<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 September 30, 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)
<TABLE>
<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 October 31, 1995 --- Common Stock, $2.50 par value ---
48,324,050 shares.
<PAGE> 2
PART I FINANCIAL INFORMATION
Company or group of companies for which report is filed:
HILTON HOTELS CORPORATION AND SUBSIDIARIES
ITEM 1. FINANCIAL STATEMENTS
Consolidated Statements of Income
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue Rooms $145.9 134.0 433.6 371.9
Food and beverage 61.4 59.2 190.5 177.7
Casino 110.6 123.6 362.6 356.6
Management and franchise fees 26.4 22.8 75.7 69.3
Other 31.5 32.7 90.4 91.0
Operating income
from unconsolidated affiliates 9.9 10.4 39.0 39.6
--------------------------------------------------------------------------
385.7 382.7 1,191.8 1,106.1
- ------------------------------------------------------------------------------------------
Expenses Rooms 47.0 45.2 138.1 127.4
Food and beverage 55.1 54.7 166.8 158.8
Casino 59.1 55.2 175.2 160.4
Other costs and expenses 161.6 153.8 455.6 442.6
Corporate expense 6.3 9.6 20.5 19.6
Transaction costs 4.0 - 4.0 -
--------------------------------------------------------------------------
333.1 318.5 960.2 908.8
- ------------------------------------------------------------------------------------------
Operating income 52.6 64.2 231.6 197.3
Interest and dividend income 9.4 5.6 25.1 15.5
Interest expense (24.2) (20.6) (71.3) (57.9)
Interest expense, net, from
unconsolidated affiliates (4.7) (1.9) (11.8) (10.1)
Property transactions .2 .7 1.2 .7
Foreign currency (losses) gains (.3) .2 - (.2)
- ------------------------------------------------------------------------------------------
Income before income taxes
and minority interest 33.0 48.2 174.8 145.3
Provision for income taxes 7.5 20.8 61.6 61.3
Minority interest, net .7 .4 3.5 .4
- ------------------------------------------------------------------------------------------
Net income $ 24.8 27.0 109.7 83.6
==========================================================================================
Net income per share $ .51 .56 2.26 1.73
==========================================================================================
Average number
of shares 48.6 48.4 48.6 48.3
==========================================================================================
</TABLE>
<PAGE> 3
Consolidated Balance Sheets
(in millions)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Assets Current assets
Cash and equivalents $ 289.4 184.4
Temporary investments 88.5 208.8
Other current assets 256.3 280.5
-----------------------------------------------------------------------
Total current assets 634.2 673.7
Investments 563.4 536.7
Property and equipment, net 1,714.2 1,664.8
Other assets 47.3 50.7
-----------------------------------------------------------------------
Total assets $2,959.1 2,925.9
===============================================================================================
Liabilities and Current liabilities
stockholders' equity Accounts payable and accrued expenses $ 284.1 284.0
Current maturities of long-term debt 171.6 36.7
Income taxes payable 9.0 7.6
-----------------------------------------------------------------------
Total current liabilities 464.7 328.3
Long-term debt 1,098.3 1,251.9
Deferred income taxes and other liabilities 191.3 217.9
Stockholders' equity 1,204.8 1,127.8
-----------------------------------------------------------------------
Total liabilities and stockholders' equity $2,959.1 2,925.9
===============================================================================================
</TABLE>
<PAGE> 4
Consolidated Statements of Cash Flows
(in millions)
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
- -----------------------------------------------------------------------------------------------------
<S> <C> <C>
Operating activities Net income $ 109.7 83.6
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 104.5 97.3
Change in working capital components:
Other current assets 26.9 (19.7)
Accounts payable and accrued expenses 2.1 8.0
Income taxes payable 1.4 5.3
Decrease in deferred income taxes (7.1) (13.3)
Decrease in other liabilities (19.0) (14.7)
Unconsolidated affiliates' distributions
in excess of earnings 26.4 .1
Gain from property transactions (1.2) (.7)
Other (.7) 10.7
-------------------------------------------------------------------------
Net cash provided by operating activities 243.0 156.6
- -----------------------------------------------------------------------------------------------------
Investing activities Capital expenditures (151.8) (188.2)
Additional investments (73.7) (108.3)
Decrease in long-term marketable securities - 42.6
Change in temporary investments 124.1 (98.8)
Payments on notes and other investments 17.5 56.9
-------------------------------------------------------------------------
Net cash used in investing activities (83.9) (295.8)
- -----------------------------------------------------------------------------------------------------
Financing activities Change in commercial paper
borrowings and revolving loans 172.9 (90.4)
Long-term borrowings - 90.0
Reduction of long-term debt (191.6) (25.7)
Issuance of common stock 8.0 7.5
Cash dividends (43.4) (43.2)
-------------------------------------------------------------------------
Net cash used in financing activities (54.1) (61.8)
- -----------------------------------------------------------------------------------------------------
Increase (decrease) in cash and equivalents 105.0 (201.0)
Cash and equivalents at beginning of year 184.4 380.4
- -----------------------------------------------------------------------------------------------------
Cash and equivalents at end of period $ 289.4 179.4
=====================================================================================================
</TABLE>
<PAGE> 5
Summary of Operations
(in millions)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
- --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenue Hotels $168.7 152.2 508.5 440.1
Gaming 217.0 230.5 683.3 666.0
---------------------------------------------------------------------------
Total $385.7 382.7 1,191.8 1,106.1
============================================================================================
Operating Hotels $ 43.0 30.0 140.8 95.5
income Gaming 19.9 43.8 115.3 121.4
Corporate expense (6.3) (9.6) (20.5) (19.6)
Transaction costs (4.0) - (4.0) -
---------------------------------------------------------------------------
Total 52.6 64.2 231.6 197.3
Net interest expense (19.5) (16.9) (58.0) (52.5)
Property transactions .2 .7 1.2 .7
Foreign currency (losses) gains (.3) .2 - (.2)
Provision for income taxes (7.5) (20.8) (61.6) (61.3)
Minority interest, net (.7) (.4) (3.5) (.4)
- --------------------------------------------------------------------------------------------
Net income $ 24.8 27.0 109.7 83.6
============================================================================================
Percentage of
occupancy Hotels 76 72 74 70
Gaming 87 90 86 88
============================================================================================
</TABLE>
<PAGE> 6
NET INCOME PER SHARE
The calculations of common and equivalent shares, net income and net income per
share are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Shares outstanding
beginning of period 48,274,133 47,982,696 48,114,723 47,846,854
Net common shares issued/
issuable upon exercise
of certain stock
options 375,499 430,486 436,099 445,949
---------- ---------- ---------- ----------
Common and equivalent shares 48,649,632 48,413,182 48,550,822 48,292,803
========== ========== ========== ==========
Net income (in millions) $24.8 $27.0 $109.7 $83.6
===== ===== ====== =====
Net income per share $.51 $.56 $2.26 $1.73
==== ==== ===== =====
Dividends declared per share $.30 $.30 $.90 $.90
==== ==== ==== ====
</TABLE>
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1: General
The consolidated financial statements presented herein have been prepared by
the Company in accordance with the accounting policies described in its 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 and nine months ended September 30, 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 1994 periods reflect certain
reclassifications to conform with classifications adopted in 1995. These
classifications have no effect on net income.
Note 2: Supplemental Cash Flow Information
<TABLE>
<CAPTION>
Nine months ended
September 30,
1995 1994
---- ----
(in millions)
<S> <C> <C>
Cash paid during the period
for the following:
Interest, net of amounts capitalized $74.3 58.3
Income taxes 64.8 63.8
</TABLE>
Note 3: Investments
Summarized operating results of the Company's unconsolidated affiliates are as
follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
(in millions) (in millions)
<S> <C> <C> <C> <C>
Revenue $373.1 323.5 994.2 939.8
Expenses 342.3 294.9 901.2 845.5
Net Income 26.9 20.7 83.4 73.4
</TABLE>
Note 4: Spin-Off of Gaming Operations
In June 1995 the Company's Board of Directors approved a plan to separate the
Company's gaming and hotel businesses by a spin-off of the gaming operations.
The transaction is expected to be tax-free, with shareholders receiving one
share of stock of the new gaming company for each share of the Company's stock.
The transaction is subject to a number of conditions including regulatory and
other third party approvals, including certain lenders, the receipt of a
favorable ruling from the IRS and other tax authorities confirming the tax-free
status of the transaction, and the final approval of the Board of Directors.
The Company is seeking to complete the spin-off by early 1996.
<PAGE> 8
Supplemental hotels segment data for the three and nine months ended
September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
(in millions) (in millions)
<S> <C> <C> <C> <C>
Revenue
Rooms $ 94.0 85.0 271.8 225.3
Food and beverage 30.8 27.5 98.5 87.5
Management and franchise fees 23.3 19.9 67.7 61.5
Other 14.3 12.8 41.8 34.7
Operating income
from unconsolidated affiliates 6.3 7.0 28.7 31.1
------ ------ ------ ------
168.7 152.2 508.5 440.1
------ ------ ------ ------
Expenses
Rooms 27.5 26.3 80.7 71.3
Food and beverage 26.6 26.1 82.5 75.8
Other costs and expenses 71.6 69.8 204.5 197.5
------ ------ ------ ------
125.7 122.2 367.7 344.6
------ ------ ------ ------
Hotels operating income $ 43.0 30.0 140.8 95.5
====== ====== ====== ======
</TABLE>
Supplemental gaming segment data for the three and nine months ended
September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---- ---- ---- ----
(in millions) (in millions)
<S> <C> <C> <C> <C>
Revenue
Rooms $ 51.9 49.0 161.8 146.6
Food and beverage 30.6 31.7 92.0 90.2
Casino 110.6 123.6 362.6 356.6
Management and franchise fees 3.1 2.9 8.0 7.8
Other 17.2 19.9 48.6 56.3
Operating income
from unconsolidated affiliates 3.6 3.4 10.3 8.5
------ ------ ------ ------
217.0 230.5 683.3 666.0
------ ------ ------ ------
Expenses
Rooms 19.5 18.9 57.4 56.1
Food and beverage 28.5 28.6 84.3 83.0
Casino 59.1 55.2 175.2 160.4
Other costs and expenses 90.0 84.0 251.1 245.1
------ ------ ------ ------
197.1 186.7 568.0 544.6
------ ------ ------ ------
Gaming operating income $ 19.9 43.8 115.3 121.4
====== ====== ====== ======
</TABLE>
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
RESULTS OF OPERATIONS
COMPARISON OF FISCAL QUARTERS ENDED SEPTEMBER 30, 1995 AND 1994
OVERVIEW
Net income for the third quarter decreased eight percent to $24.8 million or
$.51 per share, compared to $27.0 million or $.56 per share in 1994. The 1995
third quarter results include a $4.0 million pre-tax charge for transaction
costs incurred in evaluating strategic alternatives to enhance shareholder
value, including the previously announced plan of spin-off of the Company's
gaming operations. Excluding the effect of the transaction costs, net income
increased four percent over the 1994 third quarter. Total revenue in the 1995
quarter increased one percent to $385.7 million, while operating income before
transaction costs decreased 12 percent to $56.6 million from $64.2 million in
1994.
HOTELS
Hotel revenue for the 1995 third quarter was $168.7 million, an increase of 11
percent over 1994, while hotel operating income increased 43 percent to $43.0
million from $30.0 million last year. The hotel segment continues to benefit
from the sustained growth of a flourishing lodging industry. The strength of
the U.S. economy has been a catalyst for increased business travel, which has
benefitted a majority of the Company's owned and equity properties. Individual
business travel and company meeting room nights are both well ahead of prior
year levels. In addition, increased international visitation continues to
benefit a number of the Company's major market and resort properties. Nearly
all of the Company's owned and partially-owned hotels posted increases in
operating income compared to the 1994 quarter. Occupancy for hotels owned or
managed was 76 percent in 1995 compared to 72 percent in 1994, while average
room rates increased five percent over the prior year.
Results at the 50% owned New York Hilton and Towers increased $2.6 million over
the prior year quarter on double digit increases in occupancy and average rate.
Income at the Waldorf=Astoria increased $2.3 million over 1994, driven by
<PAGE> 10
increased revenue per available room. International room nights at these two
properties were up a combined 42 percent over the prior year. Operating
income from the Palmer House Hilton increased $2.1 million over the prior year
on double digit increases in individual business traveler room nights and
average rate. Operating income from the New Orleans Hilton Riverside
increased $1.5 million compared to the 1994 third quarter, primarily due to
increased occupancy. Strong company meeting volume supported occupancy gains
at the 50% owned San Francisco Hilton and Towers. Operating income at this
property improved $1.1 million over the prior year. Sustained high occupancy
levels and increased room rates on its core leisure travel segment led to
improved operating results at the 50% owned Hilton Hawaiian Village; operating
income increased $.9 million over the 1994 period.
The strength of business travel continued to benefit the Company's airport
properties. Combined operating income from the Company's eight owned and
equity airport properties increased $1.9 million over the prior year.
Results at the Company's new vacation ownership facility in Orlando, Florida
were adversely impacted by slower than expected sales. Third quarter results
also reflect the required recognition of previously deferred operating losses
of the Orlando project, prompted by the completion of the first phase of
construction in August. Combined results from the Company's Orlando and Las
Vegas vacation ownership projects decreased $7.4 million compared to the 1994
period.
Hotel management and franchise fees increased $3.4 million in 1995 to $23.3
million. Fee revenue is based primarily on operating revenue at managed
properties and room revenue at franchised hotels.
GAMING
Total gaming revenue decreased six percent in the 1995 quarter to $217.0
million from $230.5 million in 1994. Casino revenue, a component of gaming
revenue, was $110.6 million in 1995 compared to $123.6 million in the prior
<PAGE> 11
year. Gaming operating income decreased 55 percent to $19.9 million from
$43.8 million in the 1994 third quarter.
Operating income at the Las Vegas Hilton decreased $16.8 million from the prior
year due primarily to significantly lower table game win. The hotel-casino's
luxury "Sky Villa" suites continue to generate increased premium play volume
with baccarat drop up 33 percent compared to the 1994 third quarter. However,
the baccarat win percentage decreased 29 points from a higher than normal win
percentage in the 1994 quarter. The generally sluggish summer in the Las Vegas
market resulted in a nine percent decline in occupancy compared to the prior
year. The occupancy decline at this property was partially offset by a seven
percent increase in average room rate. Results at the Las Vegas Hilton are
typically more volatile than the Company's other casinos since this property
caters to the premium play segment of the market.
Operating income from the Flamingo Hilton - Las Vegas increased $1.9 million
over the 1994 quarter, reflecting the completion of major construction and
renovation projects at the property. A 10 percent decline in occupancy was
offset by a 15 percent increase in average room rate compared to the prior
year. A generally soft market continues to affect the Flamingo Hilton -
Laughlin, which posted a $1.4 million decrease in operating income. Both the
Flamingo Hilton - Reno and the Reno Hilton were adversely affected by new
competition in the Reno market, as well as lower table game win compared to the
1994 third quarter. Combined results from these two properties decreased $2.0
million from the prior year period.
Results from the Company's New Orleans riverboat operations, including equity
and fee income, decreased $1.5 million from the 1994 third quarter. The 1994
period includes fee income from a wholly-owned riverboat which was leased to
the 50% owned joint venture. This temporary boat was replaced by a riverboat
owned by the joint venture in November 1994.
<PAGE> 12
Internationally, equity income from the 19.9% owned Hotel Conrad and Jupiters
Casino was below the 1994 quarter due to significantly lower table game win.
Operating income from the 19.9% owned Conrad International Treasury
hotel-casino, which opened in April 1995, was not significant to the third
quarter results. Combined equity and fee income from the two Australia
properties decreased $1.2 million from the 1994 quarter. The Company's
proportionate share of income from its management operations at Casino Windsor,
located in Windsor, Ontario, Canada, increased $1.2 million from the prior
year.
Occupancy for the Nevada hotel-casinos was 88 percent in the 1995 quarter
compared to 94 percent last year. The average room rate for Nevada increased
eight percent.
FINANCING ACTIVITIES
Interest and dividend income increased $3.8 million to $9.4 million in 1995
primarily due to higher investment balances and yields. Consolidated interest
expense increased $3.6 million due to higher average debt levels and higher
interest rates, while interest expense from unconsolidated affiliates increased
$2.8 million.
INCOME TAXES
The effective income tax rate for the 1995 period was 22.7 percent compared to
43.2 percent in 1994. The Company's effective income tax rate is determined by
the level and composition of pre-tax income subject to varying foreign, state
and local taxes. The 1995 effective income tax rate benefitted from the
favorable resolution of Federal tax issues for prior years and the utilization
of foreign tax credits.
<PAGE> 13
COMPARISON OF NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
OVERVIEW
Net income for the nine month period was $109.7 million, an increase of 31
percent over last year. Total revenue in the 1995 period increased eight
percent to $1.2 billion, while total operating income before transaction costs
increased 19 percent to $235.6 million from $197.3 million in 1994.
HOTELS
Hotel revenue increased 16 percent to $508.5 million for the 1995 nine month
period from $440.1 million in 1994. Adjusting for the impact of increased
ownership of the New Orleans Hilton Riverside, which was consolidated as of
June 1994, revenue increased eight percent. Hotel operating income increased
47 percent to $140.8 million from $95.5 million in the 1994 period. Operating
income for the nine months improved at most of the Company's owned and
partially-owned hotels. Occupancy for hotels owned or managed was 74 percent
in 1995 compared to 70 percent in 1994. Average room rates increased five
percent over the prior year.
Results from the Waldorf=Astoria increased $3.7 million and results from the
50% owned New York Hilton and Towers increased $3.0 million on higher occupancy
and average room rates. International room nights and business travel volume
were both well ahead of 1994 levels at these two properties. Increased
business travel also benefitted the Palmer House Hilton and the 50% owned San
Francisco Hilton and Towers, which attained operating income increases of $4.5
million and $2.4 million, respectively. Operating income from the New Orleans
Hilton Riverside increased $14.2 million compared to the 1994 nine month
period. This increase includes $7.3 million attributable to improved operating
performance and $6.9 million due to the impact of increased ownership of the
property.
Average room rate growth in the leisure travel segment combined with improved
occupancy produced a double digit increase in revenue per available room at the
50% owned Hilton Hawaiian Village. Operating income for the nine months
increased $2.6 million over the 1994 period. Results from the San Diego
<PAGE> 14
Hilton Beach & Tennis Resort decreased $1.6 million from 1994, reflecting a
partial closure of the property for renovation. The renovation was completed
at the end of the second quarter.
All of the Company's airport locations attained increases in average room rate
and operating income compared to the 1994 nine month period. Combined income
for the Company's wholly-owned and partially-owned airport properties increased
$4.8 million over the 1994 period.
Results at the Company's new vacation ownership facility in Orlando, Florida
were adversely impacted by slower than expected sales. Combined results from
the Company's Orlando and Las Vegas vacation ownership projects decreased $8.3
million compared to the 1994 period.
Hotel management and franchise fees for the nine month period increased $6.2
million to $67.7 million.
GAMING
Total gaming revenue for the nine month period increased three percent to
$683.3 million from $666.0 million in 1994. Casino revenue, a component of
gaming revenue, was $362.6 million in 1995 compared to $356.6 million in the
prior year. Gaming operating income decreased five percent to $115.3 million
from $121.4 million in the 1994 period.
Operating income at the Las Vegas Hilton increased $4.8 million primarily on
the strength of increased revenue per available room, which increased seven
percent compared to the 1994 nine month period. Results from the Flamingo
Hilton - Las Vegas increased $1.6 million over the prior year. Average room
rate at this property increased 14 percent over 1994 levels. Results at the
Reno Hilton increased $2.0 million in the 1995 nine month period, primarily due
to improved revenue per available room. Operating income at the Flamingo
Hilton - Laughlin decreased $2.8 million on lower occupancy, average room rate
and gaming volume. Operating income from the Flamingo Hilton - Reno was
comparable with the 1994 period.
<PAGE> 15
Results from the Company's New Orleans riverboat operations, including equity
and fee income, decreased $1.7 million from the 1994 period. The 1994 period
includes fee income from a wholly-owned riverboat which was leased to the 50%
owned joint venture.
Combined equity and fee income from the 19.9% owned Hotel Conrad and Jupiters
Casino and the Conrad International Treasury decreased $5.6 million from the
1994 nine month period. Lower table game win at the Hotel Conrad and Jupiters
Casino accounted for most of the decline. Operating income from Casino
Windsor, which opened in May 1994, increased $3.3 million.
Occupancy for the Nevada hotel-casinos was 88 percent in the 1995 period versus
92 percent last year. The average room rate for Nevada increased 10 percent.
FINANCING ACTIVITIES
Interest and dividend income increased $9.6 million to $25.1 million in 1995
primarily due to higher investment balances and yields. Consolidated interest
expense increased $13.4 million primarily due to higher average debt levels and
higher interest rates, while interest expense from unconsolidated affiliates
increased $1.7 million. The increase in consolidated interest expense includes
$4.5 million attributable to the consolidation of the New Orleans Hilton
Riverside in June 1994.
INCOME TAXES
The effective income tax rate for the 1995 period was 35.2 percent compared to
42.2 percent in 1994. The 1995 effective income tax rate benefitted from the
favorable resolution of Federal tax issues for prior years and the utilization
of foreign tax credits.
<PAGE> 16
PROPERTY TRANSACTIONS
The 1995 period 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. The gain on this transaction is 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 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 $243.0 million for the nine
months ended September 30, 1995 compared to $156.6 million in the same period
last year, due primarily to improved operating results. Working capital
decreased from $345.4 million at December 31, 1994 to $169.5 million at
September 30, 1995, principally due to a $134.9 million increase in current
maturities of long-term debt based on the timing of debt maturities over the
next year. Capital expenditures during the period totaled $151.8 million,
while new investments amounted to $73.7 million.
A number of renovation and construction projects were completed or in progress
in 1995. Improvements at the Company's gaming properties included the
completion of the luxury "Sky Villa" suites at the Las Vegas Hilton and the
completion of renovation and expansion projects at the Flamingo Hilton - Las
Vegas and Reno Hilton. April 1995 marked the opening of the 19.9% owned Conrad
International Treasury hotel-casino in Brisbane, Australia. In the third
quarter, the Company broke ground on its $86 million river casino project in
Kansas City, Missouri. In addition, it entered into agreements for the charter
of a riverboat casino to the Ontario Casino Corporation. The vessel will serve
as a complementary facility for Casino Windsor. Major renovation projects were
completed at the San Diego Hilton Beach & Tennis Resort in the second quarter
and at the Portland Hilton in September 1995. In Orlando, development of the
<PAGE> 17
first phase of a 360-unit vacation ownership resort adjacent to Sea World
was completed in August 1995.
The 50% owned joint venture which owns and operates the Flamingo Casino - New
Orleans has engaged in discussions regarding the possible sale of that
facility. This river casino currently operates adjacent to the New Orleans
Hilton Riverside.
The Company anticipates that capital expenditures and investments will total
approximately $300 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 September 30, 1995 totaled $1.1 billion compared to $1.3
billion at December 31, 1994. This reduction is due primarily to the
aforementioned increase in the current portion of long-term debt totaling
$134.9 million. During the first nine months of 1995 the Company repurchased
$61.2 million of its long-term public debt, including $28.9 million of its $200
million Series B Medium Term Notes. At September 30, 1995, $30 million in
financing under this program was still available.
The Company's long-term revolving credit facilities had an aggregate commitment
at September 30, 1995 of $597.5 million, of which $417.8 million supported the
issuance of commercial paper outstanding. Excluding the portion of the
commitment which supports the issuance of commercial paper, $156.6 million of
revolving bank debt financing was available to the Company at September 30,
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.
<PAGE> 18
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 1991 a lawsuit was initiated by Hilton International Co.
(HI) against the Company. In this action, HI alleged generally that
the development and marketing by the Company of its hotels outside
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 sought, 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.
In November 1995 the court entered its final judgment, pemitting the
Company's hotels abroad to be referred to as "Conrad International"
hotels. The court denied HI's claim for damages.
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 third quarter of fiscal
1995.
<PAGE> 19
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: November 9, 1995 /s/ STEVE KRITHIS
-------------------------------
Steve Krithis
Senior Vice President - Finance
Date: November 9, 1995 /s/ WILLIAM C. LEBO, JR.
-------------------------------
William C. Lebo, Jr.
Senior Vice President and
General Counsel
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 289,400
<SECURITIES> 88,500
<RECEIVABLES> 191,600
<ALLOWANCES> 25,800
<INVENTORY> 15,000
<CURRENT-ASSETS> 634,200
<PP&E> 2,512,900
<DEPRECIATION> 798,700
<TOTAL-ASSETS> 2,959,100
<CURRENT-LIABILITIES> 464,700
<BONDS> 1,098,300
<COMMON> 127,600
0
0
<OTHER-SE> 1,077,200
<TOTAL-LIABILITY-AND-EQUITY> 2,959,100
<SALES> 1,191,800
<TOTAL-REVENUES> 1,191,800
<CGS> 0
<TOTAL-COSTS> 921,900
<OTHER-EXPENSES> 20,500
<LOSS-PROVISION> 17,800
<INTEREST-EXPENSE> 58,000
<INCOME-PRETAX> 174,800
<INCOME-TAX> 61,600
<INCOME-CONTINUING> 109,700
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 109,700
<EPS-PRIMARY> 2.26
<EPS-DILUTED> 2.26
</TABLE>
