<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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)
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<S> <C>
DELAWARE 36-2058176
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
</TABLE>
9336 CIVIC CENTER DRIVE, BEVERLY HILLS, CALIFORNIA 90210
(Address of principal executive offices) (Zip code)
(310) 278-4321
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding twelve months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of April 28, 1995 --- Common Stock, $2.50 par value ---
48,214,096 shares.
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PART 1 FINANCIAL INFORMATION
Company or group of companies for which report is filed:
HILTON HOTELS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
HILTON HOTELS CONSOLIDATED
CORPORATION STATEMENTS
AND OF INCOME
SUBSIDIARIES (IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Revenue Rooms $136.5 111.3
Food and beverage 61.7 55.6
Casino 118.1 114.6
Management and franchise fees 24.1 22.1
Other 28.6 26.9
Operating income
from unconsolidated affiliates 12.9 9.9
---------------------------------------------------------------------------------------------
381.9 340.4
- --------------------------------------------------------------------------------------------------------------------
Expenses Rooms 43.9 39.0
Food and beverage 53.9 50.0
Casino 56.0 50.6
Other costs and expenses 147.2 139.9
Corporate expense 6.9 3.6
---------------------------------------------------------------------------------------------
307.9 283.1
- --------------------------------------------------------------------------------------------------------------------
Operating income 74.0 57.3
Interest and dividend income 6.5 5.1
Interest expense (22.4) (18.5)
Interest expense, net, from
unconsolidated affiliates (3.6) (4.2)
Property transactions .7 --
Foreign currency losses (.1) (.4)
- --------------------------------------------------------------------------------------------------------------------
Income before
income taxes
and minority
interest 55.1 39.3
Provision for income taxes 21.5 16.6
Minority interest, net 1.6 --
- --------------------------------------------------------------------------------------------------------------------
Net income $ 32.0 22.7
====================================================================================================================
Net income per share $ .66 .47
====================================================================================================================
Average number of
shares 48.6 48.4
====================================================================================================================
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2
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HILTON HOTELS CONSOLIDATED
CORPORATION BALANCE
AND SHEETS
SUBSIDIARIES (IN MILLIONS)
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<CAPTION>
MARCH 31, DECEMBER 31,
1995 1994
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Assets Current assets
Cash and equivalents $ 190.1 184.4
Temporary investments 135.8 208.8
Other current assets 257.9 280.5
-----------------------------------------------------------------------------------------------
Total current assets 583.8 673.7
Investments 544.5 536.7
Property and equipment, net 1,682.3 1,664.8
Other assets 49.8 50.7
-----------------------------------------------------------------------------------------------
Total assets $2,860.4 2,925.9
======================================================================================================================
Liabilities and Current liabilities
stockholders' equity Accounts payable and accrued expenses $ 244.4 284.0
Current maturities of long-term debt 31.6 36.7
Income taxes payable 25.7 7.6
-----------------------------------------------------------------------------------------------
Total current liabilities 301.7 328.3
Long-term debt 1,190.2 1,251.9
Deferred income taxes
and other liabilities 217.7 217.9
Stockholders' equity 1,150.8 1,127.8
-----------------------------------------------------------------------------------------------
Total liabilities and stockholders' equity $2,860.4 2,925.9
======================================================================================================================
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3
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HILTON HOTELS CONSOLIDATED
CORPORATION STATEMENTS OF
AND CASH FLOWS
SUBSIDIARIES (IN MILLIONS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Operating activities Net income $ 32.0 22.7
Adjustments to reconcile net income
to net cash provided by
operating activities:
Depreciation and amortization 34.9 31.2
Change in working capital components:
Other current assets 22.4 6.3
Accounts payable and accrued expenses (35.7) (12.8)
Income taxes payable 18.1 28.0
Decrease in deferred income taxes (1.1) (15.8)
Change in other liabilities 1.2 .5
Unconsolidated affiliates' distributions
in excess of (less than) earnings 8.9 (.8)
Gain from property transactions (.7) --
Other (.7) (4.2)
---------------------------------------------------------------------------------------------
Net cash provided by operating activities 79.3 55.1
- --------------------------------------------------------------------------------------------------------------------
Investing activities Capital expenditures (54.7) (49.6)
Additional investments (21.7) (26.1)
Decrease in long-term marketable securities -- 12.5
Decrease in temporary investments 75.8 16.8
Payments on notes and other investments 5.2 44.1
---------------------------------------------------------------------------------------------
Net cash provided by (used in)
investing activities 4.6 (2.3)
- --------------------------------------------------------------------------------------------------------------------
Financing activities Decrease in commercial paper
borrowings and revolving loans (5.5) (144.1)
Reduction of long-term debt (61.7) --
Issuance of common stock 3.4 4.4
Cash dividends (14.4) (14.4)
---------------------------------------------------------------------------------------------
Net cash used in
financing activities (78.2) (154.1)
- --------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents 5.7 (101.3)
Cash and equivalents at beginning of year 184.4 380.4
- --------------------------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $190.1 279.1
====================================================================================================================
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4
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HILTON HOTELS SUMMARY
CORPORATION OF
AND OPERATIONS
SUBSIDIARIES (IN MILLIONS)
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
<S> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------
Revenue Hotels $158.4 127.4
Gaming 223.5 213.0
---------------------------------------------------------------------------------------------
Total $381.9 340.4
====================================================================================================================
Operating income Hotels $ 39.1 21.3
Gaming 41.8 39.6
Corporate expense (6.9) (3.6)
---------------------------------------------------------------------------------------------
Total 74.0 57.3
Net interest expense (19.5) (17.6)
Property transactions .7 --
Foreign currency losses (.1) (.4)
Provision for income taxes (21.5) (16.6)
Minority interest, net (1.6) --
- --------------------------------------------------------------------------------------------------------------------
Net income $ 32.0 22.7
====================================================================================================================
Percentage of
occupancy Hotels 70 66
Gaming 84 85
====================================================================================================================
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5
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NET INCOME PER SHARE
The calculations of common and equivalent shares, net income and net income per
share are as follows:
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
1995 1994
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
Shares outstanding beginning of period 48,114,723 47,846,854
Net common shares issued/issuable upon
exercise of certain stock options 452,971 566,790
- ---------------------------------------------------------------------------------------------------------------------
Common and equivalent shares 48,567,694 48,413,644
=====================================================================================================================
Net income (in millions) $32.0 22.7
=====================================================================================================================
Net income per share $.66 .47
=====================================================================================================================
Dividends declared per share $.30 .30
=====================================================================================================================
</TABLE>
6
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HILTON HOTELS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1: GENERAL
The consolidated financial statements contained herein have been prepared
by the Company in accordance with the accounting policies described in the 1994
Annual Report to Stockholders and should be read in conjunction with the Notes
to Consolidated Financial Statements which appear in that report.
The statements for the three months ended March 31, 1995 and 1994 are
unaudited; however, in the opinion of management, all adjustments (which include
only normal recurring accruals) have been made which are considered necessary to
present fairly the operating results for the unaudited periods.
The consolidated financial statements for the prior period reflect certain
reclassifications to conform with classifications adopted in 1995. These
classifications have no effect on net income.
NOTE 2: SUPPLEMENTAL CASH FLOW INFORMATION
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
- ---------------------------------------------------
(IN MILLIONS)
<S> <C> <C>
Cash paid during the period
for the following:
Interest, net of amounts
capitalized 22.5 19.9
Income taxes 1.4 3.1
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NOTE 3: INVESTMENTS
Summarized operating results of the Company's unconsolidated affiliates are
as follows:
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<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------
1995 1994
- ---------------------------------------------------
(IN MILLIONS)
<S> <C> <C>
Revenue 296.6 283.7
Expenses 267.1 262.6
Net income 24.5 15.0
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7
<PAGE> 8
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
COMPARISON OF FISCAL QUARTERS ENDED MARCH 31, 1995 AND 1994
OVERVIEW
Net income for the 1995 first quarter increased 41 percent to $32.0 million or
$.66 per share, compared to $22.7 million or $.47 per share in 1994. Total
revenue in the 1995 quarter increased 12 percent to $381.9 million, while total
operating income increased 29 percent to $74.0 million from $57.3 million in
1994.
HOTELS
Hotel revenue for the 1995 quarter was $158.4 million, an increase of 24
percent over last year. Adjusting for the impact of increased ownership of the
New Orleans Hilton Riverside, which was consolidated as of June 1994, revenue
increased 9 percent. Hotel operating income increased 84 percent to $39.1
million from $21.3 million in the 1994 first quarter. Operating income
improved at nearly all of the Company's owned and partially owned hotels. An
improving U.S. economy, coupled with increased international visitation and an
improving supply-demand balance of hotel rooms, have benefitted the Hotels
division, which attained overall increases in both occupancy and average room
rates. In addition, the first quarter did not include Easter week in 1995, a
traditionally slow period for hotels, as it did in 1994. Occupancy for hotels
owned or managed was 70 percent in 1995 compared to 66 percent in 1994.
Average room rates increased seven percent over the prior year.
Operating income from the New Orleans Hilton Riverside increased $7.5 million
compared to the 1994 first quarter. This increase includes $4.3 million
attributable to improved operating performance, as indicated by double-digit
increases in occupancy and revenue per available room, and $3.2 million due to
the impact of increased ownership of the property. Income from the
Waldorf=Astoria increased $.7 million over the 1994 first quarter on increased
occupancy, principally due to growth in individual business traveler stays and
international room nights. Other major market downtown/convention properties
benefitted from increased business travel including the Palmer House Hilton,
the one-third owned Chicago Hilton and Towers, and the 50% owned Washington
Hilton and Towers and New York Hilton and Towers. Operating income at these
four properties improved a combined $2.1 million over the prior year.
8
<PAGE> 9
The Company's airport properties also benefitted from the resurgence of
business travel in the first quarter of 1995. Combined income for the
Company's wholly-owned and partially owned airport properties increased $1.1
million over the prior year.
Increased leisure travel and meeting/convention business contributed to
improved operating results at the 50% owned Hilton Hawaiian Village. Results
at the 13% owned Hilton Waikoloa Village also benefitted from strong
meeting/convention volume in the 1995 first quarter. Combined operating income
from these two properties increased $1.6 million over the 1994 period.
Hotel management and franchise fees increased $2.0 million in 1995 to $21.7
million. Fee revenue is based primarily on operating revenue at managed
properties and room revenue at franchised hotels.
GAMING
Total gaming revenue increased five percent in the 1995 quarter to $223.5
million from $213.0 million in 1994. Casino revenue, a component of gaming
revenue, was $118.1 million in 1995 compared to $114.6 million in the prior
year. Gaming operating income increased six percent to $41.8 million from
$39.6 million in the 1994 first quarter. Excluding the results of the Casino
Windsor, which opened in May 1994, operating income increased three percent
from the 1994 first quarter.
Operating income at the Las Vegas Hilton increased $3.2 million from the prior
year due primarily to a 49 percent increase in table game win and the impact of
bad debt recoveries, partially offset by a 21 percent decrease in slot income.
Premium play baccarat volume at this property has increased dramatically
since the opening of the hotel's luxury "Sky Villa" suites. Baccarat volume
more than doubled and the win percentage increased two points compared to the
1994 first quarter. The Flamingo Hilton-Las Vegas recorded a slight reduction
in operating income due to continuing construction activities. A generally
soft market due to competition from new attractions in the Las Vegas market
and excess room capacity contributed to a $1.1 million decline in operating
income at the Flamingo Hilton-Laughlin. Combined results from the
Reno Hilton and the Flamingo Hilton-Reno were comparable with 1994.
9
<PAGE> 10
The 1995 period benefitted from the first full quarter of operation of the
Flamingo Casino-New Orleans river casino, which replaced the smaller
temporary river casino in November 1994. The 1995 first quarter also includes
income from Casino Windsor, which opened in May 1994. Operating income from
these ventures, including equity and fee income, totaled $4.2 million.
Equity income and management fees from the 19.9% owned Hotel Conrad and
Jupiters Casino in Australia decreased $2.0 million from the prior year,
primarily due to lower table game win.
Occupancy for the Nevada hotel-casinos was 86 percent in the 1995 quarter
compared to 88 percent last year. The average room rate for Nevada increased
nine percent.
CORPORATE EXPENSE
Corporate expense was $6.9 million in the 1995 quarter compared to $3.6 million
in 1994. The 1994 corporate expense benefitted from the reimbursement of legal
costs as a result of a lawsuit settlement.
FINANCING ACTIVITIES
Interest and dividend income increased $1.4 million to $6.5 million in 1995
primarily due to higher investment yields. Consolidated interest expense
increased $3.9 million due to higher average debt levels and higher interest
rates, while interest expense from unconsolidated affiliates decreased $.6
million. Consolidated interest expense for the 1995 quarter includes $2.3
million of interest on debt at the New Orleans Hilton Riverside. The
Company's proportionate share of this expense was included in net interest
expense from unconsolidated affiliates in 1994.
10
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INCOME TAXES
The effective income tax rate for the 1995 period was 39.0 percent compared to
42.2 percent in 1994. The Company's effective income tax rate is determined by
the level and composition of pretax income subject to varying foreign, state
and local taxes. The 1995 effective income tax rate benefitted from the
utilization of foreign tax credits, partially offset by increased state and
local taxes.
PROPERTY TRANSACTIONS
The 1995 quarter includes a pretax gain on the sale of land to Hilton Grand
Vacations Company for its vacation ownership project at the Flamingo Hilton -
Las Vegas. Gains on this transaction are being recognized on an installment
basis.
MINORITY INTEREST
The minority interest results from the consolidation of the New Orleans Hilton
Riverside. The Company increased its ownership interest in the property from
46.8% to 67.4% in June 1994.
FINANCIAL CONDITION
LIQUIDITY AND CAPITAL SPENDING
Net cash provided by operating activities totaled $79.3 million for the three
months ended March 31, 1995 compared to $55.1 million in the same period last
year, due primarily to improved operating results. Working capital decreased
from $345.4 at December 31, 1994 to $282.1 million at March 31, 1995. This
decrease was the result of using working capital to reduce long-term borrowings
and to fund new construction and investments. Capital expenditures during the
period totaled $54.7 million, while new investments amounted to $21.7 million.
During the 1995 quarter the Company reduced its borrowings under its revolving
bank credit lines and its bonds and notes by a total of $67.2 million.
11
<PAGE> 12
Construction projects are ongoing at various Company properties. Major
renovation programs are continuing at the San Diego Hilton Beach and Tennis
Resort and the Portland Hilton. In Orlando, development of the first phase of
a 360-unit vacation ownership resort adjacent to Sea World is anticipated to be
completed in the third quarter of 1995. Developments at the Company's gaming
properties include the recent completion of the luxury "Sky Villa" suites at
the Las Vegas Hilton and the April 1995 opening of the 19.9% owned Conrad
Treasury hotel-casino in Brisbane, Australia. In addition, major expansion and
renovation programs at the Flamingo Hilton-Las Vegas and the Reno Hilton are
nearing completion.
The Company anticipates that capital expenditures and investments will total
approximately $350 million in 1995. The Company intends to fund these
expenditures through internal cash flows, available debt capacity or new
borrowings.
LONG-TERM DEBT
Long-term debt at March 31, 1995 totaled $1.2 billion compared to $1.3 billion
at December 31, 1994. During the first quarter of 1995 the Company repurchased
$27.9 million of its $200 million Series B Medium Term Notes. At March 31,
1995, $30 million in financing under this program was still available.
The Company had $219.2 million in commercial paper outstanding at March 31,
1995. The Company's long-term revolving credit facilities had an aggregate
commitment at March 31, 1995 of $597.5 million, of which $219.2 million
supported the issuance of commercial paper. Excluding the portion of the
commitment which supports the issuance of commercial paper, $335.0 million of
revolving bank debt financing was available to the Company at March 31, 1995.
The Company has an effective shelf registration with the Securities and
Exchange Commission for up to $65 million of new debt securities. The terms and
conditions of the securities will be determined by market conditions at the time
of issuance.
12
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PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
27. Financial Data Schedule
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the first quarter of fiscal
1995.
13
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
HILTON HOTELS CORPORATION
(Registrant)
Date: May 9, 1995 /s/ Steve Krithis
____________________________________
Steve Krithis
Senior Vice President - Finance
Date: May 9, 1995 /s/ William C. Lebo, Jr.
____________________________________
William C. Lebo, Jr.
Senior Vice President and
General Counsel
14
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<ARTICLE> 5
<LEGEND>
EXHIBIT 27
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 190,100
<SECURITIES> 135,800
<RECEIVABLES> 199,800
<ALLOWANCES> 24,100
<INVENTORY> 13,600
<CURRENT-ASSETS> 583,800
<PP&E> 2,450,200
<DEPRECIATION> 767,900
<TOTAL-ASSETS> 2,860,400
<CURRENT-LIABILITIES> 301,700
<BONDS> 1,190,200
<COMMON> 127,600
0
0
<OTHER-SE> 1,023,200
<TOTAL-LIABILITY-AND-EQUITY> 2,860,400
<SALES> 381,900
<TOTAL-REVENUES> 381,900
<CGS> 0
<TOTAL-COSTS> 298,200
<OTHER-EXPENSES> 6,900
<LOSS-PROVISION> 2,800
<INTEREST-EXPENSE> 19,500
<INCOME-PRETAX> 55,100
<INCOME-TAX> 21,500
<INCOME-CONTINUING> 32,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 32,000
<EPS-PRIMARY> .66
<EPS-DILUTED> .66
</TABLE>
