<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): NOVEMBER 30, 1999
HILTON HOTELS CORPORATION
(exact name of Registrant as specified in its charter)
DELAWARE 001-03427 36-2058176
(State of Incorporation) (Commission File No.) (I.R.S. Employer
Identification No.)
9336 CIVIC CENTER DRIVE, BEVERLY HILLS, CA 90210
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (310) 278-4321
N/A
(Former name or former address, if changed since last report)
<PAGE>
Item 7. Financial Statements and Pro Forma Financial Information.
This current report on Form 8-K/A amends the current report on Form 8-K
previously filed with the Commission on December 2, 1999 relating to the
Company's acquisition of Promus Hotel Corporation on November 30, 1999. The
following documents are included as part of this report:
(a) Financial Statements of Businesses Acquired.
As permitted by General Instruction B.3 of Form 8-K, the
consolidated balance sheets of Promus Hotel Corporation and
subsidiaries ("Promus") as of December 31, 1998 and 1997 and
the related consolidated statements of operations for each of
the three years ended December 31, 1998 contained in Promus'
Form 10-K for the year ended December 31, 1998 and the
consolidated balance sheets of Promus as of September 30, 1999
and the related consolidated statement of operations for the
nine months ended September 30, 1999 included in Promus' Form
10-Q for the quarter ended September 30, 1999 have been
previously reported in the Company's definitive proxy
statement filed with the Securities and Exchange Commission on
October 21, 1999.
(b) Pro Forma Financial Information.
Unaudited Pro Forma Financial Statements A-1
Unaudited Pro Forma Statements of Income for the Nine Months
Ended September 30, 1999 A-2
Unaudited Pro Forma Statements of Income for the Year Ended
December 31, 1998 A-3
Unaudited Pro Forma Balance Sheet as of September 30, 1999 A-4
Notes to Unaudited Pro Forma Financial Statements A-5
to A-7
2
<PAGE>
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 hereunto duly authorized.
Date: February 14, 2000 HILTON HOTELS CORPORATION
By: /s/ Matthew J. Hart
--------------------------
Matthew J. Hart
Executive Vice President and
Chief Financial Officer
3
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Hilton Hotels Corporation
Unaudited Pro Forma Financial Statements
The unaudited pro forma statements of income and balance sheet of Hilton
illustrate the estimated effects of the acquisition of Promus Hotel
Corporation. The unaudited pro forma balance sheet of Hilton as of September
30, 1999 presents the financial position of Hilton as if the acquisition had
been completed as of such date. The unaudited pro forma statements of income
of Hilton for the nine month period ended September 30, 1999 and the year
ended December 31, 1998 present the results of operations of Hilton as if the
acquisition had been completed as of January 1, 1998.
The unaudited pro forma statements of income and balance sheet of Hilton are
based upon the historical consolidated financial statements of Hilton and
Promus contained in each company's Annual Report on Form 10-K for the year
ended December 31, 1998 and Quarterly Report on Form 10-Q for the period
ended September 30, 1999 and should be read in conjunction with those
consolidated financial statements and related notes.
The unaudited pro forma statements of income of Hilton for the nine months
ended September 30, 1999 and the year ended December 31, 1998 give effect to
the acquisition of Promus applying the purchase method of accounting and
certain adjustments that are directly attributable to the acquisition as if
such transactions were consummated as of January 1, 1998.
The unaudited pro forma balance sheet of Hilton presents the combined
financial position of Hilton and Promus as of September 30, 1999. The
unaudited pro forma balance sheet reflects the acquisition of Promus applying
the purchase method of accounting and certain adjustments that are directly
attributable to the acquisition. Such data further assume that the
transactions described above were consummated as of September 30, 1999.
The pro forma financial data does not purport to represent what the financial
position or results of operations of Hilton would have been if the
acquisition had in fact been consummated on such date or at the beginning of
the period indicated or to project the financial position or results of
operations for any future date or period. The pro forma adjustments are based
upon available information and upon certain assumptions that Hilton
management believe are reasonable. In the opinion of management, all
adjustments necessary to present fairly the unaudited pro forma financial
information have been made.
For the purposes of preparing the financial statements of Hilton, management
will undertake a study to establish the fair value of the acquired assets and
liabilities of Promus. The allocation of the purchase price to the assets and
liabilities acquired reflected in this pro forma financial data is
preliminary. Accordingly, the actual financial position and results of
operations may differ from these pro forma amounts.
A-1
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HILTON HOTELS CORPORATION
UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
(in millions, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL MERGER PRO FORMA
HILTON (2) PROMUS (2) ADJUSTMENTS HILTON (1)
- ------------------------------------------------------------------------ ------------- ------------- ------------
<S> <C> <C> <C> <C>
Revenue Owned hotels $ 1,297 323 - 1,620
Leased hotels - 293 - 293
Management and franchise fees 76 165 - 241
Other fees and income 139 52 - 191
-------------------------------------------------------- ------------- ------------ ------------
1,512 833 - 2,345
- ------------------------------------------------------------------------ ------------- ------------ ------------
Expenses Owned hotels 851 204 - 1,055
Leased hotels - 259 - 259
Depreciation and amortization 123 62 68 (3) 253
Business combination expenses - 3 (3) (4) -
Other operating expenses 117 41 - 158
Corporate expense, net 37 22 - 59
-------------------------------------------------------- ------------- ------------ ------------
1,128 591 65 1,784
- ------------------------------------------------------------------------ ------------- ------------ ------------
Operating income 384 242 (65) 561
Interest and dividend income 39 14 - 53
Interest expense (162) (40) (99) (5) (301)
Interest expense, net, from
unconsolidated affiliates (1) (10) - (11)
Net gain on asset dispositions - 26 - 26
- ------------------------------------------------------------------------ ------------- ------------ ------------
Income from continuing operations before income tax
and minority interest 260 232 (164) 328
Provision for income taxes (105) (86) 62 (6) (129)
Minority interest, net (5) (3) - (8)
- ------------------------------------------------------------------------ ------------- ------------ ------------
Income from continuing operations $ 150 143 (102) 191
======================================================================== ============= ============ ============
Income from continuing operations per share:
Basic $ .58 .51
================= ============
Diluted $ .57 .51
================= ============
Weighted average common and equivalent shares:
Basic 258 371
================= ============
Diluted 282 395
================= ============
</TABLE>
A-2
<PAGE>
HILTON HOTELS CORPORATION
UNAUDITED PRO FORMA STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
(in millions, except per share amounts)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL MERGER PRO FORMA
HILTON (2) PROMUS (2) ADJUSTMENTS HILTON (1)
- ---------------------------------------------------------------------- ------------- ----------------------------
<S> <C> <C> <C> <C> <C>
Revenue Owned hotels $ 1,485 401 - 1,886
Leased hotels - 415 - 415
Management and franchise fees 104 218 - 322
Other fees and income 180 73 - 253
------------------------------------------------------ ------------- ------------ ------------
1,769 1,107 - 2,876
- ---------------------------------------------------------------------- ------------- ------------ ------------
Expenses Owned hotels 964 249 - 1,213
Leased hotels - 367 - 367
Depreciation and amortization 125 79 92 (3) 296
Business combination expenses - 28 - 28
Other operating expenses 152 41 - 193
Corporate expense, net 64 39 - 103
------------------------------------------------------ ------------- ------------ ------------
1,305 803 92 2,200
- ---------------------------------------------------------------------- ------------- ------------ ------------
Operating income 464 304 (92) 676
Interest and dividend income 13 21 - 34
Interest expense (137) (47) (140) (5) (324)
Interest expense, net, from
unconsolidated affiliates (4) (15) - (19)
Net gain on asset dispositions - 10 - 10
- ---------------------------------------------------------------------- ------------- ------------ ------------
Income from continuing operations before income tax
and minority interest 336 273 (232) 377
Provision for income taxes (136) (116) 87 (6) (165)
Minority interest, net (12) (3) - (15)
- ---------------------------------------------------------------------- ------------- ------------ ------------
Income from continuing operations $ 188 154 (145) 197
====================================================================== ============= ============ ============
Income from continuing operations per share:
Basic $ .71 .51
================== ============
Diluted $ .71 .51
================== ============
Weighted average common and equivalent shares:
Basic 250 364
================== ============
Diluted 278 391
================== ============
</TABLE>
A-3
<PAGE>
HILTON HOTELS CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
AS OF SEPTEMBER 30, 1999
(in millions)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL HISTORICAL MERGER PRO FORMA
HILTON PROMUS ADJUSTMENTS HILTON
- ------------------------------------------------------------------------------- ------------- -----------------------------
<S> <C> <C> <C> <C> <C>
Assets Current assets
Cash and equivalents $ 93 52 - 145
Accounts receivable, net 242 103 (4) (7) 341
Inventories 77 - - 77
Deferred income taxes 36 - 62 (8) 98
Other current assets 69 157 - 226
-------------------------------------------------------- ------------- ------------ ------------
Total current assets 517 312 58 887
Investments 328 274 47 (9) 649
Long-term receivable 625 - - 625
Property and equipment, net 2,712 953 (5) (10) 3,660
Intangible assets 50 786 2,372 (11) 3,208
Other assets 41 104 (8) (12) 137
-------------------------------------------------------- ------------- ------------ ------------
Total investments, property and other assets 3,756 2,117 2,406 8,279
-------------------------------------------------------- ------------- ------------ ------------
Total assets $ 4,273 2,429 2,464 9,166
=============================================================================== ============= ============ ============
Liabilities and Accounts payable and accrued expenses $ 371 170 13 (13) 554
stockholders' equity Current maturities of long-term debt 13 2 - 15
Income taxes payable 30 - - 30
-------------------------------------------------------- ------------- ------------ ------------
Total current liabilities 414 172 13 599
Long-term debt 3,415 750 1,843 (5) 6,008
Deferred income taxes 52 265 639 (8) 956
Insurance reserves and other 133 87 - 220
-------------------------------------------------------- ------------- ------------ ------------
Total liabilities 4,014 1,274 2,495 7,783
Stockholders' equity 259 1,155 (31) (14) 1,383
-------------------------------------------------------- ------------- ------------ ------------
Total liabilities and stockholders' equity $ 4,273 2,429 2,464 9,166
=============================================================================== ============= ============ ============
</TABLE>
A-4
<PAGE>
Hilton Hotels Corporation
Notes to Unaudited Pro Forma Financial Statements
The following table sets forth the determination and allocation of the
purchase price of Promus. Per the terms of the merger agreement, Hilton paid
$38.50 per share in cash for 55 percent of the outstanding Promus shares. The
remaining 45 percent of Promus shares were exchanged for Hilton common stock.
Each share of Promus common stock was exchanged for 3.2158 Hilton common
shares, based on an exchange ratio computation defined in the merger
agreement. For purposes of determining the purchase price in the pro forma
financial statements, a Hilton common stock price of $9.93 per share is used,
representing the average closing price for the period beginning three days
before and ending three days after the date the exchange ratio became fixed.
<TABLE>
<CAPTION>
(in millions)
--------------
<S> <C>
Cash share purchase $ 1,670
Exchange of shares 1,124
--------------
Net equity purchase price 2,794
Assumption of Promus debt 752
Transaction costs and expenses 166
--------------
$ 3,712
==============
</TABLE>
The preliminary allocation of the pro forma purchase price is as follows:
<TABLE>
<S> <C>
Investments $ 321
Property and equipment, net 948
Identifiable intangible assets 1,918
Goodwill 1,240
Other, net (715)
--------------
$ 3,712
==============
</TABLE>
(1) Pro forma results do not reflect any operational efficiencies, cost
savings associated with greater economies of scale or revenue enhancement
opportunities which Hilton expects to achieve as a result of the
acquisition. Hilton expects to realize pre-tax annual revenue
enhancements and pre-tax cost savings, including operating efficiencies,
totaling approximately $90 million upon full integration of Promus.
Hilton expects to realize approximately $55 million of benefits in 2000,
and the entire $90 million of benefits beginning in 2001. However, the
estimated benefits are based on projections and assumptions, not actual
experiences. As a result, Hilton's ability to realize these benefits
could be adversely impacted by difficulties integrating Promus into
Hilton, the inability to achieve certain economies of scale or other
risks associated with achieving projected revenues and cost savings.
Hilton cannot assure you that these revenue enhancements and cost savings
will be achieved.
A-5
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(2) There are no significant adjustments required to the historical financial
data of Promus to conform to the accounting policies of Hilton. Certain
reclassifications have been made to the historical balances of Hilton and
Promus to conform to the financial presentation of the two entities.
Hilton's rooms, food and beverage and other revenues and expenses have
been reclassified as owned hotel revenues and expenses, and depreciation
and amortization expense has been segregated. Promus' general and
administrative expenses have been reclassified as corporate and other
operating expenses. These reclassifications have no effect on historical
or pro forma operating income, income from continuing operations or
earnings per share.
(3) To adjust depreciation and amortization to reflect the revaluation of
acquired property and equipment, equity investments, identifiable
intangible assets and goodwill.
(4) To reverse direct acquisition costs included in the historical Promus
results.
(5) To record the estimated increase in interest expense and long-term debt
associated with
- the cash portion of the acquisition consideration totaling $1,670
million,
- estimated change of control and severance costs relating to
certain Promus employees,
- estimated direct acquisition costs of Hilton and Promus, and
- increased interest rates on existing indebtedness of Hilton and
Promus.
The estimated increase in interest expense for the incremental debt is
computed at an assumed weighted average borrowing rate of 6.32% for the
nine months ended September 30, 1999 and 6.81% for the year ended
December 31, 1998, representing LIBOR plus 125 basis points. Change of
control costs include contractual payments for certain Promus executives,
including option cash-outs. Severance costs include termination benefits
related to the elimination of duplicative corporate office and
operational support functions. Direct acquisition costs include
investment advisor fees and bank financing costs. Each 1/8 percent change
in the rate on this financing would result in a change in interest
expense of $2 million for the nine months ended September 30, 1999 and $2
million for the year ended December 31, 1998.
The pro forma adjustment to interest expense also includes amortization
of estimated debt issuance costs totaling $4 million for the nine months
ended September 30, 1999 and $5 million for the year ended December 31,
1998.
(6) To record the tax effect of the pro forma adjustments to depreciation and
amortization expense, and interest expense. The amortization of goodwill
is not deductible for tax purposes.
(7) To conform Promus' accounting for certain receivables associated with
purchasing and service fees to Hilton's policy.
(8) To record the deferred tax effect of the pro forma balance sheet
adjustments, primarily related to property and equipment, equity
investments, identifiable intangible assets, severance and acquisition
costs.
(9) To increase Promus' equity hotel investments to estimated fair market
value, net of the elimination of Promus common shares owned by Hilton at
September 30, 1999.
(10) To adjust Promus' property and equipment to estimated fair market value.
A-6
<PAGE>
(11) To value Promus' identifiable intangible assets at fair market value and
reflect the excess purchase price over the estimated fair value of assets
acquired and liabilities assumed. Identifiable intangible assets include
management and franchise contracts, lease agreements and acquired brands
and trademarks, and are amortized over a weighted average life of 23
years. Goodwill is amortized over 40 years.
(12) To record deferred financing costs associated with financing the cash
portion of the acquisition, net of deferred financing costs of Promus not
valued in purchase accounting, and to adjust certain other assets to
estimated fair market value.
(13) To record the accrual of certain direct acquisition costs of Hilton and
Promus.
(14) The net increase in stockholders' equity results from:
- the issuance of an estimated $1,124 million in Hilton equity
consideration in connection with the acquisition and
- the elimination of Promus' historical equity.
A-7
