<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
----------------
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 20, 1998
Hilton Hotels Corporation
------------------------------
(Exact Name of Registrant as
Specified in Charter)
Delaware 1-3427 36-2058176
---------------- ------------ --------------
(State or Other (Commission (IRS Employer
Jurisdiction of File Identification
Incorporation) Number) No.)
9336 Civic Center Drive
Beverly Hills, California 90210
--------------------------------
(Address of Principal
Executive Offices)
(310) 278-4321
----------------------------
(Registrant's telephone
number, including area code)
<PAGE>
ITEM 5. OTHER EVENTS
(a) On October 20, 1998, the Registrant announced its earnings for
the third quarter and nine months ended September 30, 1998. A copy of the
Registrant's press release is attached hereto as Exhibit 99.1 and
incorporated herein by reference.
(b) On October 14, 1998, the Registrant announced the filing with
the Securities and Exchange Commission by Park Place Entertainment
Corporation ("Park Place") of a preliminary joint proxy statement and
prospectus with respect to the proposed merger of Park Place with the
Mississippi operations of Grand Casinos, Inc. A copy of the Registrant's
press release is attached hereto as Exhibit 99.2 and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
7(c) Exhibits
--------
99.1 Press Release of Hilton Hotels Corporation, dated
October 20, 1998.
99.2 Press Release of Hilton Hotels Corporation, dated
October 14, 1998
2
<PAGE>
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 hereunto duly authorized.
HILTON HOTELS CORPORATION
Dated: October 20, 1998 By: /s/ THOMAS E. GALLAGHER
-------------------------------------------
Name: Thomas E. Gallagher
Title: Executive Vice President and
General Counsel
3
<PAGE>
[HILTON LETTERHEAD]
Contact: Marc Grossman
310-205-4030
Kathy Shepard
310-205-7676
Geoff Davis
310-205-4541
HILTON REPORTS THIRD QUARTER, NINE-MONTH RESULTS
------------------------------------------------
BEVERLY HILLS, Calif., October 20, 1998 -- Hilton Hotels Corporation
(NYSE:HLT) today reported results for the third quarter and nine months ended
September 30, 1998.
Net income for the quarter totaled $79 million, or $.30 per diluted
share, compared to $94 million, or $.35 per diluted share, last year. In an
announcement made September 14, the company had indicated that net income per
diluted share for the third quarter was expected to be in the low-30 cent
range.
Third quarter earnings before interest, taxes, depreciation,
amortization and non-cash items (EBITDA) totaled $297 million, up 8 percent
from last year's $276 million. The increase was attributable primarily to
continued strength at many of the company's owned and equity hotel properties
and EBITDA from newly acquired hotels.
Net income for the quarter was impacted by an increase in net interest
expense due primarily to higher average debt levels resulting from
acquisition spending and increased depreciation expense also related to
acquisitions.
<PAGE>
3Q Earnings
2-2-2-2
LODGING
-------
EBITDA for Hilton's lodging division in the third quarter was $159
million, an increase of 16 percent from $137 million a year ago.
Double-digit EBITDA gains were reported at most of the company's "Top Ten"
hotels, with properties in Washington, New York, Chicago and New Orleans
showing particularly strong results.
In the third quarter, Hilton's "Top Ten" hotels contributed $95 million
of EBITDA, which, on a comparable basis, represented a 15 percent increase
over the prior year. Average daily rate (ADR) increased 6 percent at these
ten hotels to $166.57 in the third quarter, with occupancy showing a
2.5-point decline to 80.7 percent, resulting in a revenue per available room
(RevPAR) increase of 3 percent. EBITDA margin at these properties continued
strong at 34 percent. Impacting results at the "Top Ten" properties was
continuing softness at the Hilton Hawaiian Village in Honolulu as a result of
adverse economic conditions in Asia, and, as reported in the September 14
announcement, a slight decline in EBITDA and RevPAR at the San Francisco
Hilton. Excluding the impact of Hawaii from the "Top Ten," EBITDA was up 21
percent, with RevPAR increasing 5.6 percent.
ADR for Hilton's other comparable U.S. owned and partially owned hotels
improved 8.6 percent to $140.99. Occupancy for this group of properties fell
4.5 points to 75.2 percent, resulting in a RevPAR increase of 2.4 percent.
Contributing to the occupancy decline was the comparatively early timing of
religious holidays that in 1997 fell in the fourth quarter, along with
post-summer business travel starting later than usual due to the timing of
Labor Day.
-more-
<PAGE>
3Q Earnings
3-3-3-3
Also impacting hotel division EBITDA, as previously announced, was
lower-than-expected management fee income from the Conrad International Hong
Kong, which is being negatively affected by the Asian economic situation.
During the quarter, Hilton announced the acquisition of two full-service
hotel properties: the 405-room Hilton East Brunswick & Towers in East
Brunswick, New Jersey, and the 585-room Pointe Hilton Tapatio Cliffs Resort
in Phoenix, Arizona. These two acquisitions bring Hilton's hotel purchases
for the year to more than $860 million.
Also in the third quarter, Hilton announced the addition of new
full-service franchised properties in Windsor and Montreal, Canada and
Guadalajara, Mexico. Hilton Garden Inn properties, the company's mid-priced
franchised product, were either opened or began construction in California,
Washington, Ohio, Washington D.C. and Calgary, Canada.
GAMING
------
Gaming division EBITDA for the third quarter of $151 million was
comparable with last year's $153 million. The flat performance, as disclosed
in the September 14 announcement, was attributable primarily to comparatively
low table game hold percentage at Bally's Park Place in Atlantic City, and
lower-than expected RevPAR at the company's Las Vegas properties as a result
of a generally sluggish Las Vegas market. Results were also impacted by a
soft quarter at the company's Reno properties due to continued difficult
market conditions.
-more-
<PAGE>
3Q Earnings
4-4-4-4
The Flamingo Hilton-Las Vegas reported EBITDA of $22 million, a 12
percent decline from $25 million a year ago. Occupancy was off 1.8 points to
87.6 percent, with ADR down 6.5 percent to $69.02. An increase in slot
handle and win helped offset a decline in table game win.
EBITDA of $20 million at Bally's Las Vegas was up 5 percent from $19
million last year. Occupancy was up slightly to 88.9 percent, while ADR
decreased 5.7 percent to $81.19. The property benefited from a significantly
improved table game win percentage, along with an increase in slot handle and
win.
The Las Vegas Hilton, coming off an exceptionally soft third quarter
1997, reported EBITDA of $11 million, compared with last year's $5 million.
Occupancy rose 3.1 points to 83.2 percent and ADR fell 10.8 percent to
$86.71. Contributing to the strong quarter at the property was a major
increase in non-baccarat table game drop and improved win percentage, coupled
with a higher baccarat win percentage compared to an abnormally low win
percentage last year.
In Atlantic City, Bally's Park Place reported EBITDA of $52 million, a
decline of 12 percent from last year's $59 million. The decline was due to
the aforementioned low table game win percentage, along with a difficult
comparison owing to the successful grand opening of "The Wild Wild West"
casino having occurred at the beginning of the third quarter 1997. EBITDA at
the Atlantic City Hilton, benefiting from the property's 300 new guest rooms
and an increase in table game drop, improved 46 percent to $19 million.
-more-
<PAGE>
3Q Earnings
5-5-5-5
NINE-MONTH RESULTS
------------------
For the nine months ended September 30, 1998, Hilton reported net income
of $262 million, or $.98 per diluted share, up from last year's $255 million,
or $.95 per diluted share. EBITDA for the nine months totaled $891 million,
a 14 percent increase over $785 million a year ago.
Hilton's lodging division reported nine-month EBITDA of $473 million, a
15 percent increase from $410 million in 1997, while the company's gaming
operations showed EBITDA of $461 million, compared with last year's $422
million -- a 9 percent increase.
SEPARATION OF BUSINESSES/GRAND CASINO MERGER
--------------------------------------------
Hilton announced further that plans were proceeding in relation to the
company's proposed separation of its gaming and lodging businesses, and the
proposed merger of the new gaming company -- to be called Park Place
Entertainment Corporation -- with the Mississippi operations of Grand
Casinos, Inc. (NYSE:GND.) It is expected that proxy materials will be mailed
to shareholders before the end of October, with each company holding its
respective shareholder meeting in late November. The transactions are on
track for an anticipated completion by year-end 1998, subject to shareholder,
regulatory and other approvals.
-more-
<PAGE>
3Q Earnings
6-6-6-6
"The majority of our large owned hotels continued to perform well due to
a continued favorable supply-demand environment, while our gaming properties
are holding their own in increasingly competitive markets," said Stephen F.
Bollenbach, president and chief executive officer. "We are confident in our
ability to withstand what will be a difficult operating environment in Las
Vegas for the next year or so, while taking advantage of prevailing economic
conditions to continue growing our lodging business."
# # #
Note: This press release contains "forward-looking statements" within the
meaning of federal securities law, including statements concerning business
strategies and their intended results, and similar statements concerning
anticipated future events and expectations that are not historical facts.
The forward-looking statements in this press release are subject to numerous
risks and uncertainties, including the effects of economic conditions; supply
and demand changes for hotel rooms; competitive conditions in the lodging and
gaming industries, relationships with clients and property owners; the impact
of government regulations; and the availability of capital to finance growth,
which could cause actual results to differ materially from those expressed in
or implied by the statements herein.
<PAGE>
HILTON HOTELS CORPORATION
SUPPLEMENTARY STATISTICAL INFORMATION
<TABLE>
<CAPTION>
HOTELS
---------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 September 30
% / PT % / PT
1998 1997 CHANGE 1998 1997 CHANGE
--------------- --------------- ------------- ------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
TOP TEN HOTELS
Occupancy 80.7% 83.2% (2.5) pts 77.7% 80.4% (2.7)pts
Average Rate $ 166.57 $ 157.05 6 % $ 174.06 $ 160.92 8 %
Revpar $ 134.47 $ 130.65 3 % $ 135.32 $ 129.45 5 %
Number of hotels - - 10 10
Number of rooms - - 15,167 15,167
OTHER U.S. OWNED AND EQUITY (1)
Occupancy 75.2% 79.7% (4.5) pts 73.1% 76.4% (3.3)pts
Average Rate $ 140.99 $ 129.84 9 % $ 142.60 $ 130.24 9 %
Revpar $ 106.04 $ 103.54 2 % $ 104.27 $ 99.48 5 %
Number of hotels - - 24 20
Number of rooms - - 9,385 7,815
U.S. MANAGED (1)
Occupancy 67.4% 71.5% (4.1) pts 70.4% 73.1% (2.7)pts
Average Rate $ 124.56 $ 116.48 7 % $ 137.23 $ 128.03 7 %
Revpar $ 83.92 $ 83.23 1 % $ 96.59 $ 93.64 3 %
Number of hotels - - 17 21
Number of rooms - - 12,220 13,680
INTERNATIONAL - MANAGED (1) (2)
Occupancy 70.3% 71.2% (.9) pts 64.4% 70.1% (5.7)pts
Average Rate $ 149.61 $ 151.84 (1) % $ 152.14 $ 154.88 (2)%
Revpar $ 105.19 $ 108.10 (3) % $ 97.95 $ 108.58 (10)%
Number of hotels - - 9 9
Number of rooms - - 3,286 3,283
FRANCHISED
Occupancy 71.6% 72.8% (1.2) pts 70.2% 71.9% (1.7)pts
Average Rate $ 95.94 $ 91.38 5 % $ 97.63 $ 91.07 7 %
Revpar $ 68.69 $ 66.56 3 % $ 68.55 $ 65.45 5 %
Number of hotels - - 187 177
Number of rooms - - 46,346 44,716
</TABLE>
(1) Operating statistics are based on a comparable hotel mix.
(2) Includes two hotels where the company has a minority interest.
<TABLE>
<CAPTION>
Gaming
---------------------------------------------------------------------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
September 30 SEPTEMBER 30
% / PT % / PT
1998 1997 CHANGE 1998 1997 CHANGE
--------------- --------------- ------------- ------------- ---------- --------
<S> <C> <C> <C> <C> <C>
Number of owned, partially owned and
managed casinos and hotel-casinos - - 15 16
Number of rooms - - 17,588 17,288
Casino square footage - - 1,067,000 1,038,000
NEVADA
Occupancy 87.5% 86.6% .9 pts 88.1% 87.8% .3 pts
Average Rate $ 67.88 $ 72.46 (6)% $ 74.28 $ 75.68 (2)%
Revpar $ 59.42 $ 62.71 (5)% $ 65.44 $ 66.43 (1)%
ATLANTIC CITY
Occupancy 96.8% 95.1% 1.7 pts 94.7% 93.1% 1.6 pts
Average Rate $ 94.76 $ 103.13 (8)% $ 83.93 $ 92.34 (9)%
Revpar $ 91.77 $ 98.07 (6)% $ 79.47 $ 85.98 (8)%
</TABLE>
<PAGE>
HILTON HOTELS CORPORATION
FINANCIAL HIGHLIGHTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
% %
1998 1997 CHANGE 1998 1997 CHANGE
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Hotels $ 662 $ 654 1% $ 2,109 $ 2,043 3%
Gaming 671 660 2 2,033 1,934 5
-------- -------- -------- -------- -------- --------
Total $ 1,333 $ 1,314 1% $ 4,142 $ 3,977 4%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
EBITDA (1)
Hotels $ 159 $ 137 16% $ 473 $ 410 15%
Gaming 151 153 (1) 461 422 9
Corporate expense, net (13) (14) (7) (43) (47) (9)
-------- -------- -------- -------- -------- --------
Total $ 297 $ 276 8% $ 891 $ 785 14%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
OPERATING INCOME
Hotels $ 126 $ 113 12% $ 382 $ 338 13%
Gaming 97 99 (2) 295 269 10
Corporate expense, net (15) (14) 7 (46) (49) (6)
-------- -------- -------- -------- -------- --------
Total operating income 208 198 5 631 558 13
Interest and dividend income 9 11 (18) 27 34 (21)
Interest expense (61) (43) 42 (164) (131) 25
Net interest from equity investments (4) (4) - (13) (13) -
-------- -------- -------- -------- -------- --------
Net interest expense (56) (36) 56 (150) (110) 36
INCOME BEFORE TAXES
AND MINORITY INTEREST 152 162 (6) 481 448 7
Provision for taxes (66) (66) - (207) (184) 13
Minority interest, net (7) (2) - (12) (9) 33
-------- -------- -------- -------- -------- --------
NET INCOME $ 79 $ 94 (16)% $ 262 $ 255 3%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
NET INCOME PER SHARE
BASIC $ .31 $ .36 (14)% $ 1.02 $ .98 4%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
DILUTED $ .30 $ .35 (14)% $ .98 $ .95 3%
-------- -------- -------- -------- -------- --------
-------- -------- -------- -------- -------- --------
</TABLE>
(1) EBITDA is earnings before interest, taxes, depreciation, amortization
and non-cash items.
<PAGE>
[HILTON LETTERHEAD]
Contact: Marc Grossman
Hilton Hotels Corporation
310-205-4030
Kathy Shepard
Hilton Hotels Corporation
310-205-7676
Jaye Snyder
Grand Casinos, Inc.
612-449-8556
HILTON, GRAND CASINOS, INC. FILE PRELIMINARY JOINT PROXY,
PROSPECTUS ON GAMING SPIN-OFF, MERGER
-- NEW GAMING COMPANY NAMED PARK PLACE ENTERTAINMENT CORPORATION --
BEVERLY HILLS, Calif., October 14, 1998--Hilton Hotels Corporation
(NYSE:HLT) and Grand Casinos, Inc. (NYSE:GND) today announced the filing with
the Securities and Exchange Commission of a preliminary joint proxy statement
and prospectus detailing Hilton's proposed separation of its lodging and
gaming operations and the new gaming company's proposed merger with Grand
Casinos' Mississippi operations. This document had previously been filed
confidentially with the SEC.
The transactions are expected to be completed by year-end 1998, subject
to shareholder, regulatory and other approvals. Hilton is in the process of
obtaining a ruling from the Internal Revenue Service that the distribution of
the shares of the new gaming company will not be taxable to Hilton or Hilton
shareholders. Additionally, Grand Casinos, Inc. will separate its
Mississippi business from its Indian casino management business in a tax-free
distribution to its shareholders. The Indian casino management business along
with various other assets will form a new publicly traded company. Grand
Casinos is in the process of obtaining a ruling from the IRS that the
distribution will not be taxable to Grand Casinos shareholders. It is
anticipated that proxy materials will be mailed to shareholders later this
month, with each company expected to hold its respective shareholder meeting
in late November. The record date for shareholders of both companies has
been moved from October 5 to October 20, 1998.
-more-
<PAGE>
Proxy
2-2-2-2
Among the information contained in the filing:
- - - The new gaming company, which will be the world's largest and most diverse
casino gaming entity, will be called Park Place Entertainment Corporation.
It will trade on the New York Stock Exchange under the proposed ticker
symbol "PPE."
- - - Park Place Entertainment's executive management team will include the
following:
- - - Stephen F. Bollenbach, chairman of the board. Mr. Bollenbach will retain
his current position as president and chief executive officer of Hilton
Hotels Corporation following the split.
- - - Arthur M. Goldberg, president and chief executive officer. Mr. Goldberg
currently is president - gaming operations for Hilton Hotels Corporation.
- - - Wallace R. Barr, executive vice president. Mr. Barr is executive vice
president - eastern region for Hilton's gaming operations.
- - - Clive S. Cummis, executive vice president - law and corporate affairs, and
secretary. Mr. Cummis currently is chairman of the law firm of Sills,
Cummis, Zuckerman, Radin, Epstein & Gross.
- - - Mark Dodson, executive vice president. Mr. Dodson currently is executive
vice president and treasurer for Hilton Gaming Corporation.
- - - Scott A. LaPorta, executive vice president and chief financial officer.
Mr. LaPorta currently is senior vice president and treasurer for Hilton
Hotels Corporation.
Additionally, Grand Casinos chairman Lyle Berman will serve on Park Place
Entertainment's Board of Directors and current Grand Casinos president and
CEO Thomas Brosig will be in charge of Park Place's
Mississippi-Louisiana-Missouri operations.
Hilton also announced that upon the split, Matthew J. Hart, executive vice
president and chief financial officer for Hilton Hotels Corporation, will
also assume the responsibilities of treasurer for the lodging company.
-more-
<PAGE>
Proxy
3-3-3-3
- - - New long-term employment agreements, the details of which are contained in
the preliminary proxy statement/prospectus, will be entered into with
Messrs. Bollenbach and Goldberg. The agreements, which are primarily
stock-option based and therefore aligned with the interests of the
shareholders, include cash compensation (base salary plus bonus),
incentive (or "performance") stock options, other standard benefits and
non-compete agreements.
Following completion of the transactions, Hilton Hotels Corporation will
maintain its position as one of the world's foremost lodging companies. The
company owns, manages or franchises approximately 260 hotels in the United
States, including ownership of some of the world's most renowned properties,
such as the Waldorf=Astoria, Hilton San Francisco and Towers, Hilton Hawaiian
Village and Chicago's Palmer House Hilton. Hilton will continue to pursue a
growth strategy centered on acquiring full-service hotels in markets seeing
little new supply. So far this year, Hilton has purchased approximately $860
million of hotel properties at attractive prices. The company also will
continue aggressively building its franchise program in the U.S., Canada and
Mexico, which includes the company's successful Hilton Garden Inn program,
which is expected to have 200 hotels open or under contract by 2000.
Additionally, Hilton will focus on enhancing the worldwide presence of its
brand name through the company's strategic alliance with Hilton
International. Pro forma 1997 EBITDA for Hilton's lodging business was $497
million, with pro forma 1998 EBITDA (through June 30) of $295 million.
Park Place Entertainment Corporation will be the world's largest (as measured
by revenues) and most diverse gaming company. In 1999, the company will
have 18 gaming properties with a total of 1.4 million square feet of casino
space and more than 23,000 hotel rooms. Park Place will be the only casino
gaming company with a leading presence in Las Vegas, Atlantic City and
Mississippi -- the three largest gaming markets in the U.S. -- along with
casinos in Louisiana, Missouri, Australia, Uruguay and other Nevada markets.
As a leading participant in the rapidly consolidating gaming business, Park
Place's growth strategy will focus on strategic acquisitions and new
development. As an example of the latter, the company's new $760 million
Paris Casino Resort ($400 million expended to date) is scheduled to open in
fall 1999 on the Las Vegas Strip adjacent to Bally's Las Vegas. Through its
significant presence in the largest gaming markets, the origination of Park
Place's cash flows will be geographically diverse. Pro forma EBITDA for Park
Place Entertainment (including Grand Casinos' Mississippi operations) for the
12 months ended June 30, 1998 was $681 million, with debt of $2.2 billion.
-more-
<PAGE>
Proxy
4-4-4-4
NOTE: This press release contains "forward-looking statements" within the
meaning of federal securities law, including statements concerning business
strategies and their intended results, and similar statements concerning
anticipated future events and expectations that are not historical facts.
The forward-looking statements in this press release are subject to numerous
risks and uncertainties, including the effects of economic conditions; supply
and demand changes for hotel rooms; competitive conditions in the lodging and
gaming industries, relationships with clients and property owners; the impact
of government regulations; and the availability of capital to finance growth,
which could cause actual results to differ materially from those expressed in
or implied by the statements herein.
# # #
