florida,
the 405-room Brunswick Hilton in East Brunswick, New Jersey and the 376-room
Newark Airport Hilton in Newark, New Jersey. Also in 1993, Conrad opened the
269-room Conrad Brussels in Brussels, Belgium. Conrad was selected by the
National Bank of Greece to manage the 565-room Astir Palace Hotel in
Vouliagmeni, Greece, near Athens. Conrad has applied for a license to operate a
casino at the Astir Palace resort property.
The Company has also continued its ongoing program of monitoring and
improving its franchise operations. The Company added four franchises to its
system in 1993, while 14 franchise arrangements were terminated, many due to
noncompliance with the Company's standards.
For a description of the Company's planned expansion activities, see "Hotel
Operations -- Expansion Program" and "Gaming Operations -- Expansion Program"
below.
INDUSTRY SEGMENTS
Hilton's revenues and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned or leased
hotels, management and franchise fees and operating income from unconsolidated
affiliates and (ii) hotel-casino operations. For financial data relating to the
Company's hotel and hotel-casino operations for the three years ended December
31, 1993, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 46 and 47 in the 1993 Stockholders Report.
The Company re-entered the international arena in November 1985, with the
opening of a hotel-casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
the French West Indies, England, Ireland, Hong Kong, Turkey, Belgium and Greece.
To date, the amounts of revenues, operating profits and identifiable assets
attributable to geographic areas, other than the United States, have not been
material.
HOTEL OPERATIONS
OWNED HOTELS
On February 1, 1994, the following hotels were owned in fee and operated by
Hilton:
<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1994
- -------------------------- ------------------ --------- -----------------
<S> <C> <C> <C>
Atlanta Airport Hilton 501
Atlanta, Georgia(1) (1989) 1960 $50,000,000
Palmer House Hilton 1,639
Chicago, Illinois(2) (1925; 1945) 1988 --
Flamingo Hilton-Las Vegas 3,034
Las Vegas, Nevada (various dates 1971 --
through 1990)
Las Vegas Hilton 3,174
Las Vegas, Nevada (various dates 1971 --
through 1981)
Flamingo Hilton-Laughlin 2,000
Laughlin, Nevada (1990) 1990 --
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1994
- --------------------------- ------------------ --------- -----------------
<S> <C> <C> <C>
New Orleans Airport Hilton 312
New Orleans, Louisiana(1) (1989) 1959 $32,000,000
Waldorf-Astoria 1,410
New York, New York(3) (1931) 1977 --
Portland Hilton 455
Portland, Oregon (1963) 1963 --
Flamingo Hilton-Reno 604
Reno, Nevada(4) (1978) 1981 --
Reno Hilton 2,001
Reno, Nevada (1978) 1992 --
Hilton Garden Inn 195
Southfield, Michigan(5) (1988) 1993 --
Hilton Suites 224
Auburn Hills, Michigan (1991) 1991 --
Hilton Suites 203
Brentwood, Tennessee (1989) 1989 --
Hilton Suites 230
Orange, California (1989) 1989 --
Hilton Suites 226
Phoenix, Arizona (1990) 1990 --
</TABLE>
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(1) The Atlanta Airport Hilton and the New Orleans Airport Hilton were closed
and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.
(2) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
February 1988.
(3) The Company operated the Waldorf-Astoria under a lease from February 1950
until April 1977.
(4) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.
(5) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.
LEASED HOTELS
Hilton leases the land upon which eight hotels have been built. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 47 in the 1993
Stockholders Report. Hilton, in all cases, owns all furniture and equipment, is
responsible for repairs, maintenance, operating expenses and lease rentals, and
retains complete managerial discretion over operations. Generally, Hilton pays a
percentage rental based on the gross revenues of the facility, but in some
instances the rental is a fixed amount.
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On February 1, 1994, the following hotels were leased and operated by
Hilton:
<TABLE>
<CAPTION>
NUMBER OF
ROOMS (YEAR OF
INITIAL
COMPLETION
AND YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
- ----------------------------- ----------------- --------------------------------------------
<S> <C> <C>
Logan Airport Hilton 541 2014, with renewal options aggregating 25
Boston, Massachusetts(1) (1959; 1988) years under specified circumstances
O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)
Oakland Airport Hilton 362 2033
Oakland, California (1970; 1970)
Pittsburgh Hilton & Towers 714 2004, with renewal options aggregating 30
Pittsburgh, Pennsylvania (1959; 1959) years
San Diego Hilton Beach 354 2019
& Tennis Resort (1962; 1965)
San Diego, California
San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)
Seattle Airport Hilton 173 2004, with renewal options aggregating 30
Seattle, Washington (1961; 1961) years
Tarrytown Hilton 236 2003, with renewal options aggregating 40
Tarrytown, New York(3) (1961; 1993) years
</TABLE>
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(1) The Company managed and was a joint venture partner with respect to the
Logan Airport Hilton from 1975 until July 1988, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
(2) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.
(3) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
During the three years ended December 31, 1993, Hilton paid aggregate
rentals, including rentals attributable to the properties listed in the above
table, of $8,700,000, $9,500,000 and $11,300,000, respectively. For information
relating to minimum rental commitments in the future, see "Leases" in the Notes
to the Company's Consolidated Financial Statements on page 47 in the 1993
Stockholders Report.
MANAGED HOTELS
On February 1, 1994, Hilton operated 35 domestic hotels and eight
international hotels under management agreements. Under its standard management
arrangement, Hilton operates a hotel for the benefit of its owner, which either
owns or leases the hotel and the personal property, and Hilton's fee is
generally based on a percentage of the hotel's gross revenues plus an
incremental incentive fee based on operating performance.
Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an interest of
up to 50%. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 39 and 40 in
the 1993 Stockholders Report.
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The Company has also agreed to provide loans or investments to the owners
of certain managed hotels under specified circumstances. See "Commitments and
Contingent Liabilities" in the Notes to the Company's Consolidated Financial
Statements on page 48 in the 1993 Stockholders Report.
On February 1, 1994, the following hotels were operated by Hilton under
management agreements:
<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------ ---------------------- ------------------------------------
<S> <C> <C>
DOMESTIC
Anaheim Hilton & Towers 1,576 2004, with renewal options
Anaheim, California(3) (1984) aggregating approximately 55
years, subject to certain
termination rights
Anchorage Hilton 591 2006, with renewal options
Anchorage, Alaska (various dates aggregating 20 years
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10
Atlanta, Georgia (1976) years
Beverly Hilton 581 2007, with renewal options
Beverly Hills, California (1955; 1967) aggregating 20 years
Chicago Hilton & Towers 1,543 2005, with renewal options
Chicago, Illinois(1) (various dates aggregating 20 years
through 1986)
Brunswick Hilton 405 2013, subject to certain termination
East Brunswick, New Jersey(3) (1989) rights
Hilton Hawaiian Village 2,540 1997, with renewal options
Honolulu, Hawaii(2) (various dates aggregating 20 years
through 1988)
Long Beach Hilton 398 2012, with renewal options
Long Beach, California (1992) aggregating 20 years, subject to
certain termination rights
Los Angeles Airport Hilton & Towers 1,279 1999, with renewal options
Los Angeles, California (1983) aggregating 10 years, subject to
certain termination rights
Los Angeles Hilton & Towers 900 1998, subject to certain termination
Los Angeles, California (1952) rights
McLean Hilton 457 2007, with renewal options
McLean, Virginia(1) (1987) aggregating 20 years
Fontainebleau Hilton Resort & Spa 1,206 1998, with a renewal option for 10
Miami, Florida (1954) years, subject to certain
termination rights
Miami Airport Hilton & Marina 500 2004, with renewal options
Miami, Florida(1) (1983) aggregating 20 years
Minneapolis Hilton & Towers 814 2012, with renewal options
Minneapolis, Minnesota(3) (1992) aggregating 20 years, subject to
certain termination rights
Newark Airport Hilton 376 2003
Newark, New Jersey(3) (1988)
New Orleans Hilton Riverside 1,602 2007, with a renewal option for 10
& Towers (1977; 1983) years
New Orleans, Louisiana(1)(3)
New York Hilton & Towers 1,952 1995
New York, New York(2) (1963)
Novi Hilton 236 2002, subject to certain termination
Novi, Michigan(3) (1985) rights
Turtle Bay Hilton & Country Club 486 2004, with a renewal option for 10
Oahu, Hawaii (1972) years
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------ ---------------------- ------------------------------------
<S> <C> <C>
Hilton at Walt Disney World 813 2003, with renewal options
Orlando, Florida(3) (1983) aggregating 20 years, subject to
certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10
Pasadena, California (1970) years, subject to certain
termination rights
The Pointe Hilton on South Mountain 636 2012, with renewal options
Phoenix, Arizona (1986) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Squaw Peak 574 2012, with renewal options
Phoenix, Arizona (1977) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Tapatio Cliffs 584 2012, with renewal options
Phoenix, Arizona (1982) aggregating 20 years, subject to
certain termination rights
Rye Town Hilton 438 1995
Rye Brook, New York(2) (1973; 1978)
Hilton Palacio del Rio 482 1998, with a renewal option for 10
San Antonio, Texas (1968) years
San Antonio Airport Hilton 387 2001, subject to certain termination
San Antonio, Texas(3) (1982) rights
San Francisco Hilton on Hilton 1,890 2005, with a renewal option for 10
Square (various dates years
San Francisco, California(2) through 1988)
Hilton at Short Hills 300 2007, with renewal options
Short Hills, New Jersey (1988) aggregating 20 years, subject to
certain termination rights
Innisbrook Hilton Resort 1,000 2013, subject to certain termination
Tarpon Springs, Florida(3) (1972) rights
Hilton Waikoloa Village 1,241 2013, subject to certain termination
Waikoloa, Hawaii(1) (1988) rights
Capital Hilton 541 2005, with a renewal option for 10
Washington, D.C.(2) (1943; 1985) years
Washington Hilton & Towers 1,123 1995
Washington, D.C.(2) (1965)
Hilton Suites 212 2009, with renewal options
Oakbrook Terrace, Illinois(2)(3) (1989) aggregating 20 years
Hilton Garden Inn 152 2012, subject to certain termination
Valencia, California(1) (1991) rights
INTERNATIONAL
Conrad Brussels 269 2013, with renewal options
Brussels, Belgium (1993) aggregating 20 years
Conrad Dublin 190 2010, with renewal options
Dublin, Ireland(1)(3) (1989) aggregating 20 years
Conrad Hong Kong 513 2021
Hong Kong(1) (1990)
Conrad Istanbul 627 2011, with a renewal option for 20
Istanbul, Turkey(1)(3) (1992) years
Conrad London 159 2016, with renewal options
London, England(3) (1990) aggregating 20 years
Conrad & Jupiters Casino 605 2001
Gold Coast, (1986)
Queensland, Australia(1)
</TABLE>
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<TABLE>
<CAPTION>
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------ ---------------------- ------------------------------------
<S> <C> <C>
La Belle Creole 156 2009, with renewal options
St. Martin, French West Indies (1989) aggregating 10 years
Astir Palace Hotel 565 2013, with renewal options
Vouliagmeni, Greece (1961 through 1984) aggregating 10 years, subject to
certain termination rights
</TABLE>
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(1) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 39 and 40 in the 1993
Stockholders Report.
(2) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See note 1 above.
(3) Hilton has made loans to the owners of each of the referenced properties.
FRANCHISE HOTELS
Pursuant to franchises granted by the Company, franchise hotels are
operated under the "Hilton," "Hilton Garden Inn" or "Hilton Suites" names. The
franchise hotels operated under the "Hilton" name are generally smaller than the
full service hotels owned, leased or managed by Hilton and average approximately
250 rooms in size. Franchise hotels bearing the "Hilton Garden Inn" name are
approximately 150 to 200 rooms in size and utilize a modular design constructed
around a courtyard containing an indoor or outdoor swimming pool. The "Hilton
Suites" properties operated pursuant to franchise agreements utilize an
all-suites design with approximately 200 to 250 suites. In each instance, Hilton
approves the plan for and the location of franchise hotels and assists in their
design.
On February 1, 1994, there were 170 franchise hotels operated by others
under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names. In general,
each franchisee pays Hilton an initial fee based on the number of rooms in a
franchise hotel and a continuing fee based on a percentage of the facility's
room revenues. Although Hilton does not directly participate in the management
or operation of franchise hotels, it does periodically inspect those facilities
to ensure that Hilton's standards are maintained and renders advice with respect
to hotel operations.
EXPANSION PROGRAM
Hilton has taken a deliberate approach to developing new domestic hotel
properties due to the significant overbuilding in the hotel industry. At
present, there are no Company owned domestic hotels under construction. Hilton
intends to expand its operation of hotels primarily through conversion of
existing hotels into management and franchise properties. The Company will
invest in new domestic hotel projects or conversion properties where the return
on investment meets the Company's criteria.
The Company is actively exploring international hotel opportunities, with
particular emphasis on city center business hotels and resort hotels. These
international properties will generally be operated under the Conrad name
pursuant to long-term management agreements. In certain instances, the Company
may invest in or make advances to the entity that owns and/or operates a hotel.
The Company has entered into management contracts to operate the following three
new hotels in the Pacific Rim, each of which is scheduled to open in 1996-97:
the 321-room Conrad Surabaya in Surabaya, Indonesia; the 700-room Conrad Jakarta
in Jakarta, Indonesia; and the 600-room Conrad Kuala Lumpur in Kuala Lumpur,
Malaysia.
Negotiations relating to the management of other international hotels are
in varying stages and, in certain instances, letters of intent for management
contracts have been executed. However, no assurances can be given that
management contracts for such other hotels will be executed or that such other
hotels will be constructed and, thereafter, operated by the Company.
The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally.
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Certain countries have also restricted, from time to time, the repatriation of
funds. The Company considers the foregoing factors, among others, when
evaluating a management and/or investment opportunity abroad, but the Company
can give no assurances that changes in law or governmental policy will not
adversely affect international operations in the future.
TERRITORIAL RESTRICTIONS
Hilton has entered into various agreements which restrict its right to
operate hotels in various areas, including those hereinafter described which, in
management's opinion, represent the most significant restrictions to which the
Company is subject. In addition, pursuant to an agreement entered into at the
time of Hilton's distribution on December 1, 1964 to its stockholders of all the
issued and outstanding capital stock of Hilton International Co., as
subsequently amended, Hilton may not operate facilities outside the United
States identified as "Hilton" hotels and Hilton International Co. may not
operate facilities within the continental United States identified as "Hilton"
hotels. The Company's international hotel and hotel-casino operations are
conducted under the Conrad name. See "Hotel Operations," "Gaming
Operations -- International Hotel-Casinos" and Item 3 below. Subject to the
foregoing restrictions as to the use of the "Hilton" name, Hilton and Hilton
International Co. can compete in all, and do compete in certain, markets. The
Compass computerized reservation system utilized by Hilton and Hilton
International Co. provides information as to their respective hotels, if any, in
each market. See "Additional Information -- Computer Systems" and "Reservation
System."
The Company has entered into agreements with The Prudential Insurance
Company of America ("Prudential") which provide (a) that, except for the
Waldorf-Astoria and the New York Hilton & Towers (or the ownership, operation
and management of substitute hotels having substantially the same number of
rooms) and a hotel with not more than 1,600 rooms, the Company would not own,
operate, manage or otherwise have an interest in any hotel or similar
establishment in the Borough of Manhattan, (b) that, except for the Washington
Hilton & Towers and the Capital Hilton (or the ownership, operation and
management of substitute hotels having substantially the same number of rooms),
the Company would not own, operate, manage or otherwise have an interest in any
other hotel or similar establishment in the District of Columbia, (c) that the
Company would not own, operate, manage or otherwise have an interest in any
additional hotels or similar establishments within a radius of 20 miles of the
Rye Town Hilton, except that certain areas within said 20 mile radius have been
excluded from the territorial restriction, and (d) that, except for the Chicago
Hilton & Towers, the Palmer House Hilton, the O'Hare Hilton and specified other
properties, the Company would not manage or operate, or possess an ownership
interest in, or license or franchise, any hotel in Chicago, except the ownership
and/or management of a hotel with less than 800 rooms at the O'Hare
International Airport and a hotel with not more than 400 rooms at any other
location in Chicago.
PROPERTY TRANSACTIONS
In 1993, the Company recorded a $4,500,000 net pretax loss from property
transactions primarily as a result of the demolition of certain facilities at
the Flamingo Hilton-Las Vegas to permit further expansion at that property.
Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenues and
a favorable return on stockholders' equity.
FOREIGN CURRENCY TRANSACTIONS
In 1993, the Company recorded a $1,300,000 loss from foreign currency
transactions primarily as a result of exchange adjustments arising from the
remeasurement of the Company's operations at the Conrad Istanbul in Istanbul,
Turkey into U.S. dollars. International operations are subject to certain
economic and political risks, including foreign currency fluctuations. The
Company monitors its foreign operations and, where appropriate, adopts hedging
strategies to minimize the impact of changing economic and political
environments.
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GAMING OPERATIONS
NEVADA HOTEL-CASINOS
The Company owns and operates five hotel-casinos in the State of Nevada:
the 3,174-room Las Vegas Hilton, the 3,034-room Flamingo Hilton-Las Vegas, the
2,000-room Flamingo Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room
Flamingo Hilton-Reno. Each of the Company's hotel-casinos has gaming,
convention, dining, shopping, entertainment and, with the exception of the
Flamingo Hilton-Reno, indoor and outdoor recreational facilities. A variety of
popular entertainment is featured in theaters and lounges at each hotel.
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1993, the Las
Vegas Hilton added a new 362-foot high sign and completed remodeling of the
showroom for theater-style seating and presentation of Andrew Lloyd Webber's
"Starlight Express." The Flamingo Hilton-Las Vegas renovated the casino and the
race and sports book. The Flamingo Hilton-Laughlin also renovated the casino and
refurbished the pool and recreation deck. At the Reno Hilton, the Company has
completed an extensive renovation of all guest rooms and corridors and replaced
windows, exterior lighting and signage. The Flamingo Hilton-Reno enlarged the
casino by 3,000 square feet, renovated the valet concourse and hotel entrance
and created a new open space known as Flamingo Plaza.
The space utilized by the Company's casinos in Nevada, in terms of
approximate square feet, is as follows: Las Vegas Hilton -- 67,000 square feet
(inclusive of 33,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 73,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 65,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 100,000 square feet
(inclusive of 12,000 square feet attributable to the race and sports book); and
Flamingo Hilton-Reno -- 48,000 square feet (inclusive of 2,500 square feet
attributable to the race and sports book).
Each of the hotel-casinos is open 24 hours a day, seven days a week for
gaming activities. Games operated in these casinos include "21," Craps,
Roulette, Big "6," Baccarat, Poker, Keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.
It is impracticable for Hilton's hotel-casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment in the hotels, and occupancy rates in the hotels and in the Las
Vegas, Laughlin and Reno markets. The amount of revenues from gaming operations
varies depending upon the amount of gaming activity as well as variations in the
odds for different games and the factor of chance. Casino activities are
conducted by experienced personnel who are supervised at all times.
As in the case of any business extensively involved in the handling of
cash, gaming operations at the Company's hotel-casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all five Nevada properties are monitored by computers.
The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las
Vegas, the Flamingo Hilton-Reno and the Reno Hilton invite V.I.P. customers to
their casinos and may pay for or reimburse the cost of their air transportation
and provide them with complimentary rooms, food and beverage. In addition, the
Las Vegas Hilton, the Flamingo Hilton-Reno and the Reno Hilton have instituted
special flight programs, pursuant to which free air transportation on Company
owned or chartered aircraft and complimentary rooms, food and beverage are
provided to groups or selected persons. These persons either have established
casino credit limits or cash on deposit in the casinos and have previously
evidenced a willingness to put substantial amounts at risk
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at the casinos. The special flight programs are sometimes referred to as
junkets. The Las Vegas Hilton, the Flamingo Hilton-Reno and the Reno Hilton
hosted 22, 34 and 17 special flight programs in 1993, compared to 44, 44 and 12
such programs in 1992, respectively.
Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations of the State of Nevada and its
agencies. As is customary in the Nevada gaming industry, activities are
conducted on a credit as well as a cash basis, in accordance with procedures
established and supervised by management. Fluctuations in collecting casino
receivables could have a material effect on results of operations of these
properties. An allowance is provided for estimated uncollectible casino
receivables. Casino receivables aggregated $44,100,000, subject to a $12,200,000
(approximately 28%) reserve, at December 31, 1991; $47,000,000, subject to a
$14,400,000 (approximately 31%) reserve, at December 31, 1992; and $47,900,000,
subject to a $7,600,000 (approximately 16%) reserve, at December 31, 1993.
INTERNATIONAL HOTEL-CASINOS
The Company, through Conrad, manages two international hotel-casinos: the
605-room Conrad & Jupiters Casino in Queensland, Australia and the 627-room
Conrad Istanbul in Istanbul, Turkey.
The Company has an ownership interest of 19.9% in the Conrad & Jupiters
Casino, which has a 70,000 square foot casino featuring table games and slot
machines similar to those offered at the Company's hotel-casinos in Nevada. This
property has the exclusive rights to conduct casino gaming on Queensland's Gold
Coast through 1995.
The Company has a 25% ownership interest in the Conrad Istanbul, which
opened in 1992. This hotel-casino includes a 12,000 square foot casino featuring
table games and slot machines similar to those offered at the Company's casinos
in Nevada and Australia.
RIVERBOAT CASINO
In February 1994, the Company commenced operation of the "Hilton Queen of
New Orleans," a riverboat casino located adjacent to the New Orleans Hilton
Riverside & Towers. The initial 1,500 passenger vessel has a 20,000 square foot
casino featuring table games and slot machines similar to those offered at the
Company's hotel-casinos. This interim riverboat is wholly-owned by the Company
and is being leased to a joint venture, of which the Company owns a 50%
interest, until the permanent riverboat is completed. In late 1994, the interim
riverboat will be replaced with a permanent vessel owned by the joint venture
that will have a 30,000 square foot casino and accommodate 2,400 passengers.
EXPANSION PROGRAM
At the Las Vegas Hilton, the Company plans to construct three new luxury
suites for premium players which are expected to be completed by late 1994. The
Company has also commenced an exterior rehabilitation and landscaping project at
the Las Vegas Hilton. An extensve renovation project is planned at the Flamingo
Hilton-Las Vegas, which will include construction of a new 600-room tower, new
meeting and ballroom facilities and a themed recreation area, and additional
public space and parking. At the Flamingo Hilton-Laughlin, the Company plans to
expand the casino to add 300 new slot machines and to replace exterior signage.
At the Reno Hilton, the Company plans to make public space improvements, add a
new race and sports book and enlarge the registration area. The Flamingo
Hilton-Reno plans to remodel the buffet and coffee shop, relocate Keno and build
a new sports bar at the race and sports book.
During 1993, the Company approved plans to develop vacation ownership
resorts in Las Vegas, Nevada and Orlando, Florida. The Company, through its 50%
owned Hilton Grand Vacations Company joint venture, is constructing a 200-unit
vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas, which is
scheduled for completion in early 1995.
In December 1993, the Provincial Government of Ontario, Canada awarded a
consortium, of which Conrad owns a 33% interest, the exclusive right to develop
and manage Ontario's first casino in Windsor,
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located across from Detroit, Michigan. This venture will develop and operate a
300-room hotel-casino, which will be co-managed by Conrad. The hotel-casino will
contain a 75,000 square foot casino, off-track betting, entertainment and
meeting facilities. The Windsor project is scheduled to open on a permanent
basis in early 1996, with a temporary 60,000 square foot casino scheduled to
open in spring 1994.
The government of Queensland, Australia has designated the owner of the
Conrad & Jupiters Casino to own and develop a new 136-room hotel-casino project
to be known as the Conrad Treasury in Brisbane, Australia. This property, which
will feature a 65,000 square foot casino, will be managed by Conrad and will
have the exclusive right to conduct casino gaming in Brisbane for a ten year
period. Conrad will have a 19.9% equity interest in this project, which is
scheduled to open in early 1995.
In addition, the government of Uruguay has selected Conrad and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, will
include a 35,000 square foot casino. Conrad will manage and have a 20% equity
interest in the hotel-casino. Subject to obtaining satisfactory financing, the
hotel-casino is scheduled for completion in early 1996.
In October 1993, Conrad entered into an agreement to develop and operate a
700-room hotel-casino in Cairo, Egypt. This property will feature a 17,000
square foot European-style casino. Conrad will manage and have a 10% equity
interest in the hotel-casino, which is scheduled to open in early 1997.
In 1993, the Company was named the exclusive developer of two riverboat
casinos within the city limits of Kansas City, Missouri on the Missouri River.
The Company will own a 90% interest in these riverboats. The first vessel will
feature a 20,000 square foot casino and accommodate 1,500 passengers. Subject to
voter approval in April 1994 of a constitutional amendment authorizing games of
chance in Missouri and a city-wide riverboat gaming proposal in Kansas City, and
the receipt of all required gaming licenses, this vessel is scheduled to open in
late summer 1994. The second vessel is scheduled to commence operation in
mid-1995 and will feature a 30,000 square foot casino and carry 2,000
passengers.
In 1993, the Company and its partners filed a gaming application seeking
licensing approval in Indiana for a riverboat casino project in Michigan City,
Indiana.
In 1991, the New Jersey Casino Control Commission granted the Company's
request for a Statement of Compliance, finding that the Company satisfies all
non-facility related criteria for a casino license in Atlantic City, New Jersey.
At present, the Company does not own, nor has the Company entered into any
agreement to manage, a hotel-casino property in Atlantic City. See "Additional
Information -- Regulation and Licensing -- New Jersey Gaming Laws."
ADDITIONAL INFORMATION
VACATION OWNERSHIP
The Company owns a 50% interest in a joint venture called Hilton Grand
Vacations Company ("HGVC"), which currently operates 11 vacation ownership
resorts in Florida. During 1993, HGVC commenced development of a 200-unit
vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas and a
360-unit resort at Sea World Village in Orlando, Florida. The Las Vegas resort
is scheduled for completion in early 1995 and the first phase of the Orlando
project is anticipated to be completed in summer 1995. See "Gaming
Operations -- Expansion Program" above. HGVC is also actively seeking new
development and acquisition opportunities in other resort locations.
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly-owned subsidiary, Hilton Equipment Corporation,
and through its Hotels Division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies primarily to hotels
owned, leased or managed by Hilton and, to a lesser extent, to hotels franchised
by Hilton or owned and operated by others. The revenues of this operation depend
primarily on the number of new hotels operated or franchised by Hilton and on
refurbishing and remodeling of existing Hilton hotels.
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COMPUTER SYSTEMS
Compass Computer Services, Inc. ("Compass"), 50% of which is owned by
Hilton and the balance by Budget Rent-A-Car, Inc., operates a computerized
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets. Compass
is being managed by Litton Computer Services.
RESERVATION SYSTEM
The Compass computerized reservation system is presently utilized by
Hilton Service Corporation, the operator of a worldwide system of reservation
offices for hotels operated by Hilton, Hilton International Co., their
affiliates and others. Hilton Service Corporation is owned 51% by Hilton and
49% by Hilton International Co.
MARKETING
Hotel occupancy at Hilton's metropolitan and airport properties is derived
primarily from the convention and meeting market and the business traveler
market (businesspersons traveling as individuals or in small groups). Hotel
occupancy at the Company's resort properties is derived primarily from the tour
and travel market (tourists traveling either as individuals or in groups) and
the convention and meeting market. Hotel occupancy at the Company's
hotel-casinos is derived primarily from the convention and meeting market, the
tour and travel market and junket and V.I.P. programs. As indicated under
"Additional Information -- Business Risks" below, these sources of business are
sensitive to general economic and other conditions. In addition, the Company
participates in certain joint marketing programs with business partners in the
airline, car rental and cruise line industries.
STATISTICAL DATA
For information regarding the Company's properties, number of available
rooms, occupancy ratios and management and franchise fees, see the Ten Year
Summary on pages 50 and 51 in the 1993 Stockholders Report.
BUSINESS RISKS
In 1993, the Company was unable to increase prices to keep pace with the
rate of inflation due to the recessionary environment exacerbated by excess
industry capacity. The Company's business could also be adversely affected by
increases in transportation and fuel costs. In addition, the Company's future
operating results could be adversely impacted by continued industry overcapacity
and weak demand.
Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Since 1990, occupancy ratios at the Company's hotels have been
adversely impacted by the decrease in travel resulting from the effects of
recession in the U.S. economy and by excess industry capacity.
COMPETITION
Hilton believes it is one of the largest operators of hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. Hilton hotels also compete generally with facilities offering
similar services and located in cities and other locations where Hilton hotels
are not present. The Company's precise competitive position in most areas in
which its hotels are located cannot be determined from the information and data
available to Hilton.
To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. In this regard, recent
capacity additions have increased competition in all segments of the Las Vegas
market. Three of the Company's competitors recently opened large new theme
casinos in Las Vegas. Such new capacity additions to the Las Vegas market could
adversely impact the Company's gaming
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income. In addition, the business of Hilton's Nevada hotel-casinos might be
adversely affected if gaming operations of the type conducted in Nevada were to
be permitted under the laws of other states, particularly California. The
legalization of casino gaming in Atlantic City, New Jersey has had an impact on
the Company's Nevada hotel-casinos. The recent legalization of riverboat gaming
in a number of states and the operation of casino gaming on American Indian
tribal lands could also impact the Company's hotel-casinos in Nevada.
REGULATION AND LICENSING
Each of the Company's hotel-casinos and riverboats is subject to extensive
regulation under laws, rules and supervisory procedures, primarily in the
jurisdiction where located or docked. Some jurisdictions, however, empower their
regulators to investigate participation by licensees in gaming outside their
jurisdiction and require access to and periodic reports respecting such gaming
activities. Violations of laws in one jurisdiction could result in disciplinary
action in other jurisdictions.
Nevada Gaming Laws. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno, are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Las Vegas. The Gaming Commission,
the Control Board, the CCB and the City of Las Vegas are collectively referred
to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) the provision of a source of state and local
revenues through taxation and licensing fees. Change in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.
The Company's subsidiaries which operate the casinos (the "Licensees") are
required to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable. The
Company is registered by the Gaming Commission as a publicly-traded corporation
("Registered Corporation") and, as such, it is required periodically to submit
detailed financial and operating reports to the Gaming Commission and furnish
any other information which the Gaming Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, the
Licensees without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and the Licensees have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or the
Licensees in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of the Licensees must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of the Company
who are actively and directly involved in gaming activities of the Licensees may
be required to be licensed or found suitable by the Nevada Gaming Authorities.
The Nevada Gaming Authorities may deny an application for licensing for any
cause which they deem reasonable. A finding of suitability is comparable to
licensing, and both require submission of detailed personal and financial
information followed by a thorough
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investigation. The applicant for licensing or a finding of suitability must pay
for all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and, in addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Licensees, the companies involved would
have to sever all relationships with such person. In addition, the Gaming
Commission may require the Company or the Licensees to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and the Licensees are required to submit detailed financial and
operating reports to the Gaming Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by the Licensees
must be reported to, or approved by, the Gaming Commission.
If it were determined that the Nevada Act was violated by the Licensees,
the gaming licenses they hold could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Licensees, the Company and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Gaming Commission. Further, a supervisor could be
appointed by the Gaming Commission to operate the Company's gaming properties
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
properties) could be forfeited to the State of Nevada. Limitation, conditioning
or suspension of any gaming license or the appointment of a supervisor could
(and revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's Common Stock, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have such person's suitability as a beneficial holder of the Company's
Common Stock determined if the Gaming Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's Common Stock to report the acquisition to the Gaming Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
Common Stock apply to the Gaming Commission for a finding of suitability within
thirty days after the Chairman of the Control Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional investor,"
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of the Company's Common Stock may apply to the Gaming Commission for a
waiver of such finding of suitability if such institutional investor holds the
Common Stock for investment purposes only. An institutional investor shall not
be deemed to hold the Common Stock for investment purposes unless the Common
Stock was acquired and is held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Gaming Commission finds to be
inconsistent with holding the Company's Common Stock for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and (iii) such
other activities as the Gaming Commission may determine to be consistent with
such investment intent. If the beneficial holder of voting securities who must
be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of beneficial
owners. The applicant is required to pay all costs of investigation. Barron
Hilton, the Company's largest stockholder, has been found suitable as a
controlling stockholder of the Company.
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Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Gaming Commission or
by the Chairman of the Control Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Company's Common
Stock beyond such period of time as may be prescribed by the Gaming Commission
may be guilty of a criminal offense. The Company is subject to disciplinary
action if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company or the Licensees,
the Company (i) pays that person any dividend or interest upon voting securities
of the Company, (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or otherwise or
(v) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities for cash at fair market value. Additionally,
the CCB has taken the position that it has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming license.
The Gaming Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Gaming Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Gaming Commission, it (i) pays to the unsuitable person any dividend,
interest or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Gaming
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Gaming Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company was granted approval on
August 26, 1993 to make public offerings of securities for a period of one year,
subject to certain reporting requirements and the authority of the Chairman of
the Control Board to issue an interlocutory stop order for good cause.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Gaming Commission has established a regulatory scheme to
ameliorate the potentially
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adverse effects of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of corporate
gaming operators and their affiliates; (ii) preserve the beneficial aspects of
conducting business in the corporate form; and (iii) promote a neutral
environment for the orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Gaming Commission before the Company
can make exceptional repurchases of voting securities above the current market
price thereof and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Company's Board of Directors in response to a
tender offer made directly to its stockholders for the purpose of acquiring
control of the Company.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.
The Company and its affiliates and Licensees, who propose to become
involved in a gaming venture outside of Nevada, are required to deposit with the
Control Board, and thereafter maintain, a revolving fund in the amount of
$10,000 to pay the expenses of investigation of the Control Board of their
participation in such foreign gaming. The revolving fund is subject to increase
or decrease in the discretion of the Gaming Commission. Thereafter, the Company
and its affiliates and Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. These entities are also subject to
disciplinary action by the Gaming Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
Louisiana Gaming Laws. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Riverboat Gaming Commission (the "Commission") and the
Louisiana Riverboat Gaming Enforcement Division (the "Division"), a department
within the Louisiana State Police. The Division is responsible for investigating
the background of all applicants seeking a riverboat gaming license, issuing the
license and enforcing the laws, rules and regulations relating to riverboat
gaming activities.
The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Division. This requires the filing of an extensive
application to the Division disclosing personal, financial, criminal, business
and other information. On October 13, 1993, the Division issued a riverboat
gaming license to the Queen of New Orleans, a joint venture of which the Company
owns a 50% interest. The Company's joint venture commenced riverboat gaming
operations in New Orleans, Louisiana on February 10, 1994.
The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Division approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
The Commission must approve all security holders of the licensee and may
find any such security holder not qualified to own those securities. Louisiana
law may require that the charter or bylaws of the licensee provide that its
securities are held subject to the condition that, if a holder is found to be
disqualified by the Commission, the holder must dispose of the securities of the
licensee. If a security holder of a licensee is found disqualified, it will be
unlawful for the security holder to (i) receive any dividend or interest with
regard to the
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securities, (ii) exercise, directly or indirectly, any rights conferred by the
securities or (iii) receive any remuneration from the licensee for services
rendered or otherwise. The Commission may impose similar approval requirements
on holders of securities of any intermediary or holding company of the licensee,
but may waive those requirements with respect to holders of publicly-traded
securities of intermediary and holding companies if such holders do not have the
ability to control the publicly-traded corporation or elect one or more
directors thereof.
New Jersey Gaming Laws. The ownership and operation of hotel-casino
facilities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act (the "Act"). No hotel-casino
facility may operate unless various licenses and approvals are obtained from New
Jersey regulatory authorities, including the Casino Control Commission (the
"Commission"). The Commission is authorized under the Act to adopt regulations
covering a broad spectrum of gaming and gaming related activities and to
prescribe the methods and forms of applications for licenses.
The Act permits an applicant to request a Statement of Compliance from the
Commission finding that it satisfies one or more of the eligibility criteria for
licensure. The Statement of Compliance request may be made prior to the
construction or acquisition of a casino in Atlantic City. It is only after all
eligibility criteria are met that a casino license may be issued. On February 4,
1991, the Company and a New Jersey subsidiary filed applications with the
Commission for a casino license under the Act. At the conclusion of the
application investigation, the Company requested a Statement of Compliance
regarding all non-facility related criteria. On June 26, 1991, the Commission
granted the Company's request for a Statement of Compliance. The Company does
not now own, nor has the Company entered into any agreement to manage, a
hotel-casino in Atlantic City. The Company filed the license application in
contemplation of possibly owning and/or operating a hotel-casino in Atlantic
City.
In order to be granted a casino license under the Act, officers and
directors of a licensee and its employees who are employed in hotel or casino
operations in Atlantic City are required to be licensed or approved by the
Commission. In addition, all contracts and leases entered into by a licensee
would be subject to approval and certain enterprises which transact business
with the licensee would themselves have to be licensed. New Jersey law also
authorizes the Commission to approve security holders of a licensee in the
manner described above under the caption "Louisiana Gaming Laws."
Queensland Gaming Laws. Queensland, Australia, like Nevada and New Jersey,
has comprehensive laws and regulations governing the conduct of casino gaming.
All persons connected with the ownership and operation of a casino, including
the Company, its subsidiary that manages the Conrad & Jupiters Casino and
certain of their principal stockholders, directors and officers, must be found
suitable and licensed. A casino license once issued remains in force until
surrendered or cancelled. Queensland law defines the grounds for cancellation
and, in such event, an administrator may be appointed to assume control of the
hotel-casino complex. The Queensland authorities have conducted an investigation
of, and have found suitable, the Company and its subsidiary.
Turkey Gaming Laws. Turkey has laws and regulations governing the
establishment and operation of casino gaming. The Turkish Ministry of Tourism
inspects all casino premises prior to the commencement of operations and
conducts random inspections of ongoing casino operations. Under Turkish gaming
laws, access to casinos is limited to persons carrying a foreign passport or to
Turkish citizens receiving a permit from the Ministry of Tourism. The casino
located in the Conrad Istanbul has been authorized to conduct casino operations
by the Turkish Ministry of Tourism.
IRS Regulations. The Internal Revenue Service ("IRS") requires operators
of casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for Keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain Keno, Bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.
17
<PAGE> 19
Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates, or has applied for
licensing to operate, casinos require the reporting of currency transactions in
excess of $10,000 occurring within a gaming day, including identification of the
patron by name and social security number. This reporting obligation commenced
in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States which are exempt from the ambit of IRS
regulations.
Other Laws and Regulations. Each of the hotels and hotel-casinos operated
by the Company is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. Management believes that the Company has
obtained all required licenses and permits and its businesses are conducted in
substantial compliance with applicable laws.
EMPLOYEES
At February 1, 1994, Hilton employed approximately 43,000 persons, of whom
approximately 22,000 are covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel industry
generally. Although strikes of short duration have from time to time occurred at
certain of Hilton's facilities, Hilton believes its employee relations are
satisfactory.
ITEM 2. PROPERTIES
Hilton considers its hotels to be leading establishments with respect to
desirability of location, size, facilities, physical condition, quality and
variety of services offered in most of the areas in which they are located.
Obsolescence arising from age and condition of facilities is a factor in the
hotel industry. Accordingly, Hilton expends, and intends to continue to expend,
substantial funds to maintain its facilities in first-class condition in order
to remain competitive.
Hotels owned and operated, leased and managed by Hilton are briefly
described under Item 1 and, in particular, under the captions "Hotel Operations"
and "Gaming Operations." In addition, contemplated additions to, and major
refurbishing and remodeling of, existing hotels and new hotels presently under
construction that will be operated by Hilton are briefly described under the
captions "Hotel Operations -- Expansion Program" and "Gaming
Operations -- Expansion Program" under Item 1.
ITEM 3. LEGAL PROCEEDINGS
In management's opinion, disposition of pending litigation against the
Company, including the lawsuits described under "Commitments and Contingent
Liabilities" in the Notes to the Company's Consolidated Financial Statements on
page 48 in the 1993 Stockholders Report, is not expected to have a material
effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
18
<PAGE> 20
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company:
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME WITH THE COMPANY AGE
- ---- --------------------------------------- ---
<S> <C> <C>
Barron Hilton Chairman of the Board and Chief 66
Executive Officer and, until February
1993, President
Raymond C. Avansino, Jr. President and Chief Operating Officer 50
since February 1993
Eric M. Hilton Vice Chairman of the Board since May 60
1993, Executive Vice President --
International Operations from May 1992
until May 1993, President, Conrad
International Hotels Corporation from
January 1990 until May 1993, and Senior
Vice President -- Real Estate
Development, International until May
1992
Carl T. Mottek Executive Vice President -- Operations, 65
and President, Hilton Hotels Division
William C. Lebo, Jr. Senior Vice President and General 50
Counsel
F. Michael O'Brien Senior Vice President -- Gaming and 53
Hotel Development since January 1994,
and from May 1992 until January 1994,
Senior Vice President -- Corporate
Properties
Michael A. Ribero Senior Vice President -- Marketing and 37
Strategic Planning since January 1994,
and prior thereto, Senior Vice
President -- Marketing
Maurice J. Scanlon Senior Vice President -- Finance 59
</TABLE>
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1989. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related, except that Messrs. Barron and Eric Hilton are brothers.
Similar information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 12, 1994 (the "Proxy Statement"). The Company expects to file the Proxy
Statement with the Securities and Exchange Commission prior to April 30, 1994,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
19
<PAGE> 21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "HLT." Information regarding sales
prices, dividend payments and record holders with respect to the Company's
Common Stock is set forth under "Supplementary Financial Information" in the
Notes to the Company's Consolidated Financial Statements on page 48 in the 1993
Stockholders Report, which information is incorporated herein by reference.
On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a market value of twice the Right's exercise price.
Following the acquisition by a person or group of beneficial ownership of
30% or more of the Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership of
20% or more of the Company's Common Stock, the Rights are redeemable for one
cent per Right at the option of the Company's Board of Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
The full text of the Plan has been filed as Exhibit 4.5 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.5.
ITEM 6. SELECTED FINANCIAL DATA
See the Company's Ten Year Summary on pages 50 and 51 in the 1993
Stockholders Report and "Segments of Business" in the Notes to the Company's
Consolidated Financial Statements on pages 46 and 47 in the 1993 Stockholders
Report.
The ratio of earnings to fixed charges for the five years ended December
31, 1993 is as follows: 1993 - 2.7 to 1; 1992 - 2.9 to 1; 1991 - 2.6 to 1;
1990 - 2.8 to 1; and 1989 - 2.4 to 1. The computation of the aforesaid ratios is
set forth in Exhibit 12 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 28 through 33 in the 1993 Stockholders Report.
20
<PAGE> 22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the 1993 Stockholders Report on the pages
indicated, which information is incorporated herein by reference.
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of independent public accountants.................................... 49
Consolidated statements of income for the three years ended December 31,
1993..................................................................... 34
Consolidated balance sheets as of December 31, 1993 and 1992................ 35
Consolidated statements of cash flows for the three years ended December 31,
1993..................................................................... 36
Consolidated statements of stockholders' equity for the three years ended
December 31, 1993........................................................ 37
Notes to consolidated financial statements.................................. 38
Segment data for the five years ended December 31, 1993 contained in the Ten
Year Summary............................................................. 50
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers" in Part I. Other
information respecting certain executive officers, as well as the required
information for directors, will be contained in the Proxy Statement, and
reference is expressly made thereto for the specific information incorporated
herein by the aforesaid reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Common Stock
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Election of
Directors -- Certain Relationships and Interests in Certain Transactions" and
"Compensation Committee Interlocks and Insider Participation" in the Proxy
Statement, and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
21
<PAGE> 23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
The index to consolidated financial statements and supplementary data is
set forth under Item 8 on page 21 hereof.
2. Financial Statement Schedules:
<TABLE>
<CAPTION>
PAGE
-----
<S> <C> <C>
Report of Independent Public Accountants......................................... 23
Schedule I -- Marketable Securities -- Other Security Investments............ 24
Schedule II -- Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties............ 25
Schedule V -- Property and Equipment......................................... 26
Schedule VI -- Accumulated Depreciation of Property and Equipment............. 27
Schedule VII -- Guarantees of Securities of Other Issuers...................... 28
Schedule VIII -- Valuation and Qualifying Accounts.............................. 29
Schedule X -- Supplementary Income Statement Information..................... 30
Supplemental Note to Consolidated Financial Statements........................... 31
</TABLE>
All other schedules are inapplicable or the required information is
included elsewhere herein.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.
22
<PAGE> 24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
SUPPLEMENTAL SCHEDULES AND SUPPLEMENTAL NOTE
To Hilton Hotels Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
2, 1994. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedules I, II, V, VI, VII, VIII
and X and the supplemental note to consolidated financial statements as shown on
pages 24 through 31 are the responsibility of the company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. The supplemental schedules and the supplemental note to the
consolidated financial statements have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California
February 2, 1994
23
<PAGE> 25
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE I -- MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS
AT DECEMBER 31, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
AMOUNT
INCLUDED IN
PRINCIPAL MARKET BALANCE
NAME AMOUNT COST VALUE SHEET
- ---- --------- ------ ------ -----------
<S> <C> <C> <C> <C>
Cash....................................................... $ -- -- -- 34.0
Certificates of Deposit.................................... .5 .5 .5 .5
Eurodollar Deposits........................................ 3.4 3.4 3.4 3.4
Unit Trusts................................................ 5.5 5.5 5.5 5.5
Commercial Paper........................................... 12.7 12.6 12.7 12.7
Money Market Preferred Stock............................... 65.0 65.0 65.0 65.0
Government Agency.......................................... 112.5 112.5 112.5 112.5
Taxable Auction Preferred Stock............................ 143.5 143.4 143.4 143.4
Accrued Interest........................................... -- -- -- 3.4
-------
Total Cash and Equivalents.............................. $ 380.4
-------
-------
Certificates of Deposit.................................... $ 3.1 3.4 3.1 3.1
Floating Rate Notes........................................ 5.0 5.0 5.0 5.0
U.S. Treasuries............................................ 10.0 10.7 10.2 10.0
Government Agency.......................................... 33.8 33.7 33.6 33.8
Medium Term Notes.......................................... 46.0 48.2 46.2 46.2
-------
Total Temporary Investments............................. $ 98.1
-------
-------
Medium Term Notes.......................................... $ 5.0 5.0 5.0 5.0
Asset Backed Obligations................................... 26.1 27.5 26.1 26.1
Floating Rate Notes........................................ 32.5 32.6 32.5 32.5
-------
Total Long-Term Investments............................. $ 63.6
-------
-------
</TABLE>
24
<PAGE> 26
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
AT DECEMBER 31, 1993
(IN THOUSANDS)
<TABLE>
<CAPTION>
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ------------------------- -------------------
BEGINNING AMOUNTS AMOUNTS NON-
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
- ------------------------------ ----------- --------- --------- ----------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Barron Hilton(1).............. $ -- 707 (707) -- -- --
Michael A. Ribero(2).......... 114 12 -- -- -- 126
</TABLE>
- ------------
(1) Represents amounts reimbursed by Mr. Hilton to the Company during 1993
pursuant to an agreement with respect to investments in the Earthwinds
Hilton Project, a manned helium balloon system designed for a non-stop
circumnavigation of the earth. The Company is a sponsor of the Earthwinds
Hilton Project and will share in revenues generated by the project.
(2) Due August 5, 1998. Interest rate is 11% per annum, compounded annually,
subject to certain limitations. Note is secured by a Deed of Trust.
25
<PAGE> 27
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE V -- PROPERTY AND EQUIPMENT
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING ADDITIONS SALES AND TRANSFERS END OF
OF PERIOD AT COST RETIREMENTS AND OTHER PERIOD
---------- --------- ----------- --------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Land................................. $ 145.9 -- (.7) -- 145.2
Buildings and leasehold
improvements...................... 1,294.0 9.9 (20.1) 83.1 1,366.9
Furniture and equipment.............. 430.0 50.2 (30.8) 7.7 457.1
Property held for sale or
development....................... 13.6 -- -- -- 13.6
-------- ------- --------- ------- --------
1,883.5 60.1 (51.6) 90.8 1,982.8
Construction in progress............. 41.1 96.9 -- (78.0) 60.0
-------- ------- --------- ------- --------
Total................................ $1,924.6 157.0 (51.6) 12.8(A) 2,042.8
-------- ------- --------- ------- --------
-------- ------- --------- ------- --------
YEAR ENDED DECEMBER 31, 1992
Land................................. $ 131.1 14.8 -- -- 145.9
Buildings and leasehold
improvements...................... 1,159.7 71.9 (1.0) 63.4 1,294.0
Furniture and equipment.............. 396.5 50.1 (28.9) 12.3 430.0
Property held for sale or
development....................... 13.6 -- -- -- 13.6
-------- ------- --------- ------- --------
1,700.9 136.8 (29.9) 75.7 1,883.5
Construction in progress............. 32.8 85.4 -- (77.1) 41.1
-------- ------- --------- ------- --------
Total................................ $1,733.7 222.2 (29.9) (1.4)(B) 1,924.6
-------- ------- --------- ------- --------
-------- ------- --------- ------- --------
YEAR ENDED DECEMBER 31, 1991
Land................................. $ 128.3 .2 -- 2.6 131.1
Buildings and leasehold
improvements...................... 1,125.8 3.8 (7.7) 37.8 1,159.7
Furniture and equipment.............. 383.6 25.7 (19.3) 6.5 396.5
Property held for sale or
development....................... 14.2 -- (.6) -- 13.6
-------- ------- --------- ------- --------
1,651.9 29.7 (27.6) 46.9 1,700.9
Construction in progress............. 31.4 48.3 -- (46.9) 32.8
-------- ------- --------- ------- --------
Total................................ $1,683.3 78.0 (27.6) -- 1,733.7
-------- ------- --------- ------- --------
-------- ------- --------- ------- --------
</TABLE>
- ------------
(A) Represents the transfer of assets from purchased properties.
(B) Represents an abandoned project.
26
<PAGE> 28
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT BALANCE AT
BEGINNING CURRENT SALES AND END OF
OF PERIOD DEPRECIATION RETIREMENTS OTHER PERIOD
---------- ------------ ----------- ----- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Buildings and leasehold
improvements....................... $351.4 58.0 (15.5) 7.1 401.0
Furniture and equipment............... 199.0 53.8 (30.0) 1.5 224.3
------ ------ -------- ---- ------
Total................................. $550.4 111.8 (45.5) 8.6 (A) 625.3
------ ------ -------- ---- ------
------ ------ -------- ---- ------
YEAR ENDED DECEMBER 31, 1992
Buildings and leasehold
improvements....................... $302.0 50.4 (1.0) -- 351.4
Furniture and equipment............... 177.9 49.8 (28.7) -- 199.0
------ ------ ------- ---- ------
Total................................. $479.9 100.2 (29.7) -- 550.4
------ ------ ------ ---- ------
------ ------ ------ ---- ------
YEAR ENDED DECEMBER 31, 1991
Buildings and leasehold
improvements....................... $262.6 47.0 (7.6) -- 302.0
Furniture and equipment............... 149.8 47.0 (18.9) -- 177.9
------ ------ ------- ---- ------
Total................................. $412.4 94.0 (26.5) -- 479.9
------ ------ ------- ---- ------
------ ------ ------- ---- ------
</TABLE>
- ---------------
(A) Represents the transfer of accumulated depreciation from purchased
properties.
27
<PAGE> 29
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE VII -- GUARANTEES OF SECURITIES OF OTHER ISSUERS
AT DECEMBER 31, 1993
(IN MILLIONS)
<TABLE>
<CAPTION>
TITLE OF
ISSUE OF
EACH CLASS TOTAL AMOUNT
NAME OF ISSUER OF SECURITIES OF GUARANTEED
GUARANTEED BY PERSON FOR SECURITIES AND NATURE OF
WHOM STATEMENT IS FILED GUARANTEED OUTSTANDING GUARANTEE
- ------------------------------------------------ ------------ ------------ -------------
<S> <C> <C> <C>
Hilton Reservation Equipment Company Principal
A 50%-Owned Company........................... Term Loan $11.0 and Interest
International Rivercenter, a partnership in
commendam Mortgage Principal
A 46.8%-Owned Company......................... Loan 6.7 and Interest
</TABLE>
- ------------
Note: Other information has been omitted since the answer in each case is
"None."
28
<PAGE> 30
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OTHER PERIOD
---------- ---------- ---------- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts
Hotel and other............ $ 7.2 1.8 4.5 1.9 -- 11.6
Casino..................... 14.4 10.9 -- 17.7 -- 7.6
Reserve for loss on other
investments................ -- 12.5 -- -- -- 12.5
YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts
Hotel and other............ $ 6.0 1.7 1.5 2.1 .1 (A) 7.2
Casino..................... 12.2 8.0 -- 6.3 .5 (A) 14.4
Reserve for loss on other
investments................ 14.3 -- -- 14.3 -- --
YEAR ENDED DECEMBER 31, 1991
Allowance for doubtful
accounts
Hotel and other............ $ 7.0 2.0 .3 3.3 -- 6.0
Casino..................... 15.2 26.3 -- 29.3 -- 12.2
Reserve for loss on other
investments................ 10.0 4.3 -- -- -- 14.3
</TABLE>
- ---------------
(A) Represents allowance for doubtful accounts of the Reno Hilton on the date of
acquisition by the Company.
29
<PAGE> 31
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
<TABLE>
<CAPTION>
CHARGED TO COSTS AND
EXPENSES
----------------------------
ITEM 1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Advertising Costs................................................. $ 26.0 17.5 16.6
Gaming Taxes...................................................... 38.4 33.0 28.6
Repairs and Maintenance........................................... 57.9 52.7 48.0
</TABLE>
Amounts for amortization of intangible assets, pre-opening costs and royalties
are not presented as such amounts, individually, are not material.
30
<PAGE> 32
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 1993 AND 1992
(IN MILLIONS)
<TABLE>
<CAPTION>
1993 1992
------- ------
<S> <C> <C>
Accounts payable and accrued expenses at December 31, consisted of:
Accounts and notes payable.............................................. $ 47.4 58.0
Accrued salaries and wages.............................................. 26.5 25.1
Guest advance deposits.................................................. -- 14.6
Insurance............................................................... 34.9 33.3
Interest................................................................ 18.9 19.6
Other accrued expenses.................................................. 100.8 85.9
------- ------
$ 228.5 236.5
------- ------
------- ------
</TABLE>
31
<PAGE> 33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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, on March 18, 1994.
HILTON HOTELS CORPORATION
(Registrant)
By MAURICE J. SCANLON
-----------------------------------
Maurice J. Scanlon
Senior Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 18, 1994.
<TABLE>
<S> <C>
RAYMOND C. AVANSINO, JR. DONALD R. KNAB
- ---------------------------------------- ------------------------------------------
Raymond C. Avansino, Jr. Donald R. Knab
Director Director
A. STEVEN CROWN BENJAMIN V. LAMBERT
- ---------------------------------------- ------------------------------------------
A. Steven Crown Benjamin V. Lambert
Director Director
GREGORY R. DILLON CARL T. MOTTEK
- ---------------------------------------- ------------------------------------------
Gregory R. Dillon Carl T. Mottek
Director Director
BARRON HILTON MAURICE J. SCANLON
- ---------------------------------------- -----------------------------------------
Barron Hilton Maurice J. Scanlon
Chairman of the Board Senior Vice President-Finance
and Chief (Chief Financial and
Executive Officer Accounting Officer)
(Chief Executive Officer)
ERIC M. HILTON DONNA F. TUTTLE
- ---------------------------------------- ----------------------------------------
Eric M. Hilton Donna F. Tuttle
Director Director
ROBERT L. JOHNSON SAM D. YOUNG, JR.
- ---------------------------------------- ----------------------------------------
Robert L. Johnson Sam D. Young, Jr.
Director Director
</TABLE>
32
<PAGE> 34
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ------------------------------------------------------------------ -------------
<C> <S> <C>
3.1 Restated Certificate of Incorporation of Registrant, as amended
(incorporated herein by reference from Exhibit 3.1 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1987)
3.2 By-Laws of Registrant, as amended (incorporated herein by
reference from Exhibit 3.2 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)
4.1 Indenture, dated as of July 1, 1988, between Registrant and
Citibank, N.A., regarding Registrant's Subordinated Debt
Securities (incorporated herein by reference from Exhibit 4.1 to
Post-Effective Amendment No. 2 to Registrant's Registration
Statement on Form S-3 (File No. 2-95746))
4.2 Indenture, dated as of July 1, 1988, between Registrant and Morgan
Guaranty Trust Company of New York, regarding Registrant's Senior
Debt Securities (incorporated herein by reference from Exhibit 4.1
to Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (File No. 2-99967))
4.3 First Supplemental Indenture, dated as of June 30, 1992, between
Registrant and Morgan Guaranty Trust Company of New York,
regarding Registrant's Senior Debt Securities, relating to Exhibit
4.2 hereto (incorporated herein by reference from Exhibit 4.3 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992)
4.4 Reimbursement Agreements, dated as of November 15, 1990, among
Registrant, Swiss Bank Corporation and the financial institutions
signatory thereto (incorporated herein by reference from Exhibit
4.7 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990)
4.5 Rights Agreement, dated as of July 14, 1988, between Registrant
and The First National Bank of Chicago (incorporated herein by
reference from Exhibit 1 to Registrant's Current Report on Form
8-K, dated July 14, 1988)
10.1 1975 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement relating
thereto, both as amended (incorporated herein by reference from
Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989)*
10.2 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement relating
thereto, both as amended (incorporated herein by reference from
Exhibit 10.5 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989)*
10.3 Amendment, dated October 18, 1990, to the 1975 and 1984 Stock
Option and Stock Appreciation Rights Plans of Registrant, relating
to Exhibits 10.1 and 10.2 hereto (incorporated herein by reference
from Exhibit 10.3 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990)*
10.4 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement relating
thereto, both as amended (incorporated herein by reference from
Exhibit 10.4 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990)*
10.5 Amendment, dated January 20, 1994, to the 1990 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibit
10.4 hereto*......................................................
</TABLE>
33
<PAGE> 35
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ------------------------------------------------------------------ -------------
<C> <S> <C>
10.6 Incentive Compensation Plan of Registrant (incorporated herein by
reference from Exhibit 10.4 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1980)*
10.7 Amendment, dated as of January 1, 1994, to the Incentive
Compensation Plan of Registrant, relating to Exhibit 10.6
hereto*...........................................................
10.8 Retirement Plan of Registrant, as amended (incorporated herein by
reference from Exhibit 10.6 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)*
10.9 Supplemental Executive Retirement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.6 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991)*
10.10 Directors' Retirement Benefit Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991)*
10.11 Retirement Benefit Replacement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.9 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992)*
10.12 Amendment, dated as of January 1, 1994, to the Retirement Benefit
Replacement Plan of Registrant, relating to Exhibit 10.11
hereto*...........................................................
10.13 Investment Plan of Registrant, as amended (incorporated herein by
reference from Exhibit 10.10 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)*
10.14 Form of Executive Employment Agreement, as amended (incorporated
herein by reference from Exhibit 10.6 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989)*
11 Computation of Earnings Per Share.................................
12 Computation of Ratios of Earnings to Fixed Charges................
13 Registrant's Annual Report to Stockholders for the year ended
December 31, 1993.................................................
21 List of Registrant's Subsidiaries.................................
23 Consent of Independent Public Accountants.........................
99 Undertakings......................................................
</TABLE>
- ---------------
* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K,
previously filed where indicated and incorporated herein by reference.
Pursuant to Regulation sec. 229.601, Item 601(b)(4)(iii) of Regulation S-K,
upon request of the Securities and Exchange Commission, the Registrant hereby
undertakes to furnish a copy of any unfiled instrument which defines the rights
of holders of long-term debt of the Registrant and its consolidated subsidiaries
(and for any of its unconsolidated subsidiaries for which financial statements
are required to be filed) wherein the total amount of securities authorized
thereunder does not exceed 10% of the total consolidated assets of the
Registrant.
34
<PAGE> 1
EXHIBIT 10.5
SUMMARY OF AMENDMENTS TO
HILTON HOTELS CORPORATION'S
1990 STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
On January 20, 1994, the Board of Directors of Hilton Hotels
Corporation (the "Company") authorized the following amendments to the
Company's 1990 Stock Option and Stock Appreciation Rights Plan (the "Plan"):
(i) an increase in the number of shares of the Company's Common Stock
reserved for issuance under the Plan from 1,000,000 to 1,500,000 shares; and
(ii) establishment of a one year time period for the existing limitation on the
maximum grant to any one employee of 10% of the shares reserved for issuance
under the Plan.
The above described amendments to the Plan were authorized by the
Company's Board of Directors subject to approval by the Company's stockholders
at the annual meeting of stockholders scheduled for May 12, 1994 (the "Annual
Meeting"). At the Annual Meeting, the Company's stockholders will also consider
the approval and ratification of any stock options granted to employees of the
Company after February 17, 1993 and prior to the Annual Meeting.
A copy of the Plan, as amended, along with a more detailed discussion
of the Plan amendments, will be contained in the Company's proxy statement with
respect to the Annual Meeting, which will be distributed to the Company's
stockholders prior to April 30, 1994.
<PAGE> 1
EXHIBIT 10.7
AMENDMENT 1994-I
TO
HILTON HOTELS THRIFT SAVINGS PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the Hilton
Hotels Thrift Savings Plan (the "Plan"); and
WHEREAS, the Plan currently provides that tips, tokens and gratuities are
not counted as compensation under the Plan; and
WHEREAS, it is desirable to amend the Plan, effective January 1, 1994, to
include tips, tokens and gratuities as compensation, but only to the extent
such items are reported as income subject to tax withholding; and
WHEREAS, an amendment to the Plan to accomplish this purpose has been
previously approved by the committee for the Plan.
NOW, THEREFORE, BE IT RESOLVED, by virtue and in exercise of the power
reserved to the Company pursuant to Section 8.3 of the Plan, such Plan is
hereby amended effective January 1, 1994 in the following particulars:
The definition of Compensation contained in Article I of the Plan
is amended by adding the following sentence:
"Effective January 1, 1994, Compensation shall include tips, tokens
and gratuities, but only to the extent that such tips, tokens and
gratuities are actually reported as income subject to income tax
withholding on Form W-2 for the Employee."
Date: March 18, 1994.
HILTON HOTELS CORPORATION
By William C. Lebo, Jr.
<PAGE> 1
EXHIBIT 10.12
AMENDMENT 1994-I
TO
HILTON HOTELS RETIREMENT BENEFIT REPLACEMENT PLAN
WHEREAS, Hilton Hotels Corporation (the "Company") maintains the Hilton
Hotels Retirement Benefit Replacement Plan (the "Replacement Plan") and the
Hilton Hotels Retirement Plan (the "Retirement Plan"); and
WHEREAS, as a result of federal legislation effective January 1, 1994,
benefits attributable to each employee's compensation in excess of $150,000
will be provided by the Replacement Plan rather than the Retirement Plan; and
WHEREAS, it is desirable to provide the Replacement Plan benefits from
the general assets of the Company (rather than through grantor trusts) to those
employees who are participants in the Replacement Plan but who are not also
participants in the Hilton Supplemental Executive Retirement Plan; and
WHEREAS, an amendment to the Replacement Plan to accomplish this
purpose has been previously approved by the committee for the Retirement Plan.
NOW, THEREFORE, BE IT RESOLVED, by virtue and in exercise of the power
reserved to the Company pursuant to Section 4 of the Replacement Plan, such
Plan is hereby amended effective January 1, 1994 in the following particulars:
1. Subsection 2.6 is deleted in its entirety and there is substituted
therefor the following:
"2.6 Participant Grantor Trust Provisions. Notwithstanding the
foregoing provisions of this Section 2, if the present value of a
Participant's replacement benefits described in subsection 2.2 exceeds
$1,000.00, and such Participant is also a participant in the Hilton
Supplemental Executive Retirement Plan, then distribution of such
replacement benefits shall be made to the Participant under Section 5
hereof."
2. The following new sentence is hereby added as the initial sentence of
Subsection 5.1:
"The provisions of this Section 5 of this Plan (which includes this
subsection 5.1 and all of the other
<PAGE> 2
subsections of this Section 5) shall apply only to those Participants who
are also participants in the Hilton Supplemental Executive Retirement
Plan."
Date: March 18, 1994.
HILTON HOTELS CORPORATION
By William C. Lebo, Jr.
2
<PAGE> 1
EXHIBIT 11
HILTON HOTELS CORPORATION AND SUBSIDIARIES
COMPUTATION OF PER SHARE EARNINGS
Net income per share is based on net income divided by the total of the
weighted average number of common shares outstanding during the year, plus the
equivalent shares relating to the assumed exercise of stock options. The
calculation of common shares is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Shares outstanding January 1............................... 47,677,922 47,549,892 47,471,399
Stock option -- weighted average exercises................. 14,078 10,923 6,795
Outstanding when market price exceeds exercise price at end
of periods............................................... 999,033 1,055,849 1,161,899
Less shares assumed purchased with proceeds................ (709,285) (736,744) (859,271)
---------- ---------- ----------
COMMON AND COMMON EQUIVALENT SHARES........................ 47,981,748 47,879,920 47,780,822
---------- ---------- ----------
---------- ---------- ----------
Net income (in millions)................................... $106.1 103.9 84.3
---------- ---------- ----------
---------- ---------- ----------
Earnings per share......................................... $2.21 2.17 1.76
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
<PAGE> 1
EXHIBIT 12
HILTON HOTELS CORPORATION AND SUBSIDIARIES
Computation of Ratios of Earnings to Fixed Charges
<TABLE>
<CAPTION>
1989 1990 1991 1992 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Pre-tax income including
50% owned companies $162.0 $168.0 $121.3 $156.8 $156.2
Add: Interest expense from
Wholly-owned 62.0 54.3 58.1 66.9 80.4
50% owned 20.0 18.9 10.8 7.3 9.5
Distributions from less than
50% owned 2.4 5.5 5.2 4.8 6.4
------ ------ ------ ------ ------
SUB-TOTAL (A) 246.4 246.7 195.4 235.8 252.5
Add: Rent expense (interest factor)
Wholly-owned 1.7 1.8 1.7 1.8 2.1
50% owned - 0.6 0.6 0.9 0.8
------ ------ ------ ------ ------
TOTAL (B) 248.1 249.1 197.7 238.5 255.4
====== ====== ====== ====== ======
Interest expense
Wholly-owned 62.0 54.3 58.1 66.9 80.4
50% owned 20.0 18.9 10.8 7.3 9.5
Capitalized interest 19.6 14.6 5.2 4.9 2.1
------ ------ ------ ------ ------
SUB-TOTAL (C) 101.6 87.8 74.1 79.1 92.0
Add: Rent expense (interest factor)
Wholly-owned 1.7 1.8 1.7 1.8 2.1
50% owned - 0.6 0.6 0.9 0.8
------ ------ ------ ------ ------
TOTAL (D) $103.3 $ 90.2 $ 76.4 $ 81.8 $ 94.9
====== ====== ====== ====== ======
Ratios
------
Interest (A/C) 2.4 2.8 2.6 3.0 2.7
Fixed charges (B/D) 2.4 2.8 2.6 2.9 2.7
</TABLE>
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION
Cash Flow and Working Capital Net cash provided by operating activities
increased to $226.9 million in 1993 from
$226.7 million in 1992 and $223.6 million
in 1991. In 1993 the Company's working
capital increased $138.5 million to
$449.1 million.
Capital expenditures, including those
financed with construction payables, were
$157.0 million in 1993, while new
investments totaled $104.7 million.
Capital expenditures and new investments
totaled $222.2 million and $53.6 million,
respectively, in 1992, and $78.0 million
and $100.1 million, respectively, in
1991.
In 1993 the Company continued its
strategy of improving and expanding its
worldwide gaming operations. In Nevada,
the Flamingo Hilton-Las Vegas commenced
an estimated $105 million project to
build a 600-room tower, add new meeting
and ballroom facilities and create a
themed recreation area. This project is
scheduled for completion in December
1994. During 1993 the Reno Hilton
completed a $16.8 million refurbishment
of its 2,001 guest rooms, while the Las
Vegas Hilton completed an $18.1 million
exterior renovation. In 1994 the Las
Vegas Hilton will construct three luxury
suites for use by premium players. This
$40.0 million project is scheduled for
completion in November 1994.
In 1993 the Company commenced
construction of a $28.0 million,
1,500-passenger riverboat casino to be
used on an interim basis in approved
riverboat gaming jurisdictions where the
Company is in the process of constructing
permanent facilities. This interim boat,
with its 20,000 square feet of casino
space, opened as "Hilton's Queen of New
Orleans" in February 1994 and is docked
adjacent to the New Orleans Hilton
Riverside. This vessel will be replaced
in late 1994 by a 2,400-passenger
permanent riverboat with 30,000 square
feet of casino space. The permanent boat
is part of a $57.0 million joint venture,
of which the Company owns a 50% interest.
The joint venture is financing this
project with $38.5 million in bank debt
and the balance in partner contributions.
The interim riverboat is 100% owned by
the Company and is being leased to the
joint venture until the permanent boat is
completed.
In January 1993 the Company was named
the exclusive developer of two riverboat
casinos in Kansas City, Missouri.
Subject to voter approval in April 1994
of state and city-wide gaming proposals
and the receipt of all required gaming
licenses, the Company anticipates the
first boat to begin operating in late
summer 1994 and will carry 1,500
passengers and feature a 20,000
square-foot casino. The second boat,
scheduled to open in mid-1995, will have
a capacity of 2,000 passengers and 30,000
square-feet of casino space. This $132.2
million effort, which includes
significant infrastructure improvements
at both sites, will be partially financed
with Port Authority of Kansas City Bonds
and the balance through partner loans and
contributions. The Company will have a
90 percent ownership interest in this
project.
The Company and its partners are also
seeking licensing approval for an
estimated $120 million riverboat casino
in Michigan City, Indiana. Licensing
consideration is expected to begin in
spring 1995.
Internationally, the Company is
developing new hotel-casinos in a number
of venues. In December 1993 the
Provincial Government of Ontario, Canada
awarded a consortium, of which the
Company has one-third interest, the
exclusive right to develop and operate
the Province's first casino in Windsor,
located immediately across from Detroit,
Michigan. This estimated $300 million
facility, scheduled to open in early
1996, will include a 75,000 square-foot
casino, a 300-room hotel, dining
facilities and recreational amenities. A
temporary casino with 60,000 square-feet
of casino space is scheduled to open in
spring 1994. This project will be
financed with a combination of long-term
debt and equity.
TWENTY-EIGHT
<PAGE> 2
Construction is proceeding on the
Conrad Treasury, a hotel-casino in
Brisbane, Australia. Scheduled for an
early 1995 opening, this project will
include a 65,000 square-foot casino and a
136-room luxury hotel. The Conrad
Treasury is owned by Jupiters Limited, a
partially owned affiliate, and will be
operated by Conrad Hotels, the Company's
international subsidiary.
In early 1996, Conrad Hotels
anticipates the opening of a new
hotel-casino resort in Punta del Este,
Uruguay. This estimated $110 million
facility will feature a 300-room hotel
and a 35,000 square-foot casino. This
20% owned venture will be financed with a
combination of long-term debt and equity.
The Company's Hotels Division has been
deliberate in its approach to developing
new properties because of significant
overbuilding in the industry. No new
construction of Company owned hotels is
currently underway. Growth in the hotel
segment will primarily occur through
conversions of existing properties to the
Hilton brand domestically, expansion of
the Conrad system overseas and the
development and management of vacation
ownership resorts.
In November 1993 the Company and its
partners acquired the former Hyatt
Regency Waikoloa on the Big Island of
Hawaii. Renamed the Hilton Waikoloa
Village, this 1,241-room property sits on
62 acres and includes a wide variety of
sports and recreational amenities. The
Company manages the property and owns a
13.3% interest.
In June 1993 the Company increased its
ownership in the partnerships that own
the 1,602-room New Orleans Hilton
Riverside and the adjacent land. The
Company believes the New Orleans market
will continue to grow as a popular
convention and leisure travel destination
as that city's gaming operations expand.
The Company is currently developing,
through its 50% owned Hilton Grand
Vacations Company joint venture, a
200-unit vacation ownership resort
adjacent to the Flamingo Hilton-Las Vegas
and a 360-unit resort at Sea World
Village in Orlando, Florida. The Las
Vegas project is scheduled for completion
in early 1995, and the first phase of the
Orlando project is anticipated to be
completed in summer 1995. Project costs
for both developments will be funded by
the Company in the form of revolving loan
facilities aggregating approximately $100
million.
The Company is committed to keeping its
properties in first-class condition.
Refurbishment programs are continually
underway at the Company's hotel and
hotel-casino properties. Capital
expenditures and investments in 1994,
including the funding requirements
associated with the aforementioned
projects, will approximate $500 million.
The Company intends to fund its portion
of these capital expenditures and new
investments through internal cash flows
and available debt capacity or new
borrowings.
Long-Term Debt Long-term debt at December 31, 1993
totaled $1.1 billion, 46 percent of the
Company's total capital. Under
registration statements currently on file
with the Securities and Exchange
Commission, the Company can offer up to
$999.2 million in either senior notes or
a combination of senior and subordinated
notes, with the subordinated notes
limited to $300 million.
The Company also has authorization to
issue up to $300 million in private debt
securities. However, the maximum
principal amount of public debt
securities and private debt securities,
either exclusively in the form of public
senior debt securities, or alternatively
in the form of one or more combinations
of public senior debt securities, public
subordinated debt securities and private
debt securities, is limited to $1.0
billion.
Available financing under the
aforementioned authorizations totaled
$312.6 million at December 31, 1993.
The Company has authorization to issue
$600 million of commercial paper. At
December 31, 1993 the Company had $347.6
million in available long-term revolving
credit lines supporting the issuance of
commercial paper. At December 31, 1993
the Company had total commercial paper
borrowings of $358.4 million, of which
$347.6 million was classified as
long-term by virtue of its credit
agreements. Available commercial paper
financing at December 31, 1993 was $241.6
million.
Stockholders' Equity Stockholders' equity increased $54.2
million in 1993 to $1.1 billion or $22.11
per share. Book value per share was
$21.02 in 1992 and $20.06 in 1991.
Dividends paid on common shares in 1993
were $1.20 per share, the same as in 1992
and 1991.
TWENTY-NINE
<PAGE> 3
Other Matters In September 1992 a lawsuit was initiated
by AMRIS, an affiliate of AMR
Corporation, against affiliates of
Marriott Corporation (Marriott), Budget
Rent-A-Car, Inc. (Budget) and the
Company. The lawsuit related to the
formation of a joint venture in 1988
among the partners to develop CONFIRM, an
integrated travel reservation system
using state-of-the-art computer
technology. In April 1992 AMRIS, the
developer of CONFIRM, advised the other
partners that the scheduled delivery and
installation of CONFIRM in mid-1992
would be delayed approximately 15 to 18
months. After evaluating the impact of
this delay, Marriott, Budget and the
Company chose to discontinue their
involvement with the project. In January
1994 the Company and its partners agreed
to a settlement, pursuant to which the
Company recovered the full amount of its
investment in the partnership.
In October 1991 a lawsuit was initiated
by Hilton International Co. (HI) against
the Company. In this action, HI alleges
generally that the development and
marketing by the Company of its hotels
outside of the United States under the
Conrad name violate the terms of certain
agreements between HI and the Company.
In 1964 the Company spun off its Hilton
International operations to the Company's
stockholders and entered into an
agreement with HI, as subsequently
amended, generally granting the Company
certain rights with respect to the Hilton
service mark in the United States and HI
certain rights to the Hilton service mark
outside the United States. The complaint
seeks, among other things, injunctive
relief against use by the Company of the
Conrad name for its hotels outside of the
United States and damages in excess of
$100 million. The Company believes that
this action is without merit and is
defending against it vigorously.
In management's opinion, disposition of
the HI lawsuit is not expected to have a
material effect on the Company's
financial position.
RESULTS OF OPERATIONS
Fiscal 1993 Compared with Fiscal 1992
Overview The Company's net income decreased one
percent, before the cumulative effect of
accounting changes, to $102.7 million or
$2.14 per share, compared to $103.9
million or $2.17 per share in 1992. The
accounting changes are related to the
January 1, 1993 implementation of new
accounting standards for income taxes and
postretirement benefits and resulted in
additional net income of $3.4 million or
$.07 per share. Total operating income
increased nine percent to $239.9 million
in 1993 compared to $219.9 million in
1992.
Hotels The hotel segment includes the
consolidated results of the Company's
domestic full service and all-suite
properties. The results also include
equity income from unconsolidated
affiliates, management fees from both
domestic and international hotel
properties and franchise fees. At
December 31, 1993 the Company owned,
partially owned, managed and franchised
18, 15, 26 and 171 properties,
respectively, totaling approximately
83,000 rooms world-wide.
Consolidated hotel revenue increased 11
percent in 1993 to $520.0 million.
Revenue per available room (RPAR) is a
measure of hotel revenue generation.
RPAR for domestic hotels increased less
than one percent in 1993, while inflation
as measured by the Consumer Price Index
For All Urban Consumers measured 2.7
percent. During the past four years,
domestic RPAR has not kept pace with
inflation due to the combined effects of
a sluggish economy and industry
overbuilding. Occupancy for hotels owned
or managed increased to 67 percent in
1993 compared to 66 percent in 1992.
Average room rates increased less than
one percent over 1992.
Hotel operating income, primarily
income from hotel interests and
management and franchise fee income,
increased five percent in 1993 to $96.2
million. Operating income in 1993 was
adversely impacted by a $12.5 million
reserve for a loan made to a managed
property. Excluding this charge,
operating income increased 19 percent
over the prior year.
Fluctuations in hotel operating income
are significantly influenced by the
operating results of the Company's
principal downtown, airport and resort
locations where it has large equity
interests. During 1993 many of the
Company's airport and secondary market
locations posted income gains over the
prior year. Combined results from the
Company's wholly-owned and partially
owned airport properties increased $6.5
million over the prior year, including a
$3.4 million increase in operating
THIRTY
<PAGE> 4
income at the O'Hare Hilton. The O'Hare
Hilton reopened as a wholly-owned
property in July 1992. The 1993 period
also benefited from improved results at
the 50% owned San Francisco Hilton and
Towers and the 46.8% owned New Orleans
Hilton Riverside as well as lower
expenses for the Company's self-insurance
and frequent traveler programs.
Operating income from the Company's
hotels in New York City improved slightly
over the prior year, while results from
the 50% owned Hilton Hawaiian Village
declined $5.1 million from 1992.
Recessionary conditions in California
and Japan continued to adversely impact
leisure travel to Hawaii.
Management and franchise fee revenue
increased $6.3 million in 1993 to $78.7
million. Fee revenue is based primarily
on operating revenues at managed
properties and rooms revenue at
franchised properties.
The Company has an ongoing program of
actively monitoring and improving its
franchise hotels. In 1993, 14 franchise
contracts, representing some 3,300 rooms,
were terminated by the Hilton Inns
franchise system, many due to
noncompliance with the Company's
standards. Four properties and 1,029
rooms were added to the franchise system
in 1993.
In addition to the Hilton Waikoloa
Village, in 1993 the Company opened
and/or assumed management of five
properties in which it holds no equity
interest: the 1,000-suite Innisbrook
Hilton Resort near Tampa, Florida, the
405-room Brunswick Hilton in East
Brunswick, New Jersey, the 376-room
Newark Airport Hilton, also in New
Jersey, the 269-room Conrad Brussels in
Belgium and the 565-room Astir Palace
Hotel in Greece.
Future operating results could be
adversely impacted by industry
overcapacity and weak demand. These
conditions may 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 could also
unfavorably impact future results. The
Company believes, however, that its
strong financial condition, coupled with
its market presence and marketing
efforts, will enable it to remain highly
competitive.
Gaming The gaming segment includes five Nevada
hotel-casinos and equity income and
management fees from partially owned
hotel-casinos in Queensland, Australia
and Istanbul, Turkey.
The Company's Nevada gaming operations
offer a diversified product and service
mix which appeal to a broad spectrum of
customers. The Flamingo Hilton-Las Vegas
caters to the broad Las Vegas middle
market, while the Las Vegas Hilton caters
to premium players as well as the
convention market. The Flamingo
Hilton-Reno focuses on middle market
activity, while the Flamingo
Hilton-Laughlin targets the budget market
segment. The Reno Hilton, acquired in
August 1992, targets both convention and
middle market activity.
Total gaming revenue increased 15
percent to $873.5 million in 1993
compared to $759.2 million in 1992.
Casino revenue, a component of gaming
revenue, was $502.1 million in 1993
compared to $438.8 million in 1992.
Operating income was $170.5 million in
1993, an 11 percent increase from $153.4
million in 1992.
Operating income at the Flamingo
Hilton-Las Vegas increased $7.3 million
in 1993, while the Reno Hilton,
benefiting from its first full year of
operation, increased $5.4 million over
the prior year. Operating income at the
Flamingo Hilton properties in Laughlin
and Reno also improved over the prior
year.
Results at the Las Vegas Hilton are
more volatile than the Company's other
casinos since this property targets the
premium play segment of the market.
Operating income at this property,
however, remained consistent with 1992
levels.
Equity income and management fees from
the 19.9% owned Conrad & Jupiters Casino
in Australia increased $2.7 million over
the prior year. Results from the 25%
owned Conrad Istanbul were not
significant.
Occupancy for the Nevada hotel-casinos
was 89 percent and 87 percent in 1993 and
1992, respectively. Average room rates
increased three percent in 1993.
The competitive environment in Las
Vegas has been impacted by new capacity
additions. In 1993 three competitors
opened large new theme casinos in Las
Vegas. The addition of these casinos
increased Las Vegas' existing room
inventory by an estimated 14 percent, or
10,500 rooms. These additions could
adversely impact the Company's gaming
income in the future.
THIRTY-ONE
<PAGE> 5
Interest and Dividend Interest and dividend income increased
Income/Expense $5.4 million in 1993 to $21.8 million due
to higher investable balances. Interest
expense, net of amounts capitalized,
increased $13.5 million to $80.4 million
due to higher average debt levels and
lower amounts of capitalized interest on
construction projects. Net interest
expense from unconsolidated affiliates
increased $3.4 million in 1993 to $14.6
million.
Income Taxes The effective income tax rate in 1993 was
36.2% compared to 34.7% in 1992. The
Company's effective income tax rate is
determined by the level and composition
of pretax income and the mix of income
subject to varying foreign, state and
local taxes. The 1993 effective income
tax rate benefited from $9.0 million in
credits resulting from the favorable
resolution of Federal and state income
taxes for prior years. These credits
were partially offset by a $5.0 million
increase in the provision for income
taxes due to the enactment of the Omnibus
Budget Reconciliation Act of 1993 which,
among other things, increased the Federal
income tax rate for corporations from 34
percent to 35 percent retroactive to
January 1, 1993. Of the $5.0 million
increase, $3.3 million was attributable
to the measurement of deferred income tax
assets and liabilities at the current
enacted rate, as required by current
accounting standards.
Property Transactions The loss from property transactions in
1993 includes a pretax write-off of $4.3
million resulting from the demolition of
certain facilities at the Flamingo
Hilton-Las Vegas to permit further
expansion at that property.
Foreign Currency Losses International operations are subject to
certain economic and political risks,
including foreign currency fluctuations.
The Company monitors its foreign
operations and, where appropriate, adopts
hedging strategies to minimize the impact
of changing economic and political
environments. The foreign currency
losses of $1.3 million are primarily due
to exchange adjustments arising from the
remeasurement of the Company's operations
in Turkey into U.S. dollars.
New Accounting Standards In February 1992 the Financial Accounting
Standards Board (FASB) issued Statement
of Financial Accounting Standards (SFAS)
No. 109, Accounting for Income Taxes,
which superseded previously issued
standards. The Company adopted SFAS No.
109 effective January 1, 1993. As
permissible under the new standard, the
Company reflected the impact as a
cumulative adjustment in the 1993 first
quarter and did not restate prior
periods. The new standard had a
favorable impact on net income of $8.0
million.
In December 1990 the FASB issued SFAS
No. 106, Employers' Accounting for
Postretirement Benefits Other Than
Pensions. The Company adopted SFAS No.
106 effective January 1, 1993. As
permissible under the new standard, the
Company reflected the impact as a
cumulative adjustment in the 1993 first
quarter and did not restate prior
periods. The new standard resulted in a
charge to net income of $4.6 million, net
of a $2.3 million deferred tax benefit.
Fiscal 1992 Compared with Fiscal 1991
Overview The Company's net income increased 23
percent to $103.9 million or $2.17 per
share compared to $84.3 million or $1.76
per share in 1991. Total operating
income increased 19 percent to $219.9
million in 1992 compared to $184.8
million in 1991.
Hotels Consolidated hotel revenue increased six
percent in 1992 to $470.4 million.
Excluding the revenues of the O'Hare
Hilton, which reopened as a wholly-owned
property at the end of July, consolidated
hotel revenues increased three percent.
Hotel operating income decreased two
percent to $91.5 million. Operating
income in 1992 included start-up losses
associated with the reopening of the
O'Hare Hilton and expenses incurred in
the rollout of the Company's new vacation
ownership venture. Adjusting for these
losses, operating income increased one
percent over 1991.
In 1992 many of the Company's airport
and secondary market locations showed
significant improvement over 1991's war
and recession depressed results.
However, conditions were difficult
THIRTY-TWO
<PAGE> 6
in the Company's primary business travel
markets, particularly New York City and
Chicago. Combined operating income from
the Waldorf-Astoria, the New York Hilton
and the Chicago Hilton declined $10.1
million from 1991.
The dual pressures of excess supply,
caused by industry overbuilding, and weak
demand, primarily due to the recessionary
economy, adversely impacted the Company's
large downtown business and convention
hotels. Competition for available demand
in these markets was intense and put
significant pressure on room rates.
Average rates were at or below 1990
levels at many of the Company's larger
properties. These conditions resulted in
lower operating margins as hotels were
unable to increase rates to offset
increases in wages and the cost of goods
and services.
Operating income from the Hilton
Hawaiian Village increased slightly over
1991 results. While international
leisure travel rebounded from the
difficult 1991 period, results were
hampered by a decline in convention room
nights and the fact that Hawaii was not
included in the domestic airfare discount
programs offered during the summer of
1992.
Management and franchise fee revenue
increased $3.0 million in 1992 to $72.4
million. Occupancy for hotels owned or
managed increased to 66 percent in 1992
compared to 64 percent in 1991. Average
room rates were down fractionally from
1991.
Gaming Total gaming revenue increased 14 percent
to $759.2 million in 1992 compared to
$668.8 million in 1991. Casino revenue,
a component of gaming revenue, was $438.8
million in 1992 compared to $392.4
million in the prior year. Operating
income was $153.4 million in 1992, a 33
percent increase from $115.0 million in
1991. Adjusting for the results of the
new Reno Hilton, revenue, casino revenue
and operating income increased six
percent, five percent and thirty percent,
respectively, from 1991 on a comparable
basis.
Operating income at the Flamingo Hilton
properties in Las Vegas and Laughlin
increased $2.6 million and $10.0 million,
respectively, from 1991 on the strength
of increased slot win and higher
occupancies and average room rates. In
1991 room rates were discounted to
stimulate business both during and after
the Persian Gulf war.
Operating income at the Las Vegas
Hilton increased $23.4 million over 1991
primarily due to an $18.5 million
decrease in bad debt expense. In 1991
the Las Vegas Hilton increased its bad
debt reserves by $13.9 million due to
less than anticipated collections on
receivables from premium players.
Operating income from the Flamingo
Hilton-Reno increased $2.3 million over
1991 due to a higher slot win. Equity
income and management fees from Conrad &
Jupiters Casino in Australia decreased
slightly from the prior year.
Occupancy for the Nevada hotel-casinos
was 87 percent and 85 percent in 1992 and
1991, respectively. Average room rates
increased five percent in 1992 compared
to a decrease of 12 percent in 1991.
Interest and Dividend Interest and dividend income increased
Income/Expense $5.1 million in 1992 to $16.4 million
primarily due to higher investable
balances. Interest expense, net of
amounts capitalized, increased $8.8
million to $66.9 million in 1992 due to
higher average debt levels. Net interest
expense from unconsolidated affiliates
decreased $4.4 million in 1992 to $11.2
million, principally due to lower debt
levels and interest rates.
Income Taxes The effective income tax rate in 1992 was
34.7% compared to 31.4% in 1991. The
1991 provision for income taxes was
reduced by $3.4 million as a result of a
favorable ruling on certain local income
tax matters.
Property Transactions In 1992 the Company recorded a $.9
million net pretax gain from property
transactions primarily as a result of the
resolution of issues associated with
prior year transactions.
THIRTY-THREE
<PAGE> 7
CONSOLIDATED STATEMENTS OF INCOME
Hilton Hotels Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In millions, except per share amounts) Year Ended December 31, 1993 1993 1992 1991
------- ------- --------
<S> <C> <C> <C> <C>
Revenue Rooms $ 440.2 386.7 345.0
Food and beverage 236.8 216.2 204.4
Casino 502.1 438.8 392.4
Management and franchise fees 85.1 79.0 76.2
Other 93.8 82.5 64.4
Operating income from unconsolidated
affiliates 35.5 26.4 30.3
------- ------- -------
1,393.5 1,229.6 1,112.7
------- ------- -------
Expenses Rooms 152.5 131.9 119.9
Food and beverage 202.4 180.3 168.4
Casino 217.5 195.6 200.1
Other costs and expenses 554.4 476.9 416.4
Corporate expense 26.8 25.0 23.1
------- ------- ------
1,153.6 1,009.7 927.9
------- ------- ------
Operating Income 239.9 219.9 184.8
Interest and dividend income 21.8 16.4 11.3
Interest expense (80.4) (66.9) (58.1)
Interest expense, net, from
unconsolidated affiliates (14.6) (11.2) (15.6)
Property transactions, net (4.5) .9 .5
Foreign currency losses (1.3) -- --
------- ----- ------
Income Before Income Taxes 160.9 159.1 122.9
Provision for income taxes 58.2 55.2 38.6
------- ----- ------
Income Before Cumulative
Effect of Accounting Changes 102.7 103.9 84.3
Cumulative effect of accounting
changes, net 3.4 -- --
------- ----- ------
Net Income $ 106.1 103.9 84.3
======= ===== ======
Income Per Share Before cumulative effect of
accounting changes $ 2.14 2.17 1.76
Cumulative effect of accounting
changes, net .07 -- --
------- ------ ------
Net Income Per Share $ 2.21 2.17 1.76
======= ====== ======
</TABLE>
See notes to consolidated financial statements
THIRTY-FOUR
<PAGE> 8
CONSOLIDATED BALANCE SHEETS
Hilton Hotels Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In millions) December 31, 1993 1992
--------- --------
<S> <C> <C> <C>
ASSETS
Current Assets Cash and equivalents $ 380.4 348.5
Temporary investments 98.1 162.4
Other current assets 248.5 164.6
--------- ------
Total current assets 727.0 675.5
--------- ------
Investments, Property and Investments in and notes from
Other Assets unconsolidated affiliates 410.4 391.6
Other investments 71.7 168.8
Property and equipment, net 1,417.5 1,374.2
Other assets 48.2 49.3
-------- -------
Total investments, property and
other assets 1,947.8 1,983.9
-------- -------
Total Assets $2,674.8 2,659.4
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities Current liabilities $ 277.9 364.9
Long-term debt 1,112.6 1,087.1
Deferred income taxes 140.6 147.2
Insurance reserves and other 87.0 57.7
-------- -------
Total liabilities 1,618.1 1,656.9
-------- -------
Stockholders' Equity Preferred stock, none outstanding -- --
Common stock, 47.8 million and 47.7 million
shares outstanding, respectively 127.6 127.6
Additional paid-in capital 1.9 4.4
Cumulative translation adjustment (1.5) --
Retained earnings 1,097.8 1,049.0
-------- -------
1,225.8 1,181.0
Less treasury stock, at cost 169.1 178.5
-------- -------
Total stockholders' equity 1,056.7 1,002.5
-------- -------
Total Liabilities and
Stockholders' Equity $2,674.8 2,659.4
======== =======
</TABLE>
See notes to consolidated financial statements
THIRTY-FIVE
<PAGE> 9
CONSOLIDATED STATEMENTS OF CASH FLOWS
Hilton Hotels Corporation and Subsidiaries
<TABLE>
<CAPTION>
(In millions) Year Ended December 31, 1993 1992 1991
------- ------ ------
<S> <C> <C> <C> <C>
Operating Activities Net income $ 106.1 103.9 84.3
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 118.9 109.3 104.8
Change in working capital components:
Inventories .7 (2.3) .8
Accounts receivable (17.9) (2.6) 32.7
Other current assets (19.9) (10.0) 2.9
Accounts payable and accrued expenses (8.2) 53.1 7.8
Income taxes payable (9.2) (1.0) (17.0)
Decrease in deferred income taxes (6.6) (14.4) (4.2)
Change in other liabilities 29.4 (11.8) 1.8
Unconsolidated affiliates' distributions
in excess of earnings 20.1 11.2 24.7
Loss (gain) from property transactions 4.5 (.9) (.5)
Other 9.0 (7.8) (14.5)
-------- ------ ------
Net cash provided by operating activities 226.9 226.7 223.6
-------- ------ ------
Investing Activities Capital expenditures (156.8) (220.9) (78.5)
Additional investments (104.7) (53.6) (100.1)
Change in long-term marketable securities 91.2 (154.8) --
Change in temporary investments 64.3 (127.4) 11.8
Payments on notes receivable 4.5 5.4 4.0
Proceeds from property transactions -- 4.7 4.1
Other 1.4 1.4 2.4
------- ------ ------
Net cash used in investing activities (100.1) (545.2) (156.3)
------- ------ ------
Financing Activities Change in short-term borrowings (54.2) 65.0 --
Long-term borrowings 56.0 373.5 344.2
Reduction of long-term debt (46.3) (32.2) (94.8)
Issuance of common stock 6.9 2.9 2.2
Cash dividends (57.3) (57.1) (57.0)
------- ------ ------
Net cash (used in) provided by financing
activities (94.9) 352.1 194.6
------- ------ ------
Increase in Cash and Equivalents 31.9 33.6 261.9
Cash and Equivalents at Beginning of Year 348.5 314.9 53.0
------- ------ ------
Cash and Equivalents at End of Year $ 380.4 348.5 314.9
======= ====== ======
</TABLE>
See notes to consolidated financial statements
THIRTY-SIX
<PAGE> 10
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Hilton Hotels Corporation and Subsidiaries
<TABLE>
<CAPTION>
Total
Number of Additional Cumulative Stock-
Shares Common Paid-In Translation Retained Treasury holders'
(In millions, except per share amounts) Outstanding Stock Capital Adjustment Earnings Stock Equity
----------- ------ ---------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1990 47.5 $127.6 10.8 -- 974.9 (190.0) 923.3
Exercise of stock options -- -- (2.2) -- -- 4.4 2.2
Net income -- -- -- -- 84.3 -- 84.3
Dividends ($1.20 per share) -- -- -- -- (57.0) -- (57.0)
---- ------ ---- ---- ------- ------ -------
Balance, December 31, 1991 47.5 127.6 8.6 -- 1,002.2 (185.6) 952.8
Exercise of stock options .2 -- (4.2) -- -- 7.1 2.9
Net income -- -- -- -- 103.9 -- 103.9
Dividends ($1.20 per share) -- -- -- -- (57.1) -- (57.1)
---- ------ ---- ---- ------- ------ -------
Balance, December 31, 1992 47.7 127.6 4.4 -- 1,049.0 (178.5) 1,002.5
Exercise of stock options .1 -- (2.5) -- -- 9.4 6.9
Cumulative translation adjustment,
net of deferred tax benefit
of $.8 million -- -- -- (1.5) -- -- (1.5)
Net income -- -- -- -- 106.1 -- 106.1
Dividends ($1.20 per share) -- -- -- -- (57.3) -- (57.3)
---- ------ ---- ---- ------- ------ -------
Balance, December 31, 1993 47.8 $127.6 1.9 (1.5) 1,097.8 (169.1) 1,056.7
==== ====== ==== ===== ======= ====== =======
See notes to consolidated financial statements
</TABLE>
THIRTY-SEVEN
<PAGE> 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Hilton Hotels Corporation and Subsidiaries
December 31, 1993
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation The consolidated financial statements
include the accounts of Hilton Hotels
Corporation and its majority and
wholly-owned subsidiaries (the Company).
All material intercompany transactions
are eliminated. There are no significant
restrictions on the transfer of funds
from the Company's wholly-owned
subsidiaries to Hilton Hotels
Corporation.
Investments in unconsolidated
affiliates are stated at cost adjusted by
equity in undistributed earnings.
Cash and Equivalents Cash and equivalents include investments
with initial maturities or put options of
three months or less.
Casino Revenues and Casino revenues are the aggregate of
Promotional Allowances gaming wins and losses. The revenue
components presented in the consolidated
financial statements and the notes
thereto exclude the retail value of
rooms, food and beverage provided to
customers on a complimentary basis. The
estimated cost of providing these
promotional allowances is as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
----- ---- ----
<S> <C> <C> <C>
Rooms $ 8.9 8.0 7.6
Food and beverage 27.6 21.7 19.6
----- ---- ----
Total cost of promotional allowances $36.5 29.7 27.2
===== ==== ====
</TABLE>
The cost of promotional allowances has
been allocated to expense as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
----- ---- ----
<S> <C> <C> <C>
Casino $27.6 22.4 21.3
Other costs and expenses 8.9 7.3 5.9
----- ---- ----
</TABLE>
Currency Translation Assets and liabilities denominated in
most foreign currencies are translated
into U.S. dollars at year end exchange
rates and related gains and losses, net
of applicable deferred income taxes, are
reflected in stockholders' equity. Gains
and losses from foreign currency
transactions and translation of balance
sheets in highly inflationary economies
are included in earnings.
Property, Equipment and Property and equipment are stated at cost.
Depreciation Interest incurred during construction of
facilities is capitalized and amortized
over the life of the asset.
Costs of improvements are capitalized.
Costs of normal repairs and maintenance
are charged to expense as incurred. Upon
the sale or retirement of property and
equipment, the cost and related
accumulated depreciation are removed from
the respective accounts, and the resulting
gain or loss, if any, is included in
income.
Depreciation has been computed using the
straight-line method over the estimated
useful lives of the assets. Leasehold
improvements are amortized over the
shorter of the asset life or lease term.
Pre-Opening Costs Costs associated with the opening of new
properties or major additions to
properties are deferred and charged to
income over a three year period after the
opening date.
Unamortized Loan Costs Debt discount and issuance costs incurred
in connection with long-term debt are
capitalized and amortized to expense,
principally on the bonds outstanding
method.
Self-Insurance The Company is self-insured for various
levels of general liability, workers'
compensation and employee medical and
life insurance coverage. Insurance
reserves include the present values of
projected settlements for claims.
Accounting Changes Effective January 1, 1993 the Company
adopted Statement of Financial Accounting
Standard (SFAS) No. 106, Employers'
Accounting for Postretirement Benefits
Other Than Pensions. The new standard
requires the cost of postretirement
benefits to be accrued during the period
up to the date
THIRTY-EIGHT
<PAGE> 12
covered employees are eligible to retire.
Prior to the adoption of SFAS No. 106, the
cost of these benefits was charged to expense
as incurred. The Company elected to
immediately recognize the prior periods'
obligation as a cumulative adjustment in the
first quarter of 1993.
Also effective January 1, 1993 the
Company adopted SFAS No. 109, Accounting
for Income Taxes, which requires, among
other things, that deferred tax balances
be determined using the enacted income
tax rates for the years in which the
taxes are actually paid or refunds
received. The Company elected to adopt
the new standard through a cumulative
adjustment in the first quarter of 1993.
Net Income Per Share Net income per share is based on the weighted
average number of common shares outstanding
plus the common share equivalents which arise
from the assumed exercise of stock options.
Reclassifications The consolidated financial statements for
prior years reflect certain reclassifications
to conform with classifications adopted in
1993. These reclassifications have no effect
on net income.
ACCOUNTS AND NOTES RECEIVABLE Included in other current assets at
December 31, 1993 and 1992 are accounts
and notes receivable as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
---- ----
<S> <C> <C>
Hotel accounts and notes receivable $110.0 93.8
Less allowance for doubtful accounts 11.6 7.2
------ ------
98.4 86.6
------ ------
Casino accounts receivable 47.9 47.0
Less allowance for doubtful accounts 7.6 14.4
------ ------
40.3 32.6
------ ------
Federal tax refund receivable -- 1.7
------ ------
Total $138.7 120.9
====== =====
</TABLE>
An allowance is provided for estimated
uncollectible casino receivables. Such
allowances, net of recoveries, are
included in casino expenses in the amount
of $9.5 million, $7.3 million and $25.7
million in 1993, 1992 and 1991, respectively.
INVENTORIES Included in other current assets at
December 31, 1993 and 1992 are
inventories of $13.4 million and $14.1
million, respectively, determined on a
first-in, first-out basis.
INVESTMENTS The composition of the Company's total
investments in and notes from
unconsolidated affiliates at December 31,
1993 and 1992 is as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
---- ----
<S> <C> <C>
Investments
50% owned affiliates
Hotels (seven in 1993, eight in 1992) $189.5 210.0
Riverboat casino 8.3 --
Other 14.7 16.5
Less than 50% owned affiliates
Hotels (eight in 1993, seven in 1992) 65.6 35.5
Hotel-casinos (five in 1993, two in 1992) 65.6 56.6
Other 18.5 46.7
------ ------
362.2 365.3
Notes receivable 48.2 26.3
Total $410.4 391.6
====== ======
</TABLE>
THIRTY-NINE
<PAGE> 13
The changes in the Company's investments
in such affiliates are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------ -----
<S> <C> <C>
Investments, January 1 $365.3 330.4
Earnings 20.9 15.2
Distributions received (41.0) (26.4)
Additional investments 70.1 47.3
Other, net (6.4) (1.2)
------ -----
408.9 365.3
Less amount included in other current assets 46.7 --
------ -----
Investments, December 31 $362.2 365.3
====== =====
</TABLE>
Management fees totaling $30.2 million,
$27.7 million and $27.0 million were
charged by the Company to its
unconsolidated affiliates in 1993, 1992
and 1991, respectively. Other group
services were provided to unconsolidated
affiliates with no significant element of
profit.
Summarized balance sheet information of
the 50% owned affiliates at December 31,
1993 and 1992 is as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------ -----
<S> <C> <C>
Current assets $129.7 151.9
Property and other assets, net 706.3 707.2
Current liabilities 145.0 63.7
Long-term debt and other 245.4 313.8
Equity 445.6 481.6
------ -----
</TABLE>
Summarized balance sheet information of
the less than 50% owned affiliates at
December 31, 1993 and 1992 is as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------ -----
<S> <C> <C>
Current assets $ 134.8 106.2
Property and other assets, net 1,133.0 796.5
Current liabilities 241.4 116.0
Long-term debt and other 339.5 464.1
Equity 686.9 322.6
------ -----
</TABLE>
Of long-term unconsolidated affiliate
obligations totaling $584.9 million at
December 31, 1993, $567.4 million is
secured solely by venture assets or is
guaranteed by other venture partners
without recourse to the Company.
The Company's proportionate shares of
capital expenditures and depreciation
expense of unconsolidated affiliates were
$59.8 million and $40.1 million,
respectively, in 1993, $44.3 million and
$37.4 million, respectively, in 1992, and
$24.2 million and $34.8 million,
respectively, in 1991.
Summarized results of operations of the
50% owned affiliates for the three years
ended December 31, 1993 are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Revenue $516.2 509.6 478.0
Expenses 491.8 482.4 450.6
Net income 23.1 25.3 25.0
------ ----- -----
</TABLE>
Summarized results of operations of the
less than 50% owned affiliates for the
three years ended December 31, 1993 are
as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Revenue $487.8 423.1 408.3
Expenses 432.0 402.6 386.4
Gain on extinguishment of debt 18.3 -- --
Net income 56.3 20.5 21.9
------ ----- -----
</TABLE>
Other investments at December 31, 1993 and 1992
consist of:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------ -----
<S> <C> <C>
Long-term marketable securities $ 63.6 154.8
Other notes, net of $12.5 million reserve in 1993 8.1 14.0
------ -----
Total $ 71.7 168.8
====== =====
</TABLE>
FORTY
<PAGE> 14
PROPERTY AND EQUIPMENT
Property and equipment at December 31,
1993 and 1992 are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
-------- -------
<S> <C> <C>
Land $ 145.2 145.9
Buildings and leasehold improvements 1,366.9 1,294.0
Furniture and equipment 457.1 430.0
Property held for sale or development 13.6 13.6
Construction in progress 60.0 41.1
-------- -------
2,042.8 1,924.6
Less accumulated depreciation 625.3 550.4
-------- -------
Total $1,417.5 1,374.2
======== =======
</TABLE>
Purchases of property and equipment
financed with construction payables
totaled $2.9 million, $2.7 million and
$1.4 million in 1993, 1992 and 1991,
respectively.
CURRENT LIABILITIES
Current liabilities at December 31, 1993
and 1992 are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------ -----
<S> <C> <C>
Accounts payable and accrued expenses $228.5 236.5
Short-term borrowings 10.8 65.0
Current maturities of long-term debt 29.8 45.4
Income taxes payable 8.8 18.0
------ -----
Total $277.9 364.9
====== =====
</TABLE>
LONG-TERM DEBT
Long-term debt at December 31, 1993 and
1992 is as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992
-------- -------
<S> <C> <C>
Industrial development revenue bonds
at adjustable rates, due 2015 $ 82.0 82.0
Senior notes, 7.70% to 9.95%, due 1994 to 2002 687.4 732.3
Commercial paper 347.6 315.0
Revolving loans, with an average rate of 3.48%
at December 31, 1993 22.4 --
Other 3.0 3.2
-------- -------
1,142.4 1,132.5
Less current maturities 29.8 45.4
-------- -------
Net long-term debt $1,112.6 1,087.1
======== =======
</TABLE>
Of the $687.4 million in senior notes,
$94.5 million is redeemable by the
Company at par plus accrued interest on
June 1, 1995.
Interest paid, net of amounts
capitalized, was $79.8 million, $63.0
million and $54.8 million in 1993, 1992
and 1991, respectively. Capitalized
interest amounted to $2.0 million, $4.9
million and $5.2 million, respectively.
Debt maturities during the next five
years are as follows:
<TABLE>
<CAPTION>
(In millions)
<S> <C>
1994 $ 29.8
1995 34.8
1996 517.8
1997 --
1998 178.7
-----
</TABLE>
Secured debt obligations of $82.0 million
at December 31, 1993 are collateralized
by property with a net book value of
$63.5 million and are payable over
remaining terms ranging to 21 years.
Under registration statements currently
on file with the Securities and Exchange
Commission, the
FORTY-ONE
<PAGE> 15
Company can offer up to $999.2 million in
either senior notes or a combination of
senior and subordinated notes, with the
subordinated notes limited to $300
million.
The Company also has authorization to
issue up to $300 million in private debt
securities. However, the maximum
principal amount of public debt
securities and private debt securities,
either exclusively in the form of public
senior debt securities, public
subordinated debt securities and private
debt securities, is limited to $1 billion.
Available financing under the
aforementioned public and private
authorizations totaled $312.6 million at
December 31, 1993.
The Company has authorization to issue
up to $600 million of commercial paper.
During 1993, 1992 and 1991 the Company
issued and renewed commercial paper and
private notes for varying periods with
interest at market rates. The Company
had $358.4 million, $380.0 million and
$241.6 million in commercial paper and
private notes outstanding at December 31,
1993, 1992 and 1991, respectively. In
1993, 1992 and 1991 average amounts of
commercial paper and private notes
outstanding were $273.1 million, $210.7
million and $172.6 million, respectively,
with the largest amounts outstanding at
any one time being $358.4 million, $391.4
million, and $319.4 million, respectively.
Weighted average interest rates were 3.16%,
3.71% and 5.96%, respectively. Available
commercial paper financing at December 31,
1993 was $241.6 million.
At December 31, 1993 the Company had
$370 million in long-term revolving
credit lines, of which $347.6 million
supported the issuance of commercial
paper.
At December 31, 1993 the Company was
party to 15 interest rate swap agreements
having a total notional principal amount
of $110 million. These swap agreements
have a weighted average fixed rate of
8.52% and an average remaining life of
1.8 years. The Company is exposed to a
potential financial loss in the event of
nonperformance by the other parties to
the swap agreements. However, the
Company does not anticipate
nonperformance by the counterparties.
Provisions under various loan
agreements require the Company to comply
with certain financial covenants which
include maintaining a minimum
consolidated tangible net worth and
limiting the amount of outstanding
indebtedness.
FINANCIAL INSTRUMENTS
Cash Equivalents and The carrying amount of cash equivalents
Temporary Investments and temporary investments approximates
fair value.
Long-Term Marketable The fair value of long-term marketable
Securities securities is estimated based on the
quoted market price of the investments.
Other Financial Instruments It is not practicable to estimate the
fair value of notes receivable and a cost
basis investment, the carrying values of
which totaled $69.4 million in 1993 and
$87.2 million in 1992. The Company
received cash payments of $4.5 million
and $6.0 million with respect to such
investments in 1993 and 1992,
respectively.
Short-Term Borrowings The carrying amount of short-term
borrowings, principally commercial paper,
approximates fair value.
Long-Term Debt The estimated fair value of long-term
debt is based on the quoted market prices
for the same or similar issues or on the
current rates offered to the Company for
debt of the same remaining maturities.
Interest Rate Swap Agreements The fair value of interest rate swap
agreements is the estimated amount that
the Company would pay to terminate the
swap agreements at the reporting date,
taking into account current interest
rates and the current creditworthiness of
the swap counterparties.
Foreign Currency Exchange The fair value of foreign currency
Contracts exchange contracts is estimated based on
the quoted market prices of these
instruments.
The estimated fair values of the
Company's financial instruments at
December 31, 1993 and 1992 are as
follows:
<TABLE>
<CAPTION>
1993 1992
---------------------- ----------------------
Carrying Fair Carrying Fair
(In millions) Amount Value Amount Value
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Cash and equivalents and
temporary investments $ 478.5 478.5 510.9 510.9
Long-term marketable securities 63.6 63.6 154.8 155.2
Short-term borrowings 10.8 10.8 65.0 65.0
Long-term debt (including current
maturities) 1,142.4 1,203.5 1,132.5 1,173.5
Unrecognized financial instruments:
Interest rate swaps in net
payable position -- 9.2 -- 10.1
Foreign currency exchange contracts -- 3.2 -- --
-------- ------- ------- -------
</TABLE>
FORTY-TWO
<PAGE> 16
INCOME TAXES
Effective January 1, 1993 the Company
adopted SFAS No. 109, Accounting for
Income Taxes. As permissible under the
new standard, the Company reflected the
impact as a cumulative adjustment in the
1993 first quarter and did not restate
prior periods. The cumulative adjustment
had a favorable impact on net income of
$8.0 million.
The provisions for income taxes for the
three years ended December 31, 1993 are as
follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
----- ---- ----
<S> <C> <C> <C>
Current
Federal $65.9 57.6 30.1
State, foreign and local 1.5 4.0 .5
----- ---- ----
67.4 61.6 30.6
Deferred (9.2) (6.4) 8.0
----- ---- ----
Total $58.2 55.2 38.6
===== ==== ====
</TABLE>
The components of deferred income tax
expense were as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
------ ---- ----
<S> <C> <C> <C>
Fixed assets, primarily depreciation $ -- 3.3 5.3
Investments in unconsolidated affiliates -- -- 3.5
Self-insurance reserves (2.1) (4.3) (1.2)
Benefit plans (2.4) -- 4.2
Valuation reserves (5.0) -- --
Other, net (3.0) (5.4) (3.8)
------ ---- ----
(12.5) (6.4) 8.0
Effect of the increase in the Federal statutory
rate on deferred income tax balances 3.3 -- --
------ ---- ----
Total $ (9.2) (6.4) 8.0
====== ==== ====
</TABLE>
During 1993, 1992 and 1991 the Company
paid income taxes of $74.1 million, $70.8
million and $56.8 million, respectively.
The income tax effects of temporary
differences between financial and income
tax reporting that gave rise to deferred
income tax assets and liabilities at
December 31, 1993, under the provisions
of SFAS No. 109, are as follows:
<TABLE>
<CAPTION>
(In millions) Assets Liabilities Total
------- ----------- ------
<S> <C> <C> <C>
Current deferred income taxes
Bad debt reserves $ 8.1 -- 8.1
Accrued expenses 12.5 -- 12.5
Other .9 -- .9
----- ------ ------
Total $21.5 -- 21.5
===== ====== ======
Non-current deferred income taxes
Fixed assets, primarily
depreciation $ -- (98.4) (98.4)
Investments in unconsolidated affiliates -- (63.7) (63.7)
Self-insurance reserves 26.5 -- 26.5
Benefit plans 2.7 (5.8) (3.1)
Valuation reserves 5.5 -- 5.5
Other 12.2 (19.6) (7.4)
----- ------ ------
Total $46.9 (187.5) (140.6)
===== ====== ======
</TABLE>
FORTY-THREE
<PAGE> 17
Reconciliation of the Federal income tax
rate and the Company's effective tax rate
is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
---- ---- -----
<S> <C> <C> <C>
Federal income tax rate 35.0% 34.0 34.0
Increase (reduction) in taxes:
Adjustment to deferred tax balances due
to increase in Federal statutory rate 2.0 -- --
State, foreign and local income
taxes, net of Federal tax benefits .7 1.7 .2
Benefit of dividend and municipal bond income (.3) (.6) (1.4)
Other (1.2) (.4) (1.4)
---- ---- ----
Effective tax rate 36.2% 34.7 31.4
==== ==== ====
</TABLE>
CAPITAL STOCK Ninety million shares of common stock
with a par value of $2.50 per share are
authorized, of which 51.0 million were
issued at December 31, 1993 and 1992,
including treasury shares of 3.2 million
and 3.3 million in 1993 and 1992,
respectively.
Ten million shares of preferred stock
with a par value of $1.00 per share are
authorized. The shares are issuable in
series. No shares were outstanding in
1993 or 1992.
The Company has a Share Purchase Rights
Plan, under which a right is attached to
each share of the Company's common stock.
The rights may only become exercisable
under certain circumstances involving
actual or potential acquisitions of the
Company's common stock by a specified
person or affiliated group. Depending on
the circumstances, if the rights become
exercisable, the holder may be entitled
to purchase units of the Company's junior
participating preferred stock, shares of
the Company's common stock or shares of
common stock of the acquiror. The rights
remain in existence until July 25, 1998
unless they are terminated, exercised or
redeemed.
At December 31, 1993, 1.8 million
shares of common stock were reserved for
the exercise of options under the
Company's stock option plans. Options
may be granted to salaried officers and
other key employees of the Company to
purchase common stock at not less than
fair market value at the date of grant.
Options may be exercised in
installments commencing one year after
the date of grant. The plan also permits
the granting of Stock Appreciation Rights
(SARs). No SARs have been granted as of
December 31, 1993.
Changes in stock options during 1993
were as follows:
<TABLE>
<CAPTION>
Options
Price Range Options Available
(Per Share) Outstanding for Grant
------------- ----------- ---------
<S> <C> <C> <C>
Balance at January 1 $21.31-111.63 1,491,874 474,339
Granted 46.94- 49.00 89,000 (89,000)
Exercised 21.31- 52.06 (174,010) --
Cancelled 29.63-111.63 (54,438) 54,438
------------- --------- -------
Balance at December 31 28.34- 53.19 1,352,426 439,777
------------- ========= =======
Exercisable at December 31 28.34- 53.19 816,748
------------- ---------
</TABLE>
Under provisions of Nevada, New Jersey
and other gaming laws, and the Company's
certificate of incorporation, certain
securities of the Company are subject to
restrictions on ownership which may be
imposed by specified governmental
commissions. Such restrictions may
require the holder to dispose of the
securities or, if the holder refuses to
make such disposition, the Company may be
obligated to repurchase the securities.
EMPLOYEE BENEFIT PLANS
The Company has a noncontributory
retirement plan (Basic Plan) covering
substantially all regular full-time,
nonunion employees. The Company also has
plans covering qualifying officers and
non-officer directors (Supplemental
Plans). Benefits for all plans are based
upon years of service and compensation,
as defined.
The Company's funding policy is to
contribute not less than the minimum
amount required under Federal law, but
not more than the maximum deductible for
Federal income tax purposes.
Contributions are intended to provide not
only for benefits attributed to service
to date, but also for benefits expected
to be earned in the future.
FORTY-FOUR
<PAGE> 18
The following sets forth the funded
status for the Basic Plan as of December
31, 1993 and 1992:
<TABLE>
<CAPTION>
(In millions) 1993 1992
======= ======
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested benefits of
$(133.8) and $(109.2), respectively $(136.8) (112.6)
Projected benefit obligation for service rendered to date $(181.0) (150.0)
Plan assets at fair value, primarily
listed securities and temporary investments 150.3 132.4
------- ------
Projected benefit obligation in excess of plan assets (30.7) (17.6)
Unrecognized net loss from changes in assumptions 40.2 29.6
Unrecognized net asset as of January 1, 1986 (9.3) (10.7)
------- ------
Prepaid pension cost $ .2 1.3
======= ======
Pension cost includes the following components:
Service cost $ 8.7 6.6
Interest cost on projected benefit obligation 12.5 11.3
Actual return on assets (15.1) (8.8)
Net amortization 2.8 (3.2)
------- ------
Net periodic cost before allocation 8.9 5.9
Cost allocated to managed properties 1.9 1.6
------- ------
Net periodic pension cost $ 7.0 4.3
======= ======
</TABLE>
Included in plan assets at fair value are
securities of the Company of $17.6
million and $12.5 million at December 31,
1993 and 1992, respectively.
The following sets forth the funded
status for the Supplemental Plans as of
December 31, 1993 and 1992:
<TABLE>
<CAPTION>
(In millions) 1993 1992
------ ------
<S> <C> <C>
Actuarial present value of benefit obligation:
Accumulated benefit obligation, including vested
benefits of $(16.3) and $(16.2), respectively $(16.3) (16.2)
====== ======
Projected benefit obligation for service rendered to date $(17.3) (16.5)
Plan assets at fair value 15.4 16.6
------ ------
Projected benefit obligation (in excess of) less than plan assets (1.9) .1
Unrecognized net loss from changes in assumptions 8.7 12.0
Unrecognized obligation as of January 1, 1986 2.5 2.8
------ ------
Prepaid pension cost $ 9.3 14.9
====== ======
Pension cost includes the following components:
Service cost $ .9 .6
Interest cost on projected benefit obligation 1.0 1.3
Actual return on assets (increase) decrease (1.7) .2
Net amortization 2.5 .2
------ ------
Net periodic pension cost $ 2.7 2.3
====== ======
</TABLE>
The discount rates used in determining
the actuarial present values of the
projected benefit obligations were seven
and one-half percent in 1993 and eight
percent in 1992, with the rate of
increase in future compensation projected
at five and one-half percent in 1993 and
1992. The expected long-term rate of
return on assets is nine percent. The
unrecognized net (asset) obligation is
being amortized over a 15 year period.
Unrecognized net gains and losses on plan
assets are amortized over a five year
period.
A significant number of the Company's
employees are covered by union sponsored,
collectively bargained multi-employer
pension plans. The Company contributed
and charged to expense $9.3 million, $8.4
million and $8.2 million in 1993, 1992
and 1991, respectively, for such plans.
Information from the plans'
administrators is not sufficient to
permit the Company to determine its
share, if any, of unfunded vested
benefits.
The Company also has an employee
investment plan whereby the Company
contributes certain percentages of
employee contributions. The cost of the
plan is not significant.
FORTY-FIVE
<PAGE> 19
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The Company provides life insurance
benefits to certain retired employees.
Under terms of the plan covering such
life insurance benefits, the Company
reserves the right to change, modify or
discontinue these benefits. The Company
does not provide postretirement health
care benefits to its employees.
Effective January 1, 1993 the Company
adopted SFAS No. 106, Employers'
Accounting for Postretirement Benefits
Other Than Pensions. As permissible
under the new standard, the Company
reflected the impact as a cumulative
adjustment in the 1993 first quarter and
did not restate prior periods. The
cumulative adjustment resulted in a
charge to net income of $4.6 million, net
of a $2.3 million deferred tax benefit.
The incremental effect on 1993 results of
adopting SFAS No. 106 was a pretax charge
of $.9 million.
The Company's unfunded accumulated
postretirement benefit obligation as of
December 31, 1993 was as follows:
<TABLE>
<CAPTION>
(In millions) 1993
-----
<S> <C>
Retirees $(2.5)
Active employees - fully eligible (2.9)
Active employees - not fully eligible (2.8)
-----
(8.2)
Unrecognized net loss .7
-----
Accumulated postretirement benefit obligation $(7.5)
=====
Postretirement cost includes the following components:
Service cost $ .3
Interest cost on projected benefit obligation .6
-----
Total postretirement benefit cost $ .9
=====
</TABLE>
The discount rate used in determining the
actuarial present value of the
accumulated postretirement benefit
obligation was seven and one-half
percent, with the annual rate of increase
in future compensation projected at five
and one-half percent.
SEGMENTS OF BUSINESS
Financial data of the Company's business
segments for the years ended December 31,
1993, 1992 and 1991 are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
-------- ------- -------
<S> <C> <C> <C>
Depreciation (1)
Hotels $ 83.4 79.5 75.7
Gaming 65.1 54.8 49.9
Corporate 3.4 3.3 3.2
-------- ------- -------
Total $ 151.9 137.6 128.8
======== ======= =======
Capital expenditures (1)
Hotels $ 70.6 76.1 69.3
Gaming 144.2 188.9 32.2
Corporate 1.9 1.5 .7
-------- ------- -------
Total $ 216.7 266.5 102.2
======== ======= =======
Assets
Hotels (2) $ 940.7 917.4 903.3
Gaming (2) 1,085.7 987.7 836.3
Corporate 648.4 754.3 447.2
-------- ------- -------
Total $2,674.8 2,659.4 2,186.8
======== ======= =======
</TABLE>
(1) Includes Hilton's proportionate
share of unconsolidated affiliates.
(2) Includes investments in
unconsolidated affiliates.
FORTY-SIX
<PAGE> 20
Supplemental hotels segment operating
data for the three years ended December
31, 1993 are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
-------- ----- -----
<S> <C> <C> <C>
Revenue
Rooms $252.9 226.7 211.0
Food and beverage 113.5 104.2 100.5
Management and franchise fees 78.7 72.4 69.4
Other products and services 44.5 42.4 36.9
Operating income from unconsolidated affiliates 30.4 24.7 26.1
------ ----- -----
520.0 470.4 443.9
------ ----- -----
Expenses
Rooms 83.9 74.4 69.0
Food and beverage 93.7 86.8 83.6
Other costs and expenses 246.2 217.7 198.4
------ ----- -----
423.8 378.9 351.0
------ ----- -----
Hotels operating income $ 96.2 91.5 92.9
====== ===== =====
</TABLE>
Supplemental gaming segment operating
data for the three years ended December
31, 1993 are as follows:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Revenue
Rooms $187.3 160.0 134.0
Food and beverage 123.3 112.0 103.9
Casino 502.1 438.8 392.4
Other products and services 49.3 40.0 27.5
Management fees 6.4 6.7 6.8
Operating income from unconsolidated affiliates 5.1 1.7 4.2
------ ----- -----
873.5 759.2 668.8
------ ----- -----
Expenses
Rooms 68.6 57.5 50.9
Food and beverage 108.7 93.5 84.8
Casino 217.5 195.6 200.1
Other costs and expenses 308.2 259.2 218.0
------ ----- -----
703.0 605.8 553.8
------ ----- -----
Gaming operating income $170.5 153.4 115.0
====== ===== =====
</TABLE>
LEASES
The Company operates eight properties
under noncancellable operating leases,
all of which are for land only, having
remaining terms up to 40 years. Upon
expiration of four of the leases, the
Company has renewal options of 25, 30, 30
and 50 years. Seven leases require the
payment of additional rentals based on
varying percentages of revenue or income.
Minimum lease commitments under
noncancellable operating leases are as
follows:
<TABLE>
<CAPTION>
Year ending December 31, (In millions)
------------------------
<S> <C>
1994 $ 5.4
1995 4.8
1996 3.6
1997 3.3
1998 2.9
1999 to 2033 54.2
-----
Total $74.2
=====
</TABLE>
Total lease rental expense for all operating leases
is composed of:
<TABLE>
<CAPTION>
(In millions) 1993 1992 1991
------ ----- -----
<S> <C> <C> <C>
Minimum rentals $ 6.4 5.5 5.1
Additional rentals 4.9 4.0 3.6
----- ----- -----
Total $11.3 9.5 8.7
===== ===== =====
</TABLE>
FORTY-SEVEN
<PAGE> 21
COMMITMENTS AND CONTINGENT LIABILITIES
At December 31, 1993 the Company had
contractual commitments at its wholly-owned or
leased properties for major expansion and
rehabilitation projects of approximately $34.4
million. Additionally, the Company is committed,
under certain conditions, to invest or loan up to
$204.3 million to entities developing hotel,
gaming and vacation ownership properties.
The Company has entered into a hotel
management agreement whereby it
guarantees certain payments and loans to
the hotel owners if agreed upon levels of
financial performance are not maintained.
The Company does not believe it is likely
that material payments will be required
under this agreement. In addition, in
the event the Company terminates this
agreement, it may be obligated to pay
$9.5 million to the hotel owners.
In September 1992 a lawsuit was initiated by
AMRIS, an affiliate of AMR Corporation, against
affiliates of Marriott Corporation (Marriott),
Budget Rent-A-Car, Inc. (Budget) and the Company.
The lawsuit related to the formation of a joint
venture in 1988 among the partners to develop
CONFIRM, an integrated travel reservation system
using state-of-the-art computer technology. In
April 1992 AMRIS, the developer of CONFIRM,
advised the other partners that the scheduled
delivery and installation of CONFIRM in mid-1992
would be delayed approximately 15 to 18 months.
After evaluating the impact of this delay,
Marriott, Budget and the Company chose to
discontinue their involvement with the project.
In January 1994 the Company and its partners
agreed to a settlement, pursuant to which the
Company recovered the full amount of its
investment in the partnership.
In October 1991 a lawsuit was initiated by
Hilton International Co. (HI) against the
Company. In this action, HI alleges generally
that the development and marketing by the Company
of its hotels outside of the United States under
the Conrad name violate the terms of certain
agreements between HI and the Company. In 1964
the Company spun off its Hilton International
operations to the Company's stockholders and
entered into an agreement with HI, as
subsequently amended, generally granting the
Company certain rights with respect to the Hilton
service mark in the United States and HI certain
rights to the Hilton service mark outside the
United States. The complaint seeks, among other
things, injunctive relief against use by the
Company of the Conrad name for its hotels outside
the United States and damages in excess of $100
million. The Company believes that this action
is without merit and is defending against it
vigorously.
In management's opinion, disposition of the HI
lawsuit, and various other lawsuits pending
against the Company, is not expected to have a
material effect on the Company's financial
position.
SUPPLEMENTARY FINANCIAL INFORMATION (UNAUDITED)
Quarterly Financial Data (In millions, except per share amounts,
stock prices and percentages)
<TABLE>
<CAPTION>
Income Net
Occupancy(1) Before Income
-------------- Operating Income Net Per Dividends High/Low
Hotels Gaming Revenue Income Taxes Income Share Per Share Stock Price
------ ------ -------- --------- ------ ------ ----- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1993 1st Quarter (2) 66% 81 $ 331.6 54.6 36.4 26.5 .55 .30 53.25/41.75
2nd Quarter 70 87 345.2 60.2 42.5 26.8 .56 .30 53.38/42.88
3rd Quarter 68 90 346.7 66.1 40.0 20.5 .43 .30 50.00/41.50
4th Quarter 64 84 370.0 59.0 42.0 32.3 .67 .30 61.00/44.38
--- --- -------- ----- ----- ----- ---- ---- -----------
Year 67% 86 $1,393.5 239.9 160.9 106.1 2.21 1.20 61.00/41.50
=== === ======== ===== ===== ===== ==== ==== ===========
1992 1st Quarter 62% 82 $ 276.3 48.5 34.4 22.2 .46 .30 49.88/39.75
2nd Quarter 69 88 294.8 61.9 48.7 32.4 .68 .30 53.25/44.00
3rd Quarter 70 87 323.0 53.1 36.5 22.8 .48 .30 48.50/42.38
4th Quarter 64 83 335.5 56.4 39.5 26.5 .55 .30 47.25/41.38
--- --- -------- ----- ----- ----- ---- ---- -----------
Year 66% 85 $1,229.6 219.9 159.1 103.9 2.17 1.20 53.25/39.75
=== === ======== ===== ===== ===== ==== ==== ===========
</TABLE>
(1) Properties owned or managed
(2) The 1993 1st quarter included additional net
income of $3.4 million or $.07 per share
resulting from the implementation of new
accounting standards.
As of December 31, 1993 there were approximately
5,000 stockholders of record.
FORTY-EIGHT
<PAGE> 22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors and
Stockholders of Hilton Hotels Corporation:
We have audited the accompanying
consolidated balance sheets of Hilton
Hotels Corporation (a Delaware
corporation) and subsidiaries as of
December 31, 1993 and 1992, and the
related consolidated statements of
income, stockholders' equity and cash
flows for each of the three years in the
period ended December 31, 1993. These
financial statements are the
responsibility of the Company's
management. Our responsibility is to
express an opinion on these financial
statements 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
financial position of Hilton Hotels
Corporation and subsidiaries as of
December 31, 1993 and 1992 and the
results of their operations and their
cash flows for each of the three years in
the period ended December 31, 1993, in
conformity with generally accepted
accounting principles.
As discussed in the Accounting Changes
note to the consolidated financial
statements, in 1993 the Company changed
its methods of accounting for income
taxes and postretirement benefits other
than pensions.
ARTHUR ANDERSEN & CO.
Los Angeles, California
February 2, 1994
FORTY-NINE
<PAGE> 23
HILTON HOTELS CORPORATION AND SUBSIDIARIES TEN YEAR SUMMARY
<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts) 1993 1992
-------- -------
<S> <C> <C>
Operating Data for Years Revenue
Ended December 31 Hotels (1) $1,826.2 1,678.0
Management fees 42.7 37.0
Franchise fees 36.0 35.4
-------- -------
Total hotels 1,904.9 1,750.4
Gaming (1) 1,062.0 932.4
-------- -------
Total 2,966.9 2,682.8
Less nonconsolidated managed 1,608.9 1,479.6
-------- -------
Total revenue from consolidated operations $1,358.0 1,203.2
======== =======
Operating income
Hotels (2) $ 96.2 91.5
Gaming (2) 170.5 153.4
Corporate expense (26.8) (25.0)
-------- -------
Total 239.9 219.9
Net interest expense (2) (73.2) (61.7)
Property transactions, net (4.5) .9
Foreign currency losses (1.3) --
Provision for income taxes (58.2) (55.2)
-------- -------
Income before cumulative effect of accounting changes 102.7 103.9
Cumulative effect of accounting changes, net 3.4 --
-------- -------
Net income $ 106.1 103.9
======== =======
Depreciation (2) 151.9 137.6
Capital expenditures (2) 216.7 266.5
-------- -------
Stockholder Data Net income per share $ 2.21 2.17
Average common and equivalent shares 48.0 47.9
Stockholders' equity $1,056.7 1,002.5
Stockholders' equity per share 22.11 21.02
Return on average stockholders' equity 10.3% 10.6
Dividends per share $ 1.20 1.20
Market price per share - high/low 61/42 53/40
-------- -------
Financial Position
at Year End Working capital $ 449.1 310.6
Assets 2,674.8 2,659.4
Long-term debt 1,112.6 1,087.1
Ratio of long-term debt to total capital (3) .46 .47
-------- -------
General Information Percentage of occupancy (1)
Hotels 67 66
Gaming 86 85
-------- -------
Number of properties at year end
Wholly-owned or leased hotels 18 16
Partially owned hotels 15 15
Managed hotels 26 25
Franchised hotels 171 180
Wholly or partially owned hotel-casinos 7 7
-------- -------
Total 237 243
======== =======
Available rooms at year end
Wholly-owned or leased hotels 9,160 8,729
Partially owned hotels 14,991 13,982
Managed hotels 15,940 14,908
Franchised hotels 42,816 45,002
Wholly or partially owned hotel-casinos 12,045 12,557
-------- -------
Total 94,952 95,178
======== =======
</TABLE>
(1) Includes properties owned or managed.
(2) Includes Hilton's proportionate share of unconsolidated affiliates.
(3) Total capital represents total assets less current liabilities.
<PAGE> 24
<TABLE>
<CAPTION>
1991 1990 1989 1988 1987 1986 1985 1984
- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
1,526.5 1,558.4 1,500.6 1,395.2 1,279.4 1,228.3 1,138.8 1,086.3
35.4 36.9 34.4 33.3 31.3 28.8 28.2 25.4
34.0 34.6 34.2 33.5 31.9 30.7 28.2 26.2
- ------- ------- ------- ------- ------- ------- ------- -------
1,595.9 1,629.9 1,569.2 1,462.0 1,342.6 1,287.8 1,195.2 1,137.9
839.3 824.6 694.3 695.3 589.7 483.7 366.7 341.0
- ------- ------- ------- ------- ------- ------- ------- -------
2,435.2 2,454.5 2,263.5 2,157.3 1,932.3 1,771.5 1,561.9 1,478.9
1,352.8 1,367.4 1,309.4 1,241.9 1,116.9 1,052.5 877.5 831.6
- ------- ------- ------- ------- ------- ------- ------- -------
1,082.4 1,087.1 954.1 915.4 815.4 719.0 684.4 647.3
======= ======= ======= ======= ======= ======= ======= =======
92.9 120.6 129.3 115.1 100.7 83.6 90.5 107.8
115.0 130.4 102.6 128.6 107.7 88.1 76.4 69.7
(23.1) (29.2) (25.6) (20.8) (18.3) (17.6) (15.0) (10.7)
- ------- ------- ------- ------- ------- ------- ------- -------
184.8 221.8 206.3 222.9 190.1 154.1 151.9 166.8
(62.4) (54.7) (43.8) (38.1) (22.0) (22.1) (11.7) (3.2)
.5 -- (3.7) -- 43.8 (2.5) 3.1 27.9
-- -- -- -- -- -- -- --
(38.6) (54.6) (48.7) (53.9) (72.0) (31.7) (43.1) (77.5)
- ------- ------- ------- ------- ------- ------- ------- -------
84.3 112.5 110.1 130.9 139.9 97.8 100.2 114.0
-- -- -- -- -- -- -- --
- ------- ------- ------- ------- ------- ------- ------- -------
84.3 112.5 110.1 130.9 139.9 97.8 100.2 114.0
======= ======= ======= ======= ======= ======= ======= =======
128.8 119.4 104.8 89.5 80.5 71.3 65.4 58.9
102.2 262.4 367.1 386.8 205.6 240.7 293.1 261.4
- ------- ------- ------- ------- ------- ------- ------- -------
1.76 2.34 2.27 2.72 2.80 1.96 2.01 2.16
47.8 48.1 48.5 48.1 50.0 49.9 49.8 52.7
952.8 923.3 883.0 814.1 772.8 707.3 651.4 592.8
20.06 19.44 18.40 17.03 15.80 14.23 13.16 12.00
9.0 12.5 13.0 16.5 18.9 14.4 16.1 18.6
1.20 1.15 1.00 .95 .90 .90 .90 .90
50/34 84/26 116/48 55/34 46/28 40/30 37/28 29/23
- ------- ------- ------- ------- ------- ------- ------- -------
306.6 43.8 22.9 279.5 206.9 173.4 259.3 125.7
2,186.8 1,926.7 2,216.0 1,892.5 1,423.6 1,302.3 1,225.6 1,163.8
789.0 526.6 487.1 568.5 283.7 280.9 284.3 275.6
.40 .31 .30 .36 .22 .24 .26 .27
- ------- ------- ------- ------- ------- ------- ------- -------
64 68 69 70 68 65 64 64
84 84 86 87 84 84 86 84
- ------- ------- ------- ------- ------- ------- ------- -------
16 14 13 9 8 8 11 11
15 15 14 12 13 14 14 13
23 21 22 21 22 22 23 22
199 208 214 225 224 223 218 204
5 5 4 4 4 4 4 3
- ------- ------- ------- ------- ------- ------- ------- -------
258 263 267 271 271 271 270 253
======= ======= ======= ======= ======= ======= ======= =======
8,756 7,696 7,739 6,494 6,027 6,085 7,399 7,580
13,938 14,311 13,750 13,409 13,528 14,350 14,123 12,904
13,788 12,888 13,518 13,383 14,183 13,425 13,692 13,258
49,131 51,559 52,612 54,876 55,641 55,602 54,285 49,543
9,929 9,929 7,411 7,326 7,318 7,318 6,602 6,025
- ------- ------- ------- ------- ------- ------- ------- -------
95,542 96,383 95,030 95,488 96,697 96,780 96,101 89,310
======= ======= ======= ======= ======= ======= ======= =======
</TABLE>
FIFTY-ONE
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF
HILTON HOTELS CORPORATION
<TABLE>
<CAPTION>
STATE OR COUNTRY
A. WHOLLY-OWNED SUBSIDIARIES OF INCORPORATION
------------------------- ----------------
<S> <C>
BAC 1-11 Corporation Nevada
Benco, Inc. Nevada
Conrad (Indonesia) Corporation (2) (5) Nevada
Conrad International Hotels (Brussels) SA/NV (5) Belgium
Conrad International Hotels Corporation (3) Nevada
Conrad International Hotels (HK) Ltd. (5) Hong Kong
Conrad International Hotels Limited (2) (6) Ireland
Conrad International Investment Corporation (3) Nevada
Conrad (New Zealand) Corporation (5) Nevada
Conrad Royalty Corporation (3) Nevada
Destination Resorts, Inc. Arizona
Flamingo Hilton Corporation (4) Nevada
Flamingo Hilton-Laughlin, Inc. (7) Nevada
Flamingo Hilton - Reno, Inc. (4) Nevada
Hapeville Investors, Inc. Delaware
Hilton Baton Rouge Corporation (4) Louisiana
Hilton Employee Relief Fund California
Hilton Equipment Corporation Delaware
Hilton Hawaii Corporation Delaware
Hilton Hotels Partners I, Inc. Delaware
Hilton Hotels Partners II, Inc. Delaware
Hilton Hotels U.S.A., Inc. Delaware
Hilton Inns, Inc. Delaware
Hilton Insurance Corporation Vermont
Hilton Gaming Corporation Nevada
Hilton Kansas City Corporation (4) Missouri
Hilton Michigan City Corporation (4) Indiana
Hilton New Jersey Corporation (2) New Jersey
Hilton New Orleans Corporation (4) Louisiana
Hilton Pennsylvania Hotel Corporation Delaware
Hilton Recreation, Inc. Delaware
Hilton Resorts Corporation Delaware
Hilton RPS, Inc. Illinois
Hilton San Diego Corporation California
Hilton Suites, Inc. Delaware
Hilton Supersports, Inc. (4) Nevada
</TABLE>
1
<PAGE> 2
<TABLE>
<CAPTION>
STATE OR COUNTRY
A. WHOLLY-OWNED SUBSIDIARIES OF INCORPORATION
------------------------- ----------------
(CONTINUED)
<S> <C>
Hilton Systems, Inc. Nevada
Hilton Washington Corporation New York
Hotels Statler Company, Inc. Delaware
Kenner Investors, Inc. Delaware
Las Vegas Hilton Corporation (4) Nevada
Lebanco, Inc. (1) Nevada
The Palmer House Hilton Hotel Company (2) Illinois
Reno Hilton Resort Corporation (4) Nevada
Stevens Hotel Corporation (2) Illinois
The Beverly Hilton Corporation (2) California
The Hotel Waldorf-Astoria Corporation (2) New York
The New Yorker Hotel Corporation (2) New York
</TABLE>
__________________
(1) Indirect ownership. Wholly-owned by Benco, Inc., which is wholly-owned by
Hilton Hotels Corporation.
(2) Nameholding companies.
(3) Indirect ownership. Wholly-owned by Hilton Hotels U.S.A., Inc., which is
wholly-owned by Hilton Hotels Corporation.
(4) Indirect ownership. Wholly-owned by Hilton Gaming Corporation, which is
wholly-owned by Hilton Hotels Corporation.
(5) Indirect ownership. Wholly-owned by Conrad International Hotels
Corporation, which is wholly-owned by Hilton Hotels U.S.A., Inc., which is
wholly-owned by Hilton Hotels Corporation.
(6) Indirect ownership. Wholly-owned by Conrad Royalty Corporation, which is
wholly-owned by Hilton Hotels U.S.A., Inc., which is wholly-owned by
Hilton Hotels Corporation.
(7) Indirect ownership. Wholly-owned by Flamingo Hilton Corporation, which is
wholly-owned by Hilton Nevada Corporation, which is wholly-owned by
Hilton Hotels Corporation.
2
<PAGE> 3
<TABLE>
<CAPTION>
PERCENT STATE OF
B. PARTIALLY-OWNED SUBSIDIARIES OWNERSHIP INCORPORATION
---------------------------- --------- -------------
<S> <C> <C>
Attiki Casinos, H.S.A. 50% Greece
Casino Investment Limited 50% New Zealand
Compass Computer Services, Inc. 50% Delaware
Earlsfort Centre Hotel Proprietors
Limited 14.7% Ireland
Hilton Service Corporation 51% Delaware
Grand Vacations Realty, Inc. 50% Delaware
Greenroll Limited 30% Hong Kong
Jupiters Management Limited 66.6% Australia
Jupiters Limited 19.9640% Australia
Seven Hills International Hotel,
Tourism and Trade, A.S. 25% Turkey
(Yeditepe Beynelmilel Otelcilik
Turizm Ve Ticaret Anonim Sirketi
("Seven Hills")
Windsor Casino Ltd. 33% Canada
</TABLE>
C. AFFILIATES
----------
The following are special purpose corporations formed in connection
with the operation of beverage service at particular hotels. Hilton Hotels
Corporation does not directly own the shares of these corporations.
<TABLE>
<CAPTION>
STATE OF
NAME OF CORPORATION INCORPORATION
------------------- -------------
<S> <C>
Hilton Beverage Corporation Louisiana
New Orleans Hilton Beverage Corporation Louisiana
</TABLE>
3
<PAGE> 1
EXHIBIT 23
ARTHUR ANDERSEN & CO. SC
(LETTERHEAD)
CONSENT OF INDEPENDENT
PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports dated February 2, 1994 included (or incorporated by reference) in
this Form 10-K for the year ended December 31, 1993, into the Company's
previously filed Registration Statements (File Nos. 2-90922, 2-95746, 2-99967,
33-26112 and 33-35883).
ARTHUR ANDERSEN & CO.
Los Angeles, California
March 24, 1994
<PAGE> 1
EXHIBIT 99
UNDERTAKINGS
For the purposes of complying with the amendments to the rules
governing Form S-8 (effective July 13, 1990) under the Securities Act of 1933
(the "Securities Act"), the Registrant hereby undertakes as follows, which
undertaking shall be incorporated by reference into Registrant's Statement on
Form S-8 No. 2-90922 (filed May 2, 1990):
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of
the Registrant, the Registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of
expenses incurred or paid by a director, officer or controlling person
of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against
public policy as expressed in the Securities Act and will be governed
by the final adjudication of such issue.
