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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 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)
DELAWARE 36-2058176
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR IDENTIFICATION NUMBER)
ORGANIZATION)
9336 CIVIC CENTER DRIVE 90210
BEVERLY HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE
OFFICES)
Registrant's telephone number, including area code: (310) 278-4321
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, par value $2.50 per share New York, Pacific
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Based upon the February 29, 1996 New York Stock Exchange closing price of
$93.75 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $3.1 billion.
On that date, there were 48,720,634 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1995 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
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PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation and its majority and wholly-owned subsidiaries are
collectively referred to as "Hilton" or the "Company," unless the context
indicates otherwise. The Company is primarily engaged in the ownership and
management of hotels and hotel-casinos. All of these properties are located in
the United States, with the exception of six hotels and three hotel-casinos
operated by the Company's wholly-owned subsidiary, Conrad International Hotels
Corporation and its subsidiaries ("Conrad International").
On February 1, 1996, Hilton owned or leased and operated 23 hotels and
managed 44 hotels partially or wholly-owned by others. In addition, 164 hotels
were operated under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names
by others pursuant to franchises granted by a subsidiary of Hilton.
Eight of the hotels have substantial gaming operations, five of which are
wholly-owned by the Company and are located in Nevada and the other three hotels
are partially owned by the Company and are located in Australia and Turkey. The
Company also partially owns and manages one river casino in the United States
and owns a minority interest in a company which operates one casino in Canada.
The Company's gaming operations accounted for approximately 71%, 58% and 50% of
its total operating income in 1993, 1994 and 1995, respectively. For additional
information, see the Ten Year Summary on pages 58 and 59 in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1995 (the
"Stockholders Report"), which report is included as Exhibit 13 hereto and, to
the extent specific references are made thereto, incorporated herein by such
references.
The Company, along with other entities in which the Company has an
investment, is also engaged in various other activities incidental or related to
the operation of hotels and hotel-casinos. See "Additional Information."
Hilton was organized in the State of Delaware on May 29, 1946. Its principal
executive offices are located at 9336 Civic Center Drive, Beverly Hills,
California 90210, and its telephone number is (310) 278-4321.
RECENT DEVELOPMENTS
Since January 1, 1995, the Company took advantage of various opportunities
to expand its business, the most significant of which included the opening of
new vacation ownership resorts in Las Vegas, Nevada and Orlando, Florida; the
completion of the third of three new 12,600 to 15,400 square foot "Sky Villa"
luxury suites at the Las Vegas Hilton; the opening of the 136-room Conrad
International Treasury hotel-casino in Brisbane, Australia; chartering a river
casino to serve as a complementary facility for Casino Windsor in Windsor,
Ontario, Canada; the management of a 294-room hotel in Durango, Colorado, a
260-room hotel in Hurghada, Egypt and a 412-room hotel in Barcelona, Spain; and
the announcement of a major expansion of Hilton Garden Inn properties. The
Company also announced in January 1996 that it would not proceed with the
proposed spin-off of its gaming operations.
For a more detailed description of the Company's recent developments, see
"Hotel Operations," "Gaming Operations" and "Additional Information -- Vacation
Ownership" below. For a description of the Company's planned expansion
activities, see "Hotel Operations -- Expansion Program" and "Gaming Operations
- -- Expansion Program" below.
INDUSTRY SEGMENTS
Hilton's revenues and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned or leased
hotels, management and franchise fees and operating income from unconsolidated
affiliates and (ii) gaming operations, which include the operation of Hilton's
owned hotel-casinos and management fees and operating income from partially
owned hotel-casinos and river casinos. For financial data relating to the
Company's hotel and gaming operations for the three years ended December 31,
1995, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 55 and 56 in the Stockholders Report.
The Company re-entered the international arena in November 1985, with the
opening of a hotel-casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
Ireland, England, Hong Kong, Turkey, Belgium, Australia, Spain and Egypt. To
date, the amounts of revenues, operating profits and identifiable assets
attributable to geographic areas, other than the United States, have not been
material.
HOTEL OPERATIONS
OWNED HOTELS
On February 1, 1996, the following hotels were owned in fee and operated by
Hilton:
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1996
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Atlanta Airport Hilton & Towers 503 1960 $50,000,000
Atlanta, Georgia(1) (1989)
Palmer House Hilton 1,639 1988 --
Chicago, Illinois(2) (1925; 1945)
Flamingo Hilton-Las Vegas 3,642
Las Vegas, Nevada (various 1971 --
dates
through 1995)
Las Vegas Hilton 3,174
Las Vegas, Nevada (various 1971 --
dates
through 1995)
Flamingo Hilton-Laughlin 2,000 1990 --
Laughlin, Nevada (1990)
New Orleans Airport Hilton 317 1959 $32,000,000
New Orleans, Louisiana(1) (1989)
Waldorf=Astoria 1,380 1977 --
New York, New York(3) (1931)
Portland Hilton 455 1963 --
Portland, Oregon (1963)
Flamingo Hilton-Reno 604 1981 --
Reno, Nevada(4) (1978)
Reno Hilton 2,001 1992 --
Reno, Nevada (1978)
Hilton Garden Inn 195 1993 --
Southfield, Michigan(5) (1988)
Hilton Suites 224 1991 --
Auburn Hills, Michigan (1991)
Hilton Suites 203 1989 --
Brentwood, Tennessee (1989)
Hilton Suites 230 1989 --
Orange, California (1989)
Hilton Suites 226 1990 --
Phoenix, Arizona (1990)
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(1) The Atlanta Airport Hilton & Towers and the New Orleans Airport Hilton were
closed and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.
2
(2) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
acquiring the property in February 1988.
(3) The Company operated the Waldorf=Astoria under a lease from February 1950
until acquiring the property in April 1977.
(4) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.
(5) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.
LEASED HOTELS
Hilton leases the land upon which eight hotels have been built. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 56 in the Stockholders
Report. Hilton, in all cases, owns all furniture and equipment, is responsible
for repairs, maintenance, operating expenses and lease rentals, and retains
complete managerial discretion over operations. Generally, Hilton pays a
percentage rental based on the gross revenues of the facility, but in some
instances the rental is a fixed amount.
On February 1, 1996, the following hotels were leased and operated by
Hilton:
NUMBER OF
ROOMS (YEAR OF
INITIAL COMPLETION;
YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
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Logan Airport Hilton 516 2014, with renewal options aggregating 25 years
Boston, Massachusetts(1) (1959; 1988) under specified circumstances
O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)
Oakland Airport Hilton 363 2033
Oakland, California (1970; 1970)
Pittsburgh Hilton & Towers 712 2004, with renewal options aggregating 30 years
Pittsburgh, Pennsylvania (1959; 1959)
San Diego Hilton Beach & Tennis 357 2019
Resort (1962; 1965)
San Diego, California
San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)
Seattle Airport Hilton 173 2004, with renewal options aggregating 30 years
Seattle, Washington (1961; 1961)
Tarrytown Hilton 236 2003, with renewal options aggregating 40 years
Tarrytown, New York(3) (1961; 1993)
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(1) The Company managed and was a joint venture partner with respect to the
Logan Airport Hilton from 1975 until July 1988, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
(2) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.
3
(3) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the remaining
equity interest in the joint venture leasing the land underlying the hotel.
During the three years ended December 31, 1995, Hilton paid aggregate
rentals, including rentals attributable to the properties listed in the above
table, of $11,300,000, $13,300,000 and $15,300,000, respectively. For
information relating to minimum rental commitments in the future, see "Leases"
in the Notes to the Company's Consolidated Financial Statements on page 56 in
the Stockholders Report.
MANAGED HOTELS
On February 1, 1996, Hilton operated 35 domestic hotels and nine
international hotels under management agreements. Under its standard management
arrangement, Hilton operates a hotel for the benefit of its owner, which either
owns or leases the hotel and the associated personal property. Hilton's
management fee is generally based on a percentage of each hotel's gross revenues
plus, in the majority of properties, an incentive fee based on operating
performance.
Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an equity
interest. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 48 and 49 in
the Stockholders Report.
The Company has also agreed to provide loans or additional investments to
the owners of certain managed hotels under specified circumstances. See
"Commitments and Contingent Liabilities" in the Notes to the Company's
Consolidated Financial Statements on page 57 in the Stockholders Report.
On February 1, 1996, the following hotels were operated by Hilton under
management agreements:
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------- ------------------------------------------------------------------------
DOMESTIC
Anaheim Hilton & Towers 1,576 2014, with renewal options aggregating 30 years,
Anaheim, California(1) (1984) subject to certain termination rights
Anchorage Hilton 591 2006, with renewal options aggregating 20 years
Anchorage, Alaska (various dates
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10 years
Atlanta, Georgia (1976)
Beverly Hilton 581 2007, with renewal options aggregating 20 years,
Beverly Hills, California (1955; 1967) subject to certain termination rights
Chicago Hilton & Towers 1,543 2005, with renewal options aggregating 20 years
Chicago, Illinois(2) (various dates
through 1986)
Tamarron Hilton Resort 294 2015, subject to certain termination rights
Durango, Colorado (1975)
Brunswick Hilton & Towers 405 2013, subject to certain termination rights
East Brunswick, New Jersey(1) (1989)
Hilton Hawaiian Village 2,542 1997, with renewal options aggregating 20 years
Honolulu, Hawaii(3) (various dates
through 1988)
4
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------- ------------------------------------------------------------------------
Long Beach Hilton 393 2012, with renewal options aggregating 20 years,
Long Beach, California (1992) subject to certain termination rights
Los Angeles Airport Hilton & Towers 1,234 1999, with renewal options aggregating 10 years,
Los Angeles, California (1983) subject to certain termination rights
McLean Hilton 458 2007, with renewal options aggregating 20 years
McLean, Virginia(2) (1987)
Fontainebleau Hilton Resort & Towers 1,206 1998, with a renewal option for 10 years, subject
Miami, Florida (1954) to certain termination rights
Miami Airport Hilton & Towers 500 2004, with renewal options aggregating 20 years
Miami, Florida(2) (1983)
Minneapolis Hilton & Towers 814 2012, with renewal options aggregating 20 years,
Minneapolis, Minnesota (1992) subject to certain termination rights
Newark Airport Hilton 374 2003
Newark, New Jersey (1988)
New Orleans Hilton Riverside & Towers 1,600 2007, with a renewal option for 10 years
New Orleans, Louisiana(4) (1977; 1983)
Millenium Hilton 561 2004, with a renewal option for 10 years, subject
New York, New York (1992) to certain termination rights
New York Hilton & Towers 2,041 (5)
New York, New York(3) (1963)
Turtle Bay Hilton Golf & Tennis 485 2004, with a renewal option for 10 years
Resort (1972)
Oahu, Hawaii
Hilton at Walt Disney World 814 2003, with renewal options aggregating 20 years,
Orlando, Florida(1) (1983) subject to certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10 years, subject
Pasadena, California (1970) to certain termination rights
The Pointe Hilton Resort on 636 2012, with renewal options aggregating 20 years,
South Mountain (1986) subject to certain termination rights
Phoenix, Arizona
The Pointe Hilton Resort at Squaw 563 2012, with renewal options aggregating 20 years,
Peak (1977) subject to certain termination rights
Phoenix, Arizona
The Pointe Hilton Resort at 585 2012, with renewal options aggregating 20 years,
Tapatio Cliffs (1982) subject to certain termination rights
Phoenix, Arizona
Rye Town Hilton 438 (5)
Rye Brook, New York(3) (1973; 1978)
Hilton Palacio del Rio 481 1998, with a renewal option for 10 years
San Antonio, Texas (1968)
5
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------- ------------------------------------------------------------------------
San Antonio Airport Hilton 387 2001, subject to certain termination rights
San Antonio, Texas(1) (1982)
San Francisco Hilton & Towers 1,895 2005, with a renewal option for 10 years
San Francisco, California(3) (various dates
through 1988)
Hilton at Short Hills 300 2000, with a renewal option for 5 years, subject
Short Hills, New Jersey (1988) to certain termination rights
Innisbrook Hilton Resort 873 2013, subject to certain termination rights
Tarpon Springs, Florida(1) (1972)
Hilton Waikoloa Village 1,238 2013, subject to certain termination rights
Waikoloa, Hawaii(2) (1988)
Capital Hilton 543 2005, with a renewal option for 10 years
Washington, D.C.(3) (1943; 1985)
Washington Hilton & Towers 1,123 (5)
Washington, D.C.(3) (1965)
Hilton Suites 212 2009, with renewal options aggregating 20 years
Oakbrook Terrace, Illinois(1)(3) (1989)
Hilton Garden Inn 152 2012, subject to certain termination rights
Valencia, California(2) (1991)
INTERNATIONAL
Conrad International Barcelona 412 2007, with a renewal option for 5 years
Barcelona, Spain(1) (1992)
Conrad International Treasury 136 2010
Brisbane, Australia(2) (1995)
Conrad International Brussels 269 2013, with renewal options aggregating 20 years
Brussels, Belgium (1993)
Conrad International Dublin 191 2010, with renewal options aggregating 20 years
Dublin, Ireland(1)(2) (1989)
Conrad International Hong Kong 513 2021
Hong Kong(2) (1990)
Conrad International Hurghada 260 2015, with renewal options aggregating 20 years,
Hurghada, Egypt (1994) subject to certain termination rights
Conrad International Istanbul 620 2011, with a renewal option for 20 years
Istanbul, Turkey(1)(2) (1992)
Conrad International London 159 2016, with renewal options aggregating 20 years
London, England (1990)
Hotel Conrad & Jupiters Casino 605 2010
Gold Coast, (1986)
Queensland, Australia(2)
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(1) Hilton has made loans to the owners of each of the referenced properties.
(2) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 48 and 49 in the
Stockholders Report.
6
(3) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See note 2 above.
(4) Hilton has a 67.4% equity interest in the joint venture which owns the New
Orleans Hilton Riverside & Towers. See note 2 above.
(5) The management agreements with respect to each of the referenced properties
expired on December 31, 1995, but Hilton continues to manage each of the
properties for the fees specified in the expired agreements.
FRANCHISE HOTELS
Pursuant to franchises granted by the Company, franchise hotels are operated
under the "Hilton," "Hilton Garden Inn" or "Hilton Suites" names. The franchise
hotels operated under the "Hilton" name are generally smaller than the full
service hotels owned, leased or managed by Hilton and average approximately 250
rooms in size. Franchise hotels bearing the "Hilton Garden Inn" name are
approximately 90 to 250 rooms in size and utilize a modular design constructed
around a courtyard containing an indoor or outdoor swimming pool. The "Hilton
Suites" properties operated pursuant to franchise agreements utilize an
all-suites design with approximately 200 to 250 suites. In each instance, Hilton
approves the plan for and the location of franchise hotels and assists in their
design.
On February 1, 1996, there were 164 franchise hotels operated by others, of
which 160 were operated under the "Hilton" name, three were operated under the
"Hilton Garden Inn" name and one was operated under the "Hilton Suites" name. In
general, each franchisee pays Hilton an initial fee based on the number of rooms
in a franchise hotel and a continuing fee based on a percentage of the
facility's room revenues. Although Hilton does not directly participate in the
management or operation of franchise hotels, it conducts periodic inspections to
ensure that Hilton's standards are maintained and renders advice with respect to
hotel operations.
The Company has continued its ongoing program of monitoring and improving
its franchise operations. The Company added six franchises to its system in
1995, while five franchise arrangements were terminated, several due to
noncompliance with the Company's standards.
EXPANSION PROGRAM
In January 1996, Hilton announced plans for a major expansion of Hilton
Garden Inn properties. Hilton plans to add up to 100 new Hilton Garden Inns over
the next five years. Approximately 80% of the additional Hilton Garden Inns are
anticipated to be newly constructed facilities, with the remainder to be
conversions of existing properties. The properties constructed during the first
phase of the Hilton Garden Inns expansion are expected to be financed by Hilton,
either solely or with local partners.
Hilton also intends to expand its domestic operations through conversion of
existing hotels into management and franchise properties in strategically
significant markets and through development and management of vacation ownership
resorts. The Company will invest in new domestic hotel projects or conversion
properties where the return on investment meets the Company's criteria.
The Company is actively exploring international hotel opportunities, with
particular emphasis on city center business hotels and resort hotels. These
international properties will generally be operated under the Conrad
International name pursuant to long-term management agreements. In certain
instances, the Company may invest in or make advances to the entity that owns a
hotel. The Company has entered into management contracts to operate the
following new hotels, the anticipated opening dates of which are indicated
parenthetically: the 350-room Conrad International Sharm El Sheikh in Egypt
(fall 1996); the 510-room Conrad International Singapore (fall 1996); the
700-room Conrad International Jakarta in Indonesia (1998); the 400-room Conrad
International Amman in Jordan (1998); and the 400-room Conrad International
Bangkok in Thailand (1999).
Negotiations relating to the management of other international hotels are in
varying stages and, in certain instances, letters of intent for management
contracts have been executed. However, no assurances can be given that
management contracts for such other hotels will be executed or that such other
hotels will be constructed and, thereafter, operated by the Company.
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The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally. Certain countries
have also restricted, from time to time, the repatriation of funds. The Company
considers the foregoing factors, among others, when evaluating a management
and/or investment opportunity abroad, but the Company can give no assurances
that changes in law or governmental policy will not adversely affect
international operations in the future.
TERRITORIAL RESTRICTIONS
Hilton has entered into various agreements which restrict its right to
operate hotels in various areas, including those hereinafter described which, in
management's opinion, represent the most significant restrictions to which the
Company is subject. In addition, pursuant to an agreement entered into at the
time of Hilton's distribution on December 1, 1964 to its stockholders of all the
issued and outstanding capital stock of Hilton International Co., as
subsequently amended, Hilton may not operate facilities outside the United
States identified as "Hilton" hotels and Hilton International Co. may not
operate facilities within the continental United States identified as "Hilton"
hotels. The Company's international hotel and hotel-casino operations are
conducted under the Conrad International name. See "Hotel Operations" and
"Gaming Operations -- International Hotel-Casinos." Subject to the foregoing
restrictions as to the use of the "Hilton" name, Hilton and Hilton International
Co. can compete in all, and do compete in certain, markets. The Compass
computerized reservation system utilized by Hilton and Hilton International Co.
provides information as to their respective hotels, if any, in each market. See
"Additional Information -- Computer Systems" and "Reservation System."
The Company, under the terms of expired agreements with The Prudential
Insurance Company of America ("Prudential"), had agreed (a) that, except for the
New York Hilton & Towers and the Waldorf=Astoria (or the ownership, operation
and management of a substitute hotel having substantially the same number of
rooms) and a hotel with not more than 1,600 rooms, the Company would not own,
operate, manage or otherwise have an interest in any hotel or similar
establishment in the Borough of Manhattan, (b) that, except for the Washington
Hilton & Towers and the Capital Hilton (or the ownership, operation and
management of substitute hotels having substantially the same number of rooms),
the Company would not own, operate, manage or otherwise have an interest in any
other hotel or similar establishment in the District of Columbia, and (c) that
the Company would not own, operate, manage or otherwise have an interest in any
additional hotels or similar establishments within a radius of 20 miles of the
Rye Town Hilton, except that certain areas within said 20 mile radius have been
excluded from the territorial restriction. The Company has also entered into an
agreement with Prudential which provides that, except for the Chicago Hilton &
Towers, the Palmer House Hilton, the O'Hare Hilton and specified other
properties, the Company would not manage or operate, or possess an ownership
interest in, or license or franchise, any hotel in Chicago, except the ownership
and/or management of a hotel with less than 800 rooms at the O'Hare
International Airport and a hotel with not more than 400 rooms at any other
location in Chicago.
PROPERTY TRANSACTIONS
In 1995, the Company recorded a $1,500,000 pretax gain from property
transactions primarily as a result of the sale of land to Hilton Grand Vacations
Company for its vacation ownership resort located adjacent to the Flamingo
Hilton-Las Vegas. Gains on this transaction are being recognized on an
installment basis. See "Additional Information -- Vacation Ownership."
Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenues and
a favorable return on stockholders' equity.
FOREIGN CURRENCY TRANSACTIONS
The Company's international operations are subject to certain economic and
political risks, including foreign currency fluctuations. The Company monitors
its foreign operations and, where appropriate, adopts
8
hedging strategies to minimize the impact of changing economic and political
environments. See "Financial Instruments" in the Notes to the Company's
Consolidated Financial Statements on pages 50 and 51 in the Stockholders Report.
GAMING OPERATIONS
NEVADA HOTEL-CASINOS
The Company owns and operates five hotel-casinos in the State of Nevada: the
3,174-room Las Vegas Hilton, the 3,642-room Flamingo Hilton-Las Vegas, the
2,000-room Flamingo Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room
Flamingo Hilton-Reno.
The Las Vegas Hilton is located adjacent to the Las Vegas Convention Center
and focuses on up-scale individual leisure guests and convention groups. The
Flamingo Hilton-Las Vegas, the Reno Hilton and the Flamingo Hilton-Reno focus
primarily on the middle market, in particular the group tour and travel segment.
The Flamingo Hilton-Laughlin targets the budget and middle market segments. Each
of the Company's hotel-casinos has gaming, convention, dining, shopping,
entertainment and, with the exception of the Flamingo Hilton-Reno, indoor and
outdoor recreational facilities. A variety of popular entertainment is featured
in theaters and lounges at each hotel. The Company also operates a vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas. See "Additional
Information -- Vacation Ownership."
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1995, the Las
Vegas Hilton completed construction of the third of three new 12,600 to 15,400
square foot "Sky Villa" luxury suites for premium players. The Las Vegas Hilton
also completed new VIP baccarat facilities and opened a new 6,800 square foot
luxury European Suite. The Flamingo Hilton-Las Vegas completed an extensive
expansion and renovation project, including a new 600-room tower, a 10,000
square foot casino expansion, a new 21,000 square foot ballroom, remodeling of
the race and sports book, new entertainment, recreation, retail and dining
facilities, exterior enhancements and guest room renovations. The Flamingo
Hilton-Laughlin upgraded its guest room bathrooms and continued its slot machine
replacement program. The Reno Hilton completed a renovation of its casino and
the registration, entertainment and retail areas of the property, and opened a
new Johnny Rockets restaurant. The Flamingo Hilton-Reno renovated its casino and
remodeled the Top of the Flamingo Hilton restaurant.
The space utilized by the Company's casinos in Nevada, in terms of
approximate square footage, is as follows: Las Vegas Hilton -- 78,000 square
feet (inclusive of 29,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 74,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 58,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 118,000 square feet
(inclusive of 12,000 square feet attributable to the race and sports book); and
Flamingo Hilton-Reno -- 46,000 square feet (inclusive of 2,500 square feet
attributable to the race and sports book).
Each of the hotel-casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, big "6," baccarat, poker, keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.
It is impracticable for Hilton's hotel-casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment in the hotels, and occupancy rates in the hotels and in the Las
Vegas, Laughlin and Reno markets. The amount of revenues from gaming operations
varies depending upon the amount of gaming activity as well as variations in the
odds for different games and the factor of chance. Casino activities are
conducted by experienced personnel who are supervised at all times.
9
As in the case of any business extensively involved in the handling of cash,
gaming operations at the Company's hotel-casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all five Nevada properties are monitored by computers.
The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las Vegas,
the Flamingo Hilton-Reno and the Reno Hilton invite VIP customers to their
casinos and may pay for or reimburse the cost of their air transportation and
provide them with complimentary rooms, food and beverage. In addition, the Las
Vegas Hilton and the Reno Hilton have instituted special flight programs,
pursuant to which free air transportation on Company owned or chartered aircraft
and complimentary rooms, food and beverage are provided to groups or selected
persons. These persons either have established casino credit limits or cash on
deposit in the casinos and have previously evidenced a willingness to put
substantial amounts at risk at the casinos. The special flight programs are
sometimes referred to as junkets. The Las Vegas Hilton and the Reno Hilton
hosted 11 and 13 special flight programs in 1995, compared to nine and 27 such
programs in 1994, respectively.
Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations. As is customary in the Nevada gaming
industry, activities are conducted on a credit as well as a cash basis, in
accordance with procedures established and supervised by management.
Fluctuations in collecting casino receivables could have a material effect on
results of operations of these properties. An allowance is provided for
estimated uncollectible casino receivables. Casino receivables aggregated
$47,900,000, subject to a $7,600,000 (approximately 16%) reserve, at December
31, 1993; $69,100,000, subject to a $16,000,000 (approximately 23%) reserve, at
December 31, 1994; and $87,300,000, subject to a $13,500,000 (approximately 15%)
reserve, at December 31, 1995.
INTERNATIONAL HOTEL-CASINOS
The Company, through Conrad International, manages three international
hotel-casinos which feature table games and slot machines similar to those
offered at the Company's hotel-casinos in Nevada.
In April 1995, the Company commenced operation of the 136-room Conrad
International Treasury in Brisbane, Australia. This hotel-casino features a
65,000 square foot casino and has the exclusive right to conduct casino gaming
in Brisbane until 2005. The Company has a 19.9% ownership interest in this
property.
The Company also has a 19.9% ownership interest in the 605-room Hotel Conrad
& Jupiters Casino, which opened in 1985. This hotel-casino is located on the
Gold Coast in Queensland, Australia, and features a 70,000 square foot casino.
This property had the exclusive right to conduct casino gaming on Queensland's
Gold Coast through 1995.
The Company has a 25% ownership interest in the 620-room Conrad
International Istanbul, which opened in 1992. This hotel-casino includes a
12,000 square foot casino.
CASINO WINDSOR
The Company and the other two shareholders of Windsor Casino Limited ("WCL")
operate the Casino Windsor, an interim 50,000 square foot casino in Windsor,
Ontario, Canada. The Company, through Conrad International, owns a 33.3%
interest in WCL, which operates this project for the Ontario provincial
government. The Company anticipates that the interim casino will be replaced by
a permanent facility in early 1998, which will include a hotel of approximately
400 rooms, a 75,000 square foot casino, entertainment and meeting facilities.
Since December 1995, the Company has chartered a river casino to the Ontario
provincial government to serve as a complementary facility for Casino Windsor.
This vessel provides an additional 25,000 square feet of casino space for the
property.
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NEW ORLEANS RIVER CASINO
Since February 1994, the Company has operated a river casino located
adjacent to the New Orleans Hilton Riverside & Towers. The Company currently
operates a 1,500 passenger vessel which has a 20,000 square foot casino
featuring table games and slot machines similar to those offered at the
Company's hotel-casinos. This vessel is wholly-owned by the Company and leased
to a joint venture, of which the Company owns a 50% interest.
EXPANSION PROGRAM
In January 1995, the Company and Paramount Parks Inc. ("Paramount")
announced plans to build a 65,000 square foot attraction to be called "Star
Trek: The Experience at the Las Vegas Hilton." This attraction is scheduled to
open in spring 1997 and will feature a motion-based simulation ride, interactive
video and virtual reality stations, dining and souvenir shops. The building
housing the Star Trek attraction will be owned by the Company and leased to
Paramount. The attraction will also be managed by Paramount. In conjunction with
the Star Trek attraction, the Company plans to construct a themed 22,000 square
foot casino addition at the Las Vegas Hilton, which is also scheduled to open in
spring 1997.
In 1996, the Las Vegas Hilton plans to rebuild its marquee sign and renovate
700 of its guest rooms. The Flamingo Hilton-Las Vegas plans to complete a new
main entrance to the property and renovate the registration area. The Flamingo
Hilton-Laughlin plans to renovate 1,000 of its guest rooms, refinish the
exterior facade and continue its slot machine replacement program. At the Reno
Hilton, renovation of restaurants, meeting rooms and guest rooms are planned.
The Flamingo Hilton-Reno plans to renovate guest rooms and open a Benihana
restaurant.
The government of Uruguay has selected Conrad International and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, will
include a 38,000 square foot casino. Conrad International will manage and have
an equity interest of approximately 43% in the hotel-casino. The casino is
scheduled to open in early 1997 and the hotel is expected to commence operations
in late 1997.
Conrad International has entered into an agreement to develop and operate a
700-room hotel-casino in Cairo, Egypt. This property will feature a 17,000
square foot European-style casino. Conrad International will manage and have a
10% equity interest in the hotel-casino, which is scheduled to open in late
1997.
The Company is also developing a river casino in Kansas City, Missouri. The
Company will manage and own a 90% interest in this project, which will include a
30,000 square foot casino on a continuously docked 130,000 square foot barge,
concessions and entertainment facilities. Subject to the receipt of all required
gaming licenses and permits, this project is scheduled to open in mid-1996. The
Company also plans to build a 260-room hotel adjacent to the river casino, which
is scheduled to open in mid-1997.
The New Jersey Casino Control Commission has granted the Company's request
for a Statement of Compliance, finding that the Company satisfies all
non-facility related criteria for a casino license in Atlantic City, New Jersey.
At present, the Company does not own, nor has the Company entered into any
agreement to manage, a hotel-casino property in Atlantic City. See "Additional
Information -- Regulation and Licensing -- New Jersey Gaming Laws."
ADDITIONAL INFORMATION
VACATION OWNERSHIP
The Company owns a 50% interest in the Hilton Grand Vacations Company joint
venture ("HGVC"), which currently operates 12 vacation ownership resorts in
Florida and one in Nevada. In January 1995, HGVC commenced operation of a
200-unit vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas. In
August 1995, HGVC also commenced operation of the first phase of a 360-unit
vacation ownership resort adjacent to Sea World in Orlando, Florida.
Development, construction and certain operating costs of HGVC's projects in Las
Vegas and Orlando have been substantially funded by the Company in the form of
revolving loan facilities. HGVC is actively seeking new development and
acquisition opportunities in other resort locations.
11
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly-owned subsidiary, Hilton Equipment Corporation,
and through its hotels division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies to hotels and
hotel-casinos owned, leased or managed by Hilton and to hotels franchised by
Hilton or owned and operated by others. The revenues of this operation depend
primarily on the number of new hotels operated or franchised by Hilton and on
refurbishing and remodeling of existing Hilton hotels.
COMPUTER SYSTEMS
Compass Computer Services, Inc. ("Compass"), 50% of which is owned by Hilton
and the balance by Budget Rent-A-Car, Inc., operates a computerized reservation
system for, among other things, hotel reservations. This system also provides
Hilton with certain statistical data and registration packets. Compass is being
managed by Litton Computer Services.
RESERVATION SYSTEM
The Compass computerized reservation system is presently utilized by Hilton
Service Corporation, the operator of a worldwide system of reservation offices
for hotels operated by Hilton, Hilton International Co., their affiliates and
others. Hilton Service Corporation is owned 51% by Hilton and 49% by Hilton
International Co.
MARKETING
Hotel occupancy at Hilton's metropolitan and airport properties is derived
primarily from the convention and meeting market and the business traveler
market (businesspersons traveling as individuals or in small groups). Hotel
occupancy at the Company's resort properties is derived primarily from the tour
and leisure market (tourists traveling either as individuals or in groups) and
the convention and meeting market. Hotel occupancy at the Company's
hotel-casinos is derived primarily from the convention and meeting market, the
tour and leisure market and junket and VIP programs. As indicated under
"Additional Information -- Business Risks" below, these sources of business are
sensitive to general economic and other conditions. In addition, the Company
participates in certain joint marketing programs with business partners in the
airline, car rental and cruise line industries.
STATISTICAL DATA
For information regarding the Company's properties, number of available
rooms, occupancy ratios and management and franchise fees, see the Ten Year
Summary on pages 58 and 59 in the Stockholders Report.
BUSINESS RISKS
In 1995, the Company was able to increase average room rates by five percent
over 1994. The Company's future operating results could be adversely impacted by
industry overcapacity and weak demand, which could restrict the Company's
ability to raise room rates to keep pace with the rate of inflation. The
Company's business could also be adversely affected by increases in
transportation and fuel costs or sustained recessionary periods. The operating
results for the Company's hotel-casinos can be volatile depending upon the
table-game play of premium players.
Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Occupancy ratios at the Company's hotels could also be adversely
impacted by a decrease in travel resulting from fluctuations in the worldwide
economy and by excess industry capacity.
COMPETITION
Hilton believes it is one of the largest operators of hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. Hilton hotels also compete generally with facilities offering
similar services and located in cities and other locations where Hilton hotels
are not present. The Company's precise competitive position in most areas in
which its hotels are located cannot be determined from the information and data
available to Hilton.
12
To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. In this regard, recent
capacity additions have increased competition in all segments of the Las Vegas
market. Certain of the Company's competitors have announced new casino projects
in Las Vegas which, if completed, will add significant casino space and hotel
rooms to the market. Such new capacity additions to the Las Vegas market could
adversely impact the Company's gaming income. In addition, the business of
Hilton's Nevada hotel-casinos might be adversely affected if gaming operations
of the type conducted in Nevada were to be permitted under the laws of other
states, particularly California. The legalization of casino gaming in Atlantic
City, New Jersey has had an impact on the Company's Nevada hotel-casinos. The
legalization of riverboat gaming in a number of states and the operation of
casino gaming on Native American tribal lands could also impact the Company's
hotel-casinos in Nevada.
REGULATION AND LICENSING
Each of the Company's casinos is subject to extensive regulation under laws,
rules and supervisory procedures, primarily in the jurisdiction where located or
docked. Some jurisdictions, however, empower their regulators to investigate
participation by licensees in gaming outside their jurisdiction and require
access to and periodic reports respecting such gaming activities. Violations of
laws in one jurisdiction could result in disciplinary action in other
jurisdictions.
NEVADA GAMING LAWS. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno, are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Reno. The Gaming Commission, the
Control Board, the CCB and the City of Reno are collectively referred to as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) the provision of a source of state and local
revenues through taxation and licensing fees. Changes in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.
The Company's subsidiaries which operate the casinos (the "Licensees") are
required to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable. The
Company is registered by the Gaming Commission as a publicly-traded corporation
("Registered Corporation") and, as such, it is required periodically to submit
detailed financial and operating reports to the Gaming Commission and furnish
any other information which the Gaming Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, the
Licensees without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and the Licensees have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or the
Licensees in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of the Licensees must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of the Company
who are actively and directly involved in gaming activities of the Licensees may
be required to
13
be licensed or found suitable by the Nevada Gaming Authorities. The Nevada
Gaming Authorities may deny an application for licensing for any cause which
they deem reasonable. A finding of suitability is comparable to licensing, and
both require submission of detailed personal and financial information followed
by a thorough investigation. The applicant for licensing or a finding of
suitability must pay for all the costs of the investigation. Changes in licensed
positions must be reported to the Nevada Gaming Authorities and, in addition to
their authority to deny an application for a finding of suitability or
licensure, the Nevada Gaming Authorities have jurisdiction to disapprove a
change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Licensees, the companies involved would
have to sever all relationships with such person. In addition, the Gaming
Commission may require the Company or the Licensees to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and the Licensees are required to submit detailed financial and
operating reports to the Gaming Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by the Licensees
must be reported to, or approved by, the Gaming Commission.
If it were determined that the Nevada Act was violated by the Licensees, the
gaming licenses they hold could be limited, conditioned, suspended or revoked,
subject to compliance with certain statutory and regulatory procedures. In
addition, the Licensees, the Company and the persons involved could be subject
to substantial fines for each separate violation of the Nevada Act at the
discretion of the Gaming Commission. Further, a supervisor could be appointed by
the Gaming Commission to operate the Company's gaming properties and, under
certain circumstances, earnings generated during the supervisor's appointment
(except for the reasonable rental value of the Company's gaming properties)
could be forfeited to the State of Nevada. Limitation, conditioning or
suspension of any gaming license or the appointment of a supervisor could (and
revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's Common Stock, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have such person's suitability as a beneficial holder of the Company's
Common Stock determined if the Gaming Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's Common Stock to report the acquisition to the Gaming Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
Common Stock apply to the Gaming Commission for a finding of suitability within
thirty days after the Chairman of the Control Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional investor,"
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of the Company's Common Stock may apply to the Gaming Commission for a
waiver of such finding of suitability if such institutional investor holds the
Common Stock for investment purposes only. An institutional investor shall not
be deemed to hold the Common Stock for investment purposes unless the Common
Stock was acquired and is held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Gaming Commission finds to be
inconsistent with holding the Company's Common Stock for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, polices or operations; and (iii) such other
activities as the Gaming Commission may determine to be consistent with such
investment intent. If the beneficial holder of voting securities who must be
found suitable is a corporation, partnership or trust, it
14
must submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of investigation.
Barron Hilton, the Company's largest stockholder, has been found suitable as a
controlling stockholder of the Company.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Gaming Commission or
by the Chairman of the Control Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Company's Common
Stock beyond such period of time as may be prescribed by the Gaming Commission
may be guilty of a criminal offense. The Company is subject to disciplinary
action if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company or the Licensees,
the Company (i) pays that person any dividend or interest upon voting securities
of the Company; (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person; (iii) pays
remuneration in any form to that person for services rendered or otherwise; or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish the voting securities for cash at fair market value. Additionally,
the CCB has taken the position that it has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming license.
The Gaming Commission may, in its discretion, require the holder of any debt
security of a Registered Corporation to file applications, be investigated and
be found suitable to own the debt security of a Registered Corporation. If the
Gaming Commission determines that a person is unsuitable to own such security,
then pursuant to the Nevada Act, the Registered Corporation can be sanctioned,
including the loss of its approvals, if without the prior approval of the Gaming
Commission, it (i) pays to the unsuitable person any dividend, interest or any
distribution whatsoever; (ii) recognizes any voting right by such unsuitable
person in connection with such securities; (iii) pays the unsuitable person
remuneration in any form; or (iv) makes any payment to the unsuitable person by
way of principal, redemption, conversion, exchange, liquidation or similar
transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Gaming
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Gaming Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company was granted approval on
September 28, 1995 to make public offerings of securities for a period of one
year, subject to certain reporting requirements and the authority of the
Chairman of the Control Board to issue an interlocutory stop order for good
cause.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
15
The Nevada legislature has declared that some corporate acquisitions opposed
by management, repurchases of voting securities and corporate defense tactics
affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Gaming Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Gaming
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.
The Company and its affiliates and Licensees, who propose to become involved
in a gaming venture outside of Nevada, are required to deposit with the Control
Board, and thereafter maintain, a revolving fund in the amount of $10,000 to pay
the expenses of investigation of the Control Board of their participation in
such foreign gaming. The revolving fund is subject to increase or decrease in
the discretion of the Gaming Commission. Thereafter, the Company and its
affiliates and Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. These entities are also subject to
disciplinary action by the Gaming Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
LOUISIANA GAMING LAWS. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Riverboat Gaming Commission (the "Commission") and the
Louisiana Riverboat Gaming Enforcement Division (the "Division"), a department
within the Louisiana State Police. The Division is responsible for investigating
the background of all applicants seeking a riverboat gaming license, issuing the
license and enforcing the laws, rules and regulations relating to riverboat
gaming activities.
The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Division. This requires the filing of an extensive
application to the Division disclosing personal, financial, criminal, business
and other information. On October 13, 1993, the Division issued a riverboat
gaming license to the Queen of New Orleans, a joint venture of which the Company
owns a 50% interest. The Company's joint venture commenced riverboat gaming
operations in New Orleans, Louisiana on February 10, 1994.
The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Division approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
16
The Commission must approve all security holders of the licensee and may
find any such security holder not qualified to own those securities. Louisiana
law may require that the charter or bylaws of the licensee provide that its
securities are held subject to the condition that, if a holder is found to be
disqualified by the Commission, the holder must dispose of the securities of the
licensee. If a security holder of a licensee is found disqualified, it will be
unlawful for the security holder to (i) receive any dividend or interest with
regard to the securities; (ii) exercise, directly or indirectly, any rights
conferred by the securities; or (iii) receive any remuneration from the licensee
for services rendered or otherwise. The Commission may impose similar approval
requirements on holders of securities of any intermediary or holding company of
the licensee, but may waive those requirements with respect to holders of
publicly-traded securities of intermediary and holding companies if such holders
do not have the ability to control the publicly-traded corporation or elect one
or more directors thereof.
NEW JERSEY GAMING LAWS. The ownership and operation of hotel-casino
facilities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act (the "Act"). No hotel-casino
facility may operate unless various licenses and approvals are obtained from New
Jersey regulatory authorities, including the Casino Control Commission (the
"Commission"). The Commission is authorized under the Act to adopt regulations
covering a broad spectrum of gaming and gaming related activities and to
prescribe the methods and forms of applications for licenses.
The Act permits an applicant to request a Statement of Compliance from the
Commission finding that it satisfies one or more of the eligibility criteria for
licensure. The Statement of Compliance request may be made prior to the
construction or acquisition of a casino in Atlantic City. It is only after all
eligibility criteria are met that a casino license may be issued. On February 4,
1991, the Company and a New Jersey subsidiary filed applications with the
Commission for a casino license under the Act. At the conclusion of the
application investigation, the Company requested a Statement of Compliance
regarding all non-facility related criteria. On June 26, 1991, the Commission
granted the Company's request for a Statement of Compliance. The Company does
not now own, nor has the Company entered into any agreement to manage, a
hotel-casino in Atlantic City. The Company filed the license application in
contemplation of possibly owning and/or operating a hotel-casino in Atlantic
City.
In order to be granted a casino license under the Act, officers and
directors of a licensee and its employees who are employed in hotel or casino
operations in Atlantic City are required to be licensed or approved by the
Commission. In addition, all contracts and leases entered into by a licensee
would be subject to approval and certain enterprises which transact business
with the licensee would themselves have to be licensed. New Jersey law also
authorizes the Commission to approve security holders of a licensee in the
manner described above under the caption "Louisiana Gaming Laws."
QUEENSLAND GAMING LAWS. Queensland, Australia, like Nevada, Louisiana and
New Jersey, has comprehensive laws and regulations governing the conduct of
casino gaming. All persons connected with the ownership and operation of a
casino, including the Company, its subsidiary that manages the Hotel Conrad &
Jupiters Casino and the Conrad International Treasury and certain of their
principal stockholders, directors and officers, must be found suitable and
licensed. A casino license once issued remains in force until surrendered or
cancelled. Queensland law defines the grounds for cancellation and, in such
event, an administrator may be appointed to assume control of the hotel-casino
complex. The Queensland authorities have conducted an investigation of, and have
found suitable, the Company and its subsidiary.
ONTARIO GAMING LAWS. Ontario, Canada also has laws and regulations
governing the conduct of casino gaming. Ontario law requires that the operator
of a casino must be found suitable and be registered. A registration once issued
remains in force until revoked. Ontario law defines the grounds for
registration, as well as revocation or suspension of such registration. The
Company and two other shareholders formed Windsor Casino Limited ("WCL") to
operate the Casino Windsor. The Ontario authorities have conducted an
investigation of, and have found suitable, the Company and the other two
shareholders of WCL in connection with the Ontario registration of WCL.
17
TURKEY GAMING LAWS. Turkey has laws and regulations governing the
establishment and operation of casino gaming. The Turkish Ministry of Tourism
inspects all casino premises prior to the commencement of operations and
conducts random inspections of ongoing casino operations. Under Turkish gaming
laws, access to casinos is limited to persons carrying a foreign passport or to
Turkish citizens receiving a permit from the Ministry of Tourism. The casino
located in the Conrad International Istanbul has been authorized to conduct
casino operations by the Turkish Ministry of Tourism.
IRS REGULATIONS. The Internal Revenue Service ("IRS") requires operators of
casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain keno, bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.
Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates, or has applied for
licensing to operate, casinos require the reporting of currency transactions in
excess of $10,000 occurring within a gaming day, including identification of the
patron by name and social security number. This reporting obligation commenced
in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States which are exempt from the ambit of IRS
regulations.
OTHER LAWS AND REGULATIONS. Each of the hotels and hotel-casinos operated
by the Company is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. Management believes that the Company has
obtained all required licenses and permits and its businesses are conducted in
substantial compliance with applicable laws.
EMPLOYEES
At February 1, 1996, Hilton employed approximately 48,000 persons, of whom
approximately 25,000 are covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel and gaming
industries generally. Although strikes of short duration have from time to time
occurred at certain of Hilton's facilities, Hilton believes its employee
relations are satisfactory.
ITEM 2. PROPERTIES
Hilton considers its hotels and casinos to be leading establishments with
respect to desirability of location, size, facilities, physical condition,
quality and variety of services offered in most of the areas in which they are
located. Obsolescence arising from age and condition of facilities is a factor
in the hotel and gaming industries. Accordingly, Hilton expends, and intends to
continue to expend, substantial funds to maintain its facilities in first-class
condition in order to remain competitive.
Hotels and casinos owned and operated, leased and managed by Hilton are
briefly described under Item 1 and, in particular, under the captions "Hotel
Operations" and "Gaming Operations." In addition, contemplated additions to, and
major refurbishing and remodeling of, existing properties and new hotels and
casinos presently under construction that will be operated by Hilton are briefly
described under the captions "Hotel Operations -- Expansion Program" and "Gaming
Operations -- Expansion Program" under Item 1.
ITEM 3. LEGAL PROCEEDINGS
In management's opinion, disposition of pending litigation against the
Company is not expected to have a material effect on the Company's financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
18
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company:
POSITIONS AND OFFICES
NAME WITH THE COMPANY AGE
- ------------------------- --------------------------------------------------------------- ---------
Barron Hilton Chairman of the Board, and previously served as Chief Executive 68
Officer until February 1996, and President until February 1993
Stephen F. Bollenbach President and Chief Executive Officer since February 1996 53
Eric M. Hilton Vice Chairman of the Board since May 1993, Executive Vice 62
President -- International Operations from May 1992 until May
1993, President, Conrad International Hotels Corporation until
May 1993, and Senior Vice President -- Real Estate Development,
International until May 1992
Floyd M. Celey, Jr. Executive Vice President and President -- Gaming Operations 56
since September 1994, Senior Vice President -- Global Gaming
Operations from May 1993 until September 1994, and prior
thereto, Senior Vice President -- Corporate Casino Operations,
Conrad International Hotels Corporation
Dieter H. Huckestein Executive Vice President and President -- Hotel Operations 52
since May 1994, Senior Vice President --
Hawaii/California/Arizona Region from May 1991 until May 1994,
and prior thereto, Senior Vice President -- Hawaiian Region
F. Michael O'Brien Executive Vice President -- Gaming Development since September 55
1995, Executive Vice President -- Gaming and Hotel Development
from September 1994 until September 1995, Senior Vice President
-- Gaming and Hotel Development from January 1994 until
September 1994, and from May 1992 until January 1994, Senior
Vice President -- Corporate Properties
Steve Krithis Senior Vice President -- Finance since November 1994, and prior 66
thereto, Vice President and Corporate Comptroller
William C. Lebo, Jr. Senior Vice President and General Counsel 52
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1991. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related, except that Messrs. Barron and Eric Hilton are brothers.
Similar information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 9, 1996 (the "Proxy Statement"). The Company expects to file the Proxy
Statement with the Securities and Exchange Commission prior to April 30, 1996,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
19
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "HLT." Information regarding sales
prices, dividend payments and record holders with respect to the Company's
Common Stock is set forth under "Supplementary Financial Information" in the
Notes to the Company's Consolidated Financial Statements on page 57 in the
Stockholders Report, which information is incorporated herein by reference.
On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a market value of twice the Right's exercise price.
Following the acquisition by a person or group of beneficial ownership of
30% or more of the Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership of 20%
or more of the Company's Common Stock, the Rights are redeemable for one cent
per Right at the option of the Company's Board of Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
The full text of the Plan has been filed as Exhibit 4.5 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.5.
ITEM 6. SELECTED FINANCIAL DATA
See the Company's Ten Year Summary on pages 58 and 59 in the Stockholders
Report and "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 55 and 56 in the Stockholders Report.
The ratio of earnings to fixed charges for the five years ended December 31,
1995 is as follows: 1995 - 3.2 to 1; 1994 - 2.8 to 1; 1993 - 2.7 to 1; 1992 -
2.9 to 1; and 1991 - 2.6 to 1. The computation of the aforesaid ratios is set
forth in Exhibit 12 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
See pages 36 through 41 in the Stockholders Report.
20
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the Stockholders Report on the pages indicated,
which information is incorporated herein by reference.
PAGE
-----
Report of independent public accountants............................................... 57
Consolidated statements of income for
the three years ended December 31, 1995............................................... 42
Consolidated balance sheets as of December 31, 1995 and 1994........................... 43
Consolidated statements of cash flows for
the three years ended December 31, 1995............................................... 44
Consolidated statements of stockholders' equity for
the three years ended December 31, 1995............................................... 45
Notes to consolidated financial statements............................................. 46
Segment data for the five years ended December 31, 1995
contained in the Ten Year Summary..................................................... 58
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers" in Part I. Other
information respecting certain executive officers, as well as the required
information for directors, will be contained in the Proxy Statement, and
reference is expressly made thereto for the specific information incorporated
herein by the aforesaid reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Common Stock
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Election of
Directors -- Certain Relationships and Interests in Certain Transactions" in the
Proxy Statement, and reference is expressly made thereto for the specific
information incorporated herein by the aforesaid reference.
21
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
The index to consolidated financial statements and supplementary data is
set forth under Item 8 on page 21 hereof.
2. Financial Statement Schedules:
PAGE
-----
Report of Independent Public Accountants............................................... 23
Schedule II -- Valuation and Qualifying Accounts....................................... 24
Supplemental Note to Consolidated Financial Statements................................. 25
All other schedules are inapplicable or the required information is included
elsewhere herein.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.
22
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
SUPPLEMENTAL SCHEDULE AND SUPPLEMENTAL NOTE
To Hilton Hotels Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
1, 1996. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule II and the supplemental
note to consolidated financial statements as shown on pages 24 and 25 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. The supplemental schedule and
the supplemental note to the consolidated financial statements have been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 1, 1996
23
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
CHARGED
BALANCE AT CHARGED TO (CREDITED) BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OTHER PERIOD
---------- ---------- ---------- ---------- ----- ----------
YEAR ENDED DECEMBER 31, 1995
Allowance for doubtful accounts
Hotel and other......................................... $11.4 2.0 (.6) 4.4 -- 8.4
Casino.................................................. 16.0 18.1 -- 20.6 -- 13.5
Reserve for loss on other investments..................... 20.6 -- -- 1.1 -- 19.5
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful accounts
Hotel and other......................................... $11.6 1.7 .5 2.4 -- 11.4
Casino.................................................. 7.6 13.2 -- 4.8 -- 16.0
Reserve for loss on other investments..................... 12.5 -- -- -- 8.1(A) 20.6
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful accounts
Hotel and other......................................... $ 7.2 1.8 4.5 1.9 -- 11.6
Casino.................................................. 14.4 10.9 -- 17.7 -- 7.6
Reserve for loss on other investments -- 12.5 -- -- -- 12.5
- ------------------------
(A) Represents unrealized holding losses on certain equity securities.
24
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 1995 AND 1994
(IN MILLIONS)
1995 1994
--------- ---------
Accounts payable and accrued expenses at December 31, consisted of:
Accounts and notes payable.................................................................... $ 94.0 87.2
Accrued salaries and wages.................................................................... 31.2 29.5
Insurance..................................................................................... 27.3 28.7
Interest...................................................................................... 18.8 20.6
Other accrued expenses........................................................................ 135.2 118.0
--------- ---------
$ 306.5 284.0
--------- ---------
--------- ---------
25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 14, 1996.
HILTON HOTELS CORPORATION
(Registrant)
By: STEVE KRITHIS
-----------------------------------
Steve Krithis
Senior Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 14, 1996.
RAYMOND C. AVANSINO, JR. ROBERT L. JOHNSON
- ------------------------------------------- -------------------------------------------
Raymond C. Avansino, Jr. Robert L. Johnson
Director Director
STEPHEN F. BOLLENBACH DONALD R. KNAB
- ------------------------------------------- -------------------------------------------
Stephen F. Bollenbach Donald R. Knab
President and Chief Executive Officer Director
(Chief Executive Officer)
A. STEVEN CROWN STEVE KRITHIS
- ------------------------------------------- -------------------------------------------
A. Steven Crown Steve Krithis
Director Senior Vice President-Finance
(Chief Financial and Accounting Officer)
GREGORY R. DILLON BENJAMIN V. LAMBERT
- ------------------------------------------- -------------------------------------------
Gregory R. Dillon Benjamin V. Lambert
Director Director
BARRON HILTON DONNA F. TUTTLE
- ------------------------------------------- -------------------------------------------
Barron Hilton Donna F. Tuttle
Chairman of the Board Director
ERIC M. HILTON SAM D. YOUNG, JR.
- ------------------------------------------- -------------------------------------------
Eric M. Hilton Sam D. Young, Jr.
Director Director
DIETER H. HUCKESTEIN
- -------------------------------------------
Dieter H. Huckestein
Director
26
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ---------------------------------------------------------------------------------------------------- ------------
3.1 Restated Certificate of Incorporation of Registrant, as amended (incorporated herein by reference
from Exhibit 3.1 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1987)
3.2 By-Laws of Registrant, as amended (incorporated herein by reference from Exhibit 3.2 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992)
3.3 Amendment to By-Laws of Registrant, relating to Exhibit 3.2 hereto..................................
4.1 Indenture, dated as of July 1, 1988, between Registrant and Citibank, N.A., regarding Registrant's
Subordinated Debt Securities (incorporated herein by reference from Exhibit 4.1 to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form S-3 (File No. 2-95746))
4.2 Indenture, dated as of July 1, 1988, between Registrant and Morgan Guaranty Trust Company of New
York, regarding Registrant's Senior Debt Securities (incorporated herein by reference from Exhibit
4.1 to Post-Effective Amendment No. 1 to Registrant's Registration Statement on Form S-3 (File No.
2-99967))
4.3 First Supplemental Indenture, dated as of June 30, 1992, between Registrant and Morgan Guaranty
Trust Company of New York, regarding Registrant's Senior Debt Securities, relating to Exhibit 4.2
hereto (incorporated herein by reference from Exhibit 4.3 to Registrant's Annual Report on Form 10-K
for the year ended December 31, 1992)
4.4 Reimbursement Agreements, dated as of November 15, 1990, among Registrant, Swiss Bank Corporation
and the financial institutions signatory thereto (incorporated herein by reference from Exhibit 4.7
to Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)
4.5 Rights Agreement, dated as of July 14, 1988, between Registrant and The First National Bank of
Chicago (incorporated herein by reference from Exhibit 1 to Registrant's Current Report on Form 8-K,
dated July 14, 1988)
10.1 1984 Stock Option and Stock Appreciation Rights Plan of Registrant, together with the Stock Option
Agreement relating thereto , both as amended (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1989)*
10.2 Amendment, dated October 18, 1990, to the 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibit 10.1 hereto (incorporated herein by reference from Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)*
10.3 1990 Stock Option and Stock Appreciation Rights Plan of Registrant, together with the Stock Option
Agreement relating thereto, both as amended (incorporated herein by reference from Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1990)*
10.4 Amendment, dated January 20, 1994, to the 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibit 10.3 hereto (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993)*
27
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ---------------------------------------------------------------------------------------------------- ------------
10.5 Amendment, dated January 19, 1995, to the 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.3 and 10.4 hereto (incorporated herein by reference from Exhibit
10.5 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.6 1996 Stock Incentive Plan of Registrant*............................................................
10.7 1996 Chief Executive Stock Incentive Plan of Registrant*............................................
10.8 Incentive Compensation Plan of Registrant (incorporated herein by reference from Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1980)*
10.9 Amendment, dated as of January 1, 1994, to the Incentive Compensation Plan of Registrant, relating
to Exhibit 10.8 hereto (incorporated herein by reference from Exhibit 10.7 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1993)*
10.10 Retirement Plan of Registrant, as amended and restated (incorporated herein by reference from
Exhibit 10.8 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.11 First Amendment, dated as of November 15, 1995, to the Retirement Plan of Registrant, relating to
Exhibit 10.10 hereto*...............................................................................
10.12 Supplemental Executive Retirement Plan of Registrant, as amended (incorporated herein by reference
from Exhibit 10.6 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991)*
10.13 Amendment, effective April 1, 1994, to the Supplemental Executive Retirement Plan of Registrant,
relating to Exhibit 10.12 hereto (incorporated herein by reference from Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.14 Directors' Retirement Benefit Plan of Registrant, as amended (incorporated herein by reference from
Exhibit 10.7 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1991)*
10.15 Retirement Benefit Replacement Plan of Registrant, as amended (incorporated herein by reference from
Exhibit 10.9 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1992)*
10.16 Amendment, dated as of January 1, 1994, to the Retirement Benefit Replacement Plan of Registrant,
relating to Exhibit 10.15 hereto (incorporated herein by reference from Exhibit 10.12 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1993)*
10.17 Amendment, effective April 1, 1994, to the Retirement Benefit Replacement Plan of Registrant,
relating to Exhibits 10.15 and 10.16 hereto (incorporated herein by reference from Exhibit 10.14 to
Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.18 Thrift Savings Plan of Registrant, as amended and restated (incorporated herein by reference from
Exhibit 10.15 to Registrant's Annual Report on Form 10-K for the year ended December 31, 1994)*
10.19 First Amendment, dated as of March 16, 1995, to the Thrift Savings Plan of Registrant, relating to
Exhibit 10.18 hereto*...............................................................................
28
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
- -------- ---------------------------------------------------------------------------------------------------- ------------
10.20 Form of Executive Employment Agreement, dated as of November 17, 1994 (incorporated herein by
reference from Exhibit 10.16 to Registrant's Annual Report on Form 10-K for the year ended December
31, 1994)*
10.21 Employment Agreement, dated as of February 1, 1996, between Registrant and Stephen F. Bollenbach*...
11 Computation of Earnings Per Share...................................................................
12 Computation of Ratios of Earnings to Fixed Charges..................................................
13 Registrant's Annual Report to Stockholders for the year ended December 31, 1995.....................
21 List of Registrant's Subsidiaries...................................................................
23 Consent of Independent Public Accountants...........................................................
99 Undertakings........................................................................................
- ------------------------
* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation
S-K, previously filed where indicated and incorporated herein by reference.
Pursuant to Regulation Section229.601, Item 601(b)(4)(iii) of Regulation
S-K, upon request of the Securities and Exchange Commission, the Registrant
hereby undertakes to furnish a copy of any unfiled instrument which defines the
rights of holders of long-term debt of the Registrant and its consolidated
subsidiaries (and for any of its unconsolidated subsidiaries for which financial
statements are required to be filed) wherein the total amount of securities
authorized thereunder does not exceed 10% of the total consolidated assets of
the Registrant.
29