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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 [FEE REQUIRED] FOR THE FISCAL YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED] FOR THE TRANSITION PERIOD FROM
TO .
COMMISSION FILE NO. 1-10410
THE PROMUS COMPANIES INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE I.R.S. NO. 62-1411755
(State of Incorporation) (I.R.S. Employer Identification No.)
1023 CHERRY ROAD
MEMPHIS, TENNESSEE 38117
(Address of principal executive offices)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 762-8600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON WHICH
TITLE OF EACH CLASS REGISTERED
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Common Capital Stock, Par Value 1.50 per share* NEW YORK STOCK EXCHANGE
MIDWEST STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
PHILADELPHIA STOCK EXCHANGE
10 1/2% Senior Notes due 1994 of Embassy NEW YORK STOCK EXCHANGE
Suites, Inc.**
11% Subordinated Debentures due 1999 of Embassy NEW YORK STOCK EXCHANGE
Suites, Inc.**
8 3/4% Senior Subordinated Notes due 2000 of NEW YORK STOCK EXCHANGE
Embassy Suites, Inc.**
10 7/8% Senior Subordinated Notes due 2002 of NEW YORK STOCK EXCHANGE
Embassy Suites, Inc.**
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* Common Capital Stock also has special stock purchase rights listed on each of
the same exchanges
** Securities guaranteed by Registrant
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]
The aggregate market value of the voting stock held by non-affiliates of the
registrant based upon the closing price of $47.50 for Common Stock as reported
on the New York Stock Exchange Composite Tape on March 4, 1994, is
$4,729,458,007.50.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 4, 1994.
Common Stock ................................................ 102,330,710 Shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive Proxy Statement for the 1994 Annual Meeting of
Stockholders are incorporated by reference into Part III hereof and portions of
the Company's Annual Report to Stockholders for the fiscal year ended December
31, 1993, are incorporated by reference into Parts I and II hereof.
Portions of the definitive Proxy Statement-Prospectus dated December 13,
1989, for the Special Meeting of Stockholders of Holiday Corporation on January
17, 1990, which also constituted an Information Statement of the Company, are
incorporated by reference into Part I herein.
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DOCUMENTS INCORPORATED BY REFERENCE
Material from The Promus Companies Incorporated (referred to herein,
together with its subsidiaries where the context requires, as the "Company" or
"Promus") Annual Report to Stockholders for the fiscal year ended December 31,
1993 (the "Annual Report"), is incorporated by reference in Parts I and II
hereof where referred to herein. Material from the Company's Proxy Statement,
prepared and mailed to stockholders in accordance with Section 14 of the
Securities Exchange Act of 1934 (the "Exchange Act") and the rules and
regulations of the Securities and Exchange Commission (the "Commission")
thereunder, for the Annual Meeting of Stockholders of the Company to be held on
April 29, 1994 (the "Proxy Statement"), is incorporated by reference in Part III
hereof where referred to therein.
Material from the Holiday Corporation ("Holiday") Proxy
Statement-Prospectus dated December 13, 1989 (the "Special Proxy Statement"),
which also constituted an Information Statement of the Company, is incorporated
by reference in Part I hereof when and as referred to herein. The Special Proxy
Statement was prepared and mailed to Holiday stockholders in accordance with
Section 14 of the Exchange Act and the rules and regulations of the Commission
thereunder for the Special Meeting of Stockholders of Holiday held January 17,
1990.
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES.
The Company is one of the leading casino entertainment and hotel companies
in the United States. Its Harrah's casino entertainment division operates 12
casino properties in five states and has additional casino locations under
development. The Company's hotel division operates the Embassy Suites, Hampton
Inn and Homewood Suites hotel brands. Another hotel brand, Hampton Inn & Suites,
was introduced late in 1993.
Promus was formed in connection with the reorganization of Holiday in
February 1990, which involved the acquisition of the Holiday Inn hotel business
by Bass Public Limited Company ("Bass"), the transfer of the Harrah's casino
entertainment division, the Embassy Suites, Hampton Inn and Homewood Suites
hotel divisions and certain other assets to Promus and the distribution of
Promus' outstanding stock (the "Spin-off") to Holiday's stockholders (the
"Reorganization"). Following the Reorganization, the executive officers of
Holiday became the senior management of Promus.
Promus was incorporated on November 2, 1989, under Delaware law and
conducts its hotel and casino entertainment businesses through its wholly-owned
subsidiary, Embassy Suites, Inc. ("Embassy"), and Embassy's subsidiaries. The
principal asset of Promus is the stock of Embassy, which holds, directly or
indirectly through subsidiaries, substantially all of the assets of the
Company's businesses. The principal executive offices of Promus are located at
1023 Cherry Road, Memphis, Tennessee 38117, telephone (901) 762-8600.
Commencing with the fiscal year 1992, the Company changed to a calendar
year-end basis. For prior years, the Company's fiscal year ended on the Friday
nearest to December 31. Accordingly, fiscal years 1993, 1992 and 1991 ended on
December 31, 1993, December 31, 1992, and January 3, 1992, respectively.
Operating data for the three most recent fiscal years, together with
corporate expense, interest expense and other income, is set forth on page 11 of
Book Two of the Annual Report. Information as to operating data and identifiable
assets applicable to each of the Company's industry segments is set forth on the
inside front cover and page 22 of Book Two of the Annual Report. Information
regarding mortgages on properties of the Company is set forth on pages 16 and 17
of Book Two of the Annual Report. All of the foregoing pages of Book Two of the
Annual Report are incorporated herein by reference.
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CASINO ENTERTAINMENT
For information on Casino Entertainment Segment operating results and a
discussion of those results, see "Management's Discussion and Analysis--Results
of Operations--Casino Entertainment" on pages 6 and 7 of Book Two of the Annual
Report and "Operating Results by Segment" on the inside front cover of Book Two
of the Annual Report. These pages of Book Two of the Annual Report are
incorporated herein by reference.
GENERAL
Harrah's, an indirect wholly-owned subsidiary of Promus, has been in
operation for more than 56 years and is unique among casino entertainment
companies in its broad geographic diversification. Harrah's or its subsidiaries
(hereinafter referred to as "Harrah's") operates casino hotels in the five
traditional U.S. gaming markets of Reno, Lake Tahoe, Las Vegas and Laughlin,
Nevada, and Atlantic City, New Jersey. It also operates riverboat casinos in
Joliet, Illinois; dockside casinos in Vicksburg and Tunica, Mississippi; and
limited stakes casinos in Central City and Black Hawk, Colorado. As of December
31, 1993, Harrah's casino properties had a total of approximately 436,400 square
feet of casino space, 12,504 slot machines, 641 table games, 5,348 hotel rooms
or suites, approximately 76,000 square feet of convention space, 40 restaurants,
four showrooms and three cabarets.
Harrah's marketing strategy is designed to appeal primarily to the broad
middle-market gaming customer segment. Harrah's strategic direction is focused
on establishing a well-defined brand identity that communicates a consistent
message.
HARRAH'S CASINO HOTEL DIVISION
ATLANTIC CITY
The Harrah's Atlantic City casino hotel ("Harrah's Atlantic City") has
approximately 64,000 square feet of casino space. During 1993, it had the
highest gaming revenues and operating profit of the Company's casinos.
Situated on 21.4 acres in the Marina area of Atlantic City, Harrah's
Atlantic City consists of dual 16-story hotel towers with 268 suites and 492
regular rooms and adjoining low rise buildings which house the casino space and
the 23,000 square foot convention center. The hotel has eight restaurants, an
850-seat showroom, a pool, health club, teen center with video games, child care
facilities and parking for 2,452 cars. The property also has a 107-slip marina.
Occupancy at the hotel has averaged over 87% for the past five years.
Harrah's Atlantic City seeks to provide a comfortable environment for
middle and upper middle income customers to enjoy gaming. Most of the casino's
customers arrive by car from within a 150-mile radius which includes
Philadelphia, New York and Northern New Jersey. Harrah's Atlantic City gears its
advertising and promotional campaigns to the "drive-in" market.
LAS VEGAS
Harrah's Las Vegas is located on approximately 16.4 acres of the Strip in
Las Vegas and consists of a 15-floor hotel tower with 488 rooms, a 23-floor
hotel tower with 491 rooms, a 32-floor hotel tower with 734 rooms, and adjacent
low-rise buildings which house the 15,000 square foot convention center and the
casino. The hotel has 1,713 total rooms including 34 suites. The size of the
property would permit the Company to expand its facilities if the Company
decided that additional capacity were economically desirable in the future.
The Harrah's Las Vegas complex has approximately 80,000 square feet of
casino space, five restaurants, the 525-seat Commander's Theatre, a health club
and a heated pool. There are 3,087
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parking spaces available, including a substantial portion in a self park garage.
Occupancy at the hotel has averaged over 91% for the past five years.
Harrah's Las Vegas caters to middle income customers. The casino has
marketing programs, such as a low-priced, high-volume buffet, which are
generally less expensive than the marketing programs at the Company's other
casino hotels. The casino's primary feeder markets are the Midwest, California
and Canada.
LAKE TAHOE
Harrah's Lake Tahoe is situated on 22.9 acres near Lake Tahoe and consists
of an 18-story tower and adjoining low-rise building which house a 16,500 square
foot convention center and approximately 63,200 square feet of casino space. The
casino hotel, with 62 suites and 472 luxury rooms, has seven restaurants, the
752-seat South Shore Showroom, a 197-seat cabaret, a health club, a retail shop,
heated pool and an arcade. The facility has customer parking for 791 cars in a
garage and 1,161 additional spaces in an adjoining lot. Occupancy at the hotel
has averaged over 80% for the past five years. A 400-suite Embassy Suites hotel,
which is owned by a franchisee and managed by Embassy, provides an additional
supply of high-quality guest rooms, conveniently located adjacent to Harrah's
Lake Tahoe.
Harrah's also operates Bill's Lake Tahoe Casino which is located on a 2.1
acre site adjacent to Harrah's Lake Tahoe casino hotel. The casino includes
approximately 18,000 square feet of casino space and two casual on-premise
restaurants, Bennigan's and McDonald's, operated by non-affiliated restaurant
companies.
Harrah's Lake Tahoe caters to middle and upper income customers and,
accordingly, the customer marketing programs, including use of the showroom, are
tailored to these segments. Bill's Casino appeals to those customers who enjoy a
more casual atmosphere. The primary feeder markets for both casinos are
California and the Pacific Northwest.
RENO
Harrah's Reno, situated on approximately 3.5 acres, consists of a casino
hotel complex with a 24-story structure, a 14,500 square foot convention center
and 64,300 square feet of casino space. The hotel, with eight suites and 558
rooms, has five restaurants, a snack bar, the 420-seat Sammy's Showroom, a pool,
a health club and an arcade. The complex can accommodate 587 cars in a valet
parking garage and another 377 cars in a self park garage. In addition to this
on-site parking, Harrah's Reno also leases approximately 646 spaces nearby that
are available for overflow valet parking. Occupancy at the hotel has averaged
approximately 88% for the past five years.
Harrah's Reno caters primarily to middle and upper income customers. The
primary feeder markets for Harrah's Reno are Northern California, the Pacific
Northwest and Canada.
LAUGHLIN
Harrah's Laughlin is located in Laughlin, Nevada on a 44.9 acre site in a
natural cove on the Colorado River and features a hotel with 1,658 total rooms
including 23 suites, five restaurants and a 90-seat cabaret, all with a
south-of-the-border theme. It is the only property in Laughlin with a developed
beachfront on the river. Harrah's Laughlin has approximately 47,000 square feet
of casino space and approximately 7,000 square feet of convention center space.
The facility has customer parking for 2,789 cars and vans, including a covered
parking garage, and a park for recreational vehicles. Occupancy at Harrah's
Laughlin has averaged over 84% for the last five years. Harrah's Laughlin caters
primarily to middle income customers and targets its advertising and promotional
campaigns to the "drive-in" market. It is located within a four-hour drive from
both the Los Angeles and Phoenix metropolitan areas where a combined total of
approximately 15 million people reside.
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CENTRAL CITY AND BLACK HAWK
In December 1993, the Company purchased an approximate 17 percent interest
in Eagle Gaming, L.P. ("Eagle"). Eagle owns casinos in Central City and Black
Hawk, Colorado, that Harrah's began managing for a fee in December 1993. Both of
these casinos are approximately 45 minutes from downtown Denver and offer
limited stakes gaming pursuant to Colorado law.
Harrah's Central City is located in four historic buildings decorated in
authentic 1800's Victorian furnishings. The casino, with approximately 11,700
square feet of casino space, 490 slot machines and 13 table games, features the
100 year old Glory Hole Bar and the Gilded Garter Cabaret, with live
entertainment, two restaurants and a gift shop.
Harrah's Black Hawk is located in the historic mining town of Black Hawk,
and has approximately 16,100 square feet of casino space, 476 slot machines, 16
table games, a restaurant and a gift shop, on three levels and is decorated in
Victorian design reminiscent of the gold rush days in the late 1800's.
Complimentary shuttle service is available between Harrah's Black Hawk and
Harrah's Central City, a distance of approximately one mile.
The primary feeder market for both casinos is the Denver/Boulder
metropolitan area.
RIVERBOAT CASINO ENTERTAINMENT DIVISION
JOLIET
Harrah's Joliet, the Company's first riverboat casino, opened in May 1993,
in downtown Joliet, Illinois, on the Des Plaines River. The modern 210-foot
mega-yacht, Harrah's Northern Star, had 20,000 square feet of casino space with
50 table games and 606 slot machines at year end. The riverboat, which has three
levels, has the capacity to accommodate more than 1,000 guests per cruise. It
offers six cruises per day. Dockside facilities include a pavilion with two
restaurants, two lounges, including one with live entertainment, and a retail
shop. Parking is available for over 1,200 cars, including a 4-story parking
garage with 750 spaces.
In January 1994, a second riverboat casino, Harrah's Southern Star, was
placed into operation in Joliet. This 210-foot long riverboat is designed in the
spirit of a traditional 1880's sternwheeler and contains approximately 13,440
square feet of casino space. The tri-level riverboat features a banquet room on
its third level, has 365 slot machines, 31 table games, and can accommodate more
than 800 guests per cruise. It offers six cruises per day with a seventh cruise
offered on Fridays, Saturdays and on holidays. With both riverboats in
operation, on a typical weekday Harrah's can serve 10,800 customers each day
based on a combined total of 12 excursions. With the opening of the Southern
Star, the casino space on the Northern Star was reconfigured to have 31 table
games and 565 slot machines.
A joint venture in which an indirect subsidiary of the Company is the 80
percent general partner, developed and owns the dockside facilities and the
Harrah's Northern Star vessel. The Harrah's Southern Star vessel is owned by the
Company and is leased to the joint venture. Both of the Joliet riverboat
businesses are owned by the joint venture and are operated by Harrah's for a
fee.
The Chicago metropolitan area is the primary feeder market for Harrah's
Joliet, with Joliet being only 35 miles from downtown Chicago.
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VICKSBURG
In November 1993, the Company opened a dockside casino entertainment
complex in Vicksburg, Mississippi. The complex, which is located in downtown
Vicksburg on the Yazoo Diversion Canal of the Mississippi River, includes a
297-foot long stationary riverboat casino designed in the spirit of a
traditional 1800's riverboat with approximately 20,000 square feet of casino
space, 600 slot machines and 44 table games. The casino is docked next to the
Company's shoreside entertainment complex which features a food court, a
restaurant/lounge and a retail outlet. Also adjacent to the riverboat is a 117
room Harrah's hotel owned and operated by the Company and two covered parking
garages with combined parking for 800 cars. The Company owns the riverboat and
holds long-term rights to all real property pertaining to the project.
The casino's primary feeder markets are western and central Mississippi and
eastern Louisiana.
TUNICA
In November 1993, the Company opened a dockside riverboat casino in Tunica,
Mississippi, which is located approximately 25 miles south of downtown Memphis,
Tennessee. The stationary riverboat, with a classic antebellum design, has
32,000 square feet of casino space on three levels, with 1,201 slot machines, 54
table games and an entertainment lounge. Adjacent to the riverboat casino is a
30,000 square foot pavilion that houses a 255-seat buffet restaurant, employee
facilities and executive offices. On-site parking is available for 1,336 cars
with valet parking available.
The Company owns the constructed facilities and the casino business. It is
anticipated that a limited partner will have a 25% minority interest subject to
its licensing by regulatory authorities. The underlying land, including
adjoining land used for a private access road and a sewage treatment facility,
is leased with options to purchase.
The primary feeder market for Harrah's Tunica is the Memphis metropolitan
area.
UNDER DEVELOPMENT
SHREVEPORT
In March 1993, a partnership in which an indirect subsidiary of the Company
is the general partner and Louisiana developers are limited partners, entered
into agreements with the City of Shreveport, Louisiana, to develop and operate a
casino entertainment complex in that city. The project, which will be managed by
Harrah's, will include a 210-foot long riverboat with 19,600 square feet of
casino space, an anticipated 760 slot machines and 40 table games, and dockside
facilities. The project, when completed and assuming the exercise of the option
discussed in the next paragraph, is expected to involve an investment by the
Company of approximately $71 million. Construction commenced in third quarter
1993, with opening expected in April 1994.
The Company is currently a 85.72% partner in the venture which is
developing the Shreveport riverboat casino. However, an option agreement has
been entered into which could increase the Company's ownership interest in the
venture to 96%.
NORTH KANSAS CITY
The Company entered into agreements with the City of North Kansas City,
Missouri, in February 1993 to develop and operate a riverboat casino
entertainment center in that city. It is anticipated that the Company will
invest approximately $83 million to develop the project, which is currently
expected to include a 295-foot long riverboat with 31,600 square feet of casino
space with an anticipated 1,225 slot machines and 55 table games, and related
shoreside facilities. Construction commenced in
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1993 with opening expected in third quarter 1994, subject to receipt of
necessary regulatory approvals. The project will be owned and operated by the
Company.
A state-wide referendum is scheduled in Missouri on April 5, 1994, to
address the constitutional uncertainty of certain forms of gaming in that state.
Local referenda are being held at the same time in the municipalities where the
Company's planned riverboats will be located. If the results of the
state-wide referendum or either of the local referenda are unfavorable, this
could adversely affect the Company's planned riverboat operations in Missouri.
ST. LOUIS RIVERPORT
Construction is expected to commence in second quarter 1994 on a riverboat
casino project along the Missouri River in Maryland Heights, Missouri, in
northwest St. Louis County, 16 miles from downtown St. Louis. The 254-foot long
19th-century-design Missouri paddlewheeler riverboat is expected to include
approximately 30,000 square feet of casino space with 1,000 slot machines and 55
table games. Completion of the riverboat is projected for fourth quarter 1994
with total project costs estimated at $82 million. Opening of the project is
subject to various regulatory approvals. The Company will own and operate the
riverboat casino project.
See "North Kansas City" above concerning a state-wide referendum and
local referenda in Missouri to be held on April 5, 1994.
INDIAN GAMING DIVISION
SODAK GAMING, INC.
The Company owns a 13.8% ownership interest in Sodak Gaming, Inc.
("Sodak"). Under terms of an agreement with International Game Technology
("IGT") expiring in May 1998, Sodak is the exclusive distributor for IGT of its
gaming equipment in the states of North Dakota, South Dakota and Wyoming, and on
Native American Reservations within the 48 contiguous states, excluding Nevada
and New Jersey. The distribution agreement continues from year to year after May
1998, until it is cancelled.
JACKPOT JUNCTION
The Company currently provides consulting services to the Lower Sioux
Indian Nation, the owner of Jackpot Junction Casino, near Morton, Minnesota.
UNDER DEVELOPMENT
AK-CHIN
In August 1993, the Company entered into management and development
agreements with the Ak-Chin Indian Community for a planned $24.7 million casino
entertainment facility on the Community's land approximately 25 miles south of
Phoenix, Arizona. The planned approximate 72,000 square-foot facility will
feature 29,500 square feet of casino space with 475 slot machines, 40 gaming
tables, bingo, keno, a simulcast/off-track betting operation, food and beverage
outlets, meeting space and retail shops.
Construction will commence upon receipt of approval by the National Indian
Gaming Commission and the Bureau of Indian Affairs, as appropriate, of the
management, development and other agreements. The U.S. Department of the
Interior has approved the Community's Tribal/State Compact with the State of
Arizona. Opening of the project is subject to various regulatory approvals.
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The Company expects to guarantee repayment of bank financing equal to 100
percent of the project cost for the Ak-Chin facility with Sodak providing a
guarantee to Promus for one-half of this financing.
LAND-BASED CASINOS UNDER DEVELOPMENT
NEW ORLEANS
Harrah's New Orleans Investment Company (an indirect wholly-owned
subsidiary of the Company) ("Harrah's Investment") is a partner in a two-party
partnership that was selected to exclusively negotiate for a contract to own and
operate the only land-based casino entertainment facility in New Orleans.
Subsequent to such selection, Harrah's Investment and its partner added a third
partner to the project and formed a new three-party general partnership under
the name Harrah's Jazz Company. Harrah's Investment is a one-third partner in
Harrah's Jazz Company. Harrah's Jazz Company plans to construct a new facility
called "Harrah's Casino New Orleans" on the site of the present Rivergate
Convention Center in downtown New Orleans (the "Rivergate site"), featuring
approximately 200,000 square feet of casino space, approximately 6,000 slot
machines and 200 table games (the "Permanent Casino").
Pending the opening of the Permanent Casino, Harrah's Jazz Company plans to
open an approximate 76,000 square foot temporary casino in the New Orleans
Municipal Auditorium, with approximately 3,000 slot machines and 85 table games
(the "Temporary Casino"). It is anticipated that the Temporary Casino will open
in the third quarter 1994, and the Permanent Casino is expected to open
approximately one year after the opening of the Temporary Casino. (The Temporary
Casino and the Permanent Casino are sometimes referred to herein as the "New
Orleans Gaming Facilities".) The sites for the New Orleans Gaming Facilities
have been leased from the City of New Orleans. The construction and opening of
both casinos are subject to the securing of financing and receipt of necessary
regulatory and other governmental approvals, including execution of a casino
operating contract, or license, from the State of Louisiana.
The total project cost is expected to be $720 million, which is expected to
be financed through a combination of partner capital contributions, public debt
securities and bank debt. Promus' total capital contribution to this project is
expected to be approximately $23.3 million. An indirect wholly-owned subsidiary
of the Company will manage the operations for a fee. In exchange for a fee to be
paid by Harrah's Jazz Company, the Company will agree to guarantee the
completion of the New Orleans Gaming Facilities, subject to certain exceptions
and qualifications.
Harrah's Jazz Company has filed a Form S-1 Registration Statement with the
Commission to register $425 million of public debt securities to finance a
significant portion of the development of the New Orleans Gaming Facilities. The
Form S-1 Registration Statement, which includes a description of various risk
factors that could affect the development and operations of the New Orleans
Gaming Facilities, has not yet been declared effective.
Litigation was instituted in the Civil District Court for the Parish of New
Orleans in 1993 styled Henry George McCall vs. Harry McCall, Jr. et. al (the
"McCall Litigation"). The plaintiffs asserted an ownership interest in certain
land underlying the Rivergate site and sought, among other things, certain
injunctive relief with respect to the Rivergate site. On February 22, 1994, the
Civil District Court granted summary judgment against the plaintiffs regarding
all of their claims, which was a favorable result for Harrah's Jazz Company.
However, the plaintiffs may appeal such judgment. If the McCall Litigation were
ultimately decided unfavorably, it could delay or prevent the opening of the
Temporary Casino and/or the Permanent Casino or adversely affect their
operations. If the Rivergate site is, for any reason, not available for the
Permanent Casino, current law would not allow the Permanent Casino to be located
at another site. Harrah's Jazz Company will procure title insurance to cover,
subject to certain limits, the losses that may result from
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loss of the sites for the Permanent Casino or the Temporary Casino. There can be
no assurance that the title insurance will be sufficient to cover losses
incurred by Harrah's Jazz Company as a result of an inability to use these sites
or that the title insurers will be able to fulfill their financial obligations
under the title policy.
NEW ZEALAND
The Company and its venture partner have been granted a license by the New
Zealand Casino Control Authority for a casino entertainment facility currently
under construction in Auckland, New Zealand. The Company is a 20% partner in the
joint venture developing and constructing the casino, which will be managed by
the Company for a fee. The Company anticipates making an investment of up to $15
million in the joint venture. The proposed facility will feature 60,000 square
feet of casino space, a 344-room hotel, four major restaurants and two food
buffets, three lounges, a conference center, bus terminal, and a 2,770 car
parking garage. A special attraction of the facility will be a 1,076-foot Sky
Tower. Construction of the project currently budgeted at $150 million, to be
financed through a combination of partner contributions and non-recourse debt,
began in first quarter 1994. Opening of the project, which is expected in first
quarter 1996, is subject to receipt of necessary regulatory approvals.
CASINO ENTERTAINMENT-OTHER
In addition to the above, the Company is actively pursuing numerous casino
entertainment opportunities in various jurisdictions both domestically and
abroad, including riverboat casino and Indian gaming projects in the United
States. A number of these projects, if they go forward, would require
significant capital investments by the Company.
HOTELS
For information on Hotel Segment operating results and a discussion of
those results, see "Management's Discussion and Analysis--Results of
Operations--Hotel" on pages 7 and 8 of Book Two of the Annual Report and
"Operating Results by Segment" on the inside front cover of Book Two of the
Annual Report, which pages are incorporated herein by reference.
GENERAL
The Company's hotel business consists of the Embassy Suites, Hampton Inn
and Homewood Suites hotel brands. Each brand is targeted to a specific market
segment. In December 1993, the Company announced a new brand, Hampton Inn &
Suites.
Embassy Suites hotels, of which there were 107 on December 31, 1993, appeal
to the traveler who has a need or desire for greater space and more focused
services than are available in traditional upscale hotels. Embassy Suites hotels
comprise the largest all-suite upscale hotel system in the United States by
number of suites and system revenues.
Hampton Inn hotels are moderately priced hotels designed to attract the
business and leisure traveler desiring quality accommodations at affordable
prices. Since 1984, when the brand was introduced, the system has grown to 372
hotels as of December 31, 1993.
Homewood Suites hotels, of which there were 24 on December 31, 1993,
represent the Company's entry in the extended stay market and target the
traveler who stays five or more consecutive nights, as well as the traditional
business and leisure traveler.
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The Hampton Inn & Suites brand now under development will incorporate the
best features of the Hampton Inn and Homewood Suites brands, offering both
traditional hotel room accommodations and apartment-style suites.
As of December 31, 1993, the Company's hotel brands included 401 properties
that are licensed by the Company, 70 properties that are managed by the Company,
and 32 properties that are owned and operated by the Company. These properties
total 72,950 rooms and suites.
In October 1993, the senior management of the Company's hotel brands were
combined into a single management team responsible for all hotel brands.
The Company pursues a strategy of growing its hotel brands more rapidly by
minimizing its ownership of hotel real estate and concentrating on obtaining new
franchise or management contracts. As a part of this strategy, owned or leased
hotels are sold thereby realizing the value of the underlying assets for its
stockholders and increasing returns on investment. Following the sale, the
hotels are operated either by the Company under a management contract or by the
purchaser under license from the Company. In 1993, the Company transferred
ownership of six Embassy Suites hotels, all of which remained in the system as
franchises and five of which are being managed by Embassy Suites under
management contracts.
Each of the Company's hotel brands uses a centralized business system,
which includes access to reservation services, performance support or training,
operations management and revenue management. This network of business systems
is one of the most sophisticated systems in the hotel industry. The Embassy
Suites, Hampton Inn and Homewood Suites business systems' reservation module
receives reservation requests entered on terminals located at all of their
respective hotels and reservations centers, and major domestic airlines. The
systems immediately confirm reservations or indicate accommodations available at
alternate system hotels. Confirmations are transmitted automatically to the
hotel for which the reservation is made. The Company's computer center in
Memphis, Tennessee, houses the computers and satellite communications equipment
necessary for its reservations system, which is currently operational, and for
its new property management system, which is currently under development.
Each of the Company's hotel brands now offers an unconditional money-back
guarantee of service satisfaction. The Hampton Inn "100% Satisfaction Guarantee"
and Homewood Suites "Suite Assurance" guarantee have been in place since 1989
and the Embassy Suites "The Embassy Suites Way" was initiated in 1991 and
expanded system-wide in second quarter 1992. All of the Company's hotel brands
offer suites/rooms exclusively for non-smoking guests.
EMBASSY SUITES HOTELS
Embassy Suites hotels are all-suite hotels targeted at the traveler who has
a need or desire for greater space and more focused services than are available
in most traditional hotels. The following table sets forth information regarding
all Embassy Suites hotels, including company-owned hotels,
9
hotels operated by Embassy under management contracts or joint venture
arrangements and hotels operated by licensees:
MANAGEMENT CONTRACTS/
LICENSED OWNED JOINT VENTURES
------------------------ ------------------------ ------------------------
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS SUITES HOTELS SUITES HOTELS SUITES
------------- --------- ------------- --------- ------------- ---------
Fiscal Year-End 1990........................ 42 9,824 8 1,716 50 12,788
1991 Activity:
Additions................................. 2 476 6 1,519 4 1,254
Conversions, net(a)....................... 2 677 1 215 (3) (892)
Sales/Terminations........................ (4)(b) (1,171) - - (7)(b) (1,698)
-- --------- -- --------- -- ---------
Fiscal Year-End 1991........................ 42 9,806 15 3,450 44 11,452
1992 Activity:
Additions................................. 2 685 - - - (3)
Conversions, net(a)....................... 1 221 - - (1) (221)
-- --------- -- --------- -- ---------
Fiscal Year-End 1992........................ 45 10,712 15 3,450 43 11,228
1993 Activity:
Additions................................. 5 938 - - - (3)
Conversions, net(a)....................... 3 900 (6) (1,423) 3 523
Sales/Terminations........................ (1) (196) - - - -
-- --------- -- --------- -- ---------
Fiscal/Year-End 1993........................ 52 12,354 9(c) 2,027 46(d) 11,748
-- --------- -- --------- -- ---------
-- --------- -- --------- -- ---------
- ---------------
(a) Conversions consist of transfers of properties among the licensed, managed
and owned categories.
(b) The decrease in number of hotels was due to litigation with an
owner-licensee which was settled in 1991.
(c) Includes one property in which the Company owns more than a 50% interest.
(This property is under a license agreement to a third party and is managed
by Embassy.)
(d) Includes 44 hotels that are also licensed to third parties.
On December 31, 1993, five Embassy Suites hotels were under construction,
all of which will be licensee-operated.
Embassy Suites hotels are located in 31 states and the District of Columbia
in the United States and two hotels are located in Canada. One hotel is under
construction in Thailand. Embassy Suites hotels generally have between 142 and
460 suites. Each guest suite has a separate living room and dining/work area,
with a color television, refrigerator and wet bar, as well as a traditional
bedroom where most feature a remote-controlled television. Most Embassy Suites
hotels are built around an atrium lobby. All hotels offer a free breakfast and
complimentary evening cocktails.
The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Embassy Suites hotels:
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- ---------------------------------------------------------- ------------- --------------- ---------------
1993...................................................... 73.0% $ 93.91 $ 68.58
1992...................................................... 71.7% $ 90.97 $ 65.26
1991...................................................... 69.4% $ 88.19 $ 61.19
10
HAMPTON INN HOTELS
Hampton Inn hotels are moderately priced hotels designed to attract
business and leisure travelers desiring quality accommodations at affordable
prices. The following table sets forth information regarding all Hampton Inn
hotels, including company-owned hotels, hotels operated by Hampton Inns under
management contracts or joint venture arrangements and hotels operated by
licensees:
MANAGEMENT CONTRACTS/
LICENSED OWNED JOINT VENTURES
---------------------- -------------------------- --------------------------
NUMBER NUMBER NUMBER NUMBER NUMBER NUMBER
OF OF OF OF OF OF
HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
----------- --------- ------------- ----------- ------------- -----------
Fiscal Year-End 1990................. 216 27,180 13 1,756 19 2,376
1991 Activity:
Additions....................... 45 5,362 2 293 2 242
Terminations.................... (2) (239) - - - -
----- --------- -- ----------- -- -----------
Fiscal Year-End 1991................. 259 32,303 15 2,049 21 2,618
1992 Activity:
Additions....................... 32 3,216 - (1) 2 292
Terminations.................... (2) (277) - - - -
----- --------- -- ----------- -- -----------
Fiscal Year-End 1992................. 289 35,242 15 2,048 23 2,910
1993 Activity:
Additions....................... 46 4,147 - - 1 51
Terminations.................... (2) (236) - - - -
----- --------- -- ----------- -- -----------
Fiscal Year-End 1993................. 333(a) 39,153 15 2,048 24(b) 2,961
----- --------- -- ----------- -- -----------
----- --------- -- ----------- -- -----------
- ---------------
(a) Includes one property open only on a seasonal basis.
(b) These hotels are also licensed to third parties.
On December 31, 1993, 41 Hampton Inn hotels were under construction, all of
which will be licensee-operated.
Hampton Inn hotels are currently located in 43 states in the United States,
one hotel is in Canada, one hotel is in Mexico and one hotel is under
construction in Chile. An average Hampton Inn hotel has from 100 to 150 rooms.
The Hampton Inn hotel's standardized concept provides a guest room featuring a
color television, free in-room movies, free local telephone calls and
complimentary continental breakfast. Unlike full-service hotels, Hampton Inn
hotels do not feature restaurants, lounges or large public spaces. Room rates
typically are below those of traditional midscale hotels.
Hampton Inns also has a modified lodging property for use in communities
supporting hotels of fewer than 100 rooms. The building design for these smaller
communities has the same features as a standard Hampton Inn hotel, but with
fewer rooms and a smaller lobby. There are over 60 of these modified design
hotels open and 26 currently under construction.
Hampton Inn hotels compete in the segment of the lodging market that is
directed primarily to business and leisure travelers desiring quality
accommodations at reasonable prices. The following table sets forth information
concerning system occupancy, average daily rate per occupied room and revenue
per available room for all Hampton Inn hotels:
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED ROOM AVAILABLE ROOM
- --------------------------------------------------------- ------------- --------------- ---------------
1993................................................... 73.0% $ 50.81 $ 37.10
1992................................................... 71.2% $ 48.91 $ 34.82
1991................................................... 68.6% $ 47.22 $ 32.39
11
In December 1993, the Company announced the Hampton Inn & Suites brand
which combines standard guest rooms with a significant block of two-room suites
in a single property. Development of this new brand is targeted for
commercial and suburban markets, as well as destination and resort markets. Each
property will contain a centrally located "Lodge" which will serve as an
expanded lobby and complimentary services area and will include an exercise
room, convenience shop, meeting/hospitality room and coin-laundry. An expanded
complimentary continental breakfast-buffet will be offered. The first Hampton
Inn & Suites hotel is expected to open during 1995.
HOMEWOOD SUITES HOTELS
The Homewood Suites brand is the Company's entry in the extended stay
market and is targeted for travelers who stay five or more consecutive nights,
but is also a unique alternative to traditional business and leisure travelers.
The following table sets forth information regarding all Homewood Suites hotels,
including company-owned hotels and hotels operated by licensees:
LICENSED OWNED
-------------------------- --------------------------
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
HOTELS SUITES HOTELS SUITES
------------- ----------- ------------- -----------
Fiscal Year-End 1990...................................................... 9 851 7 820
1991 Activity:
Additions............................................................... 5 653 1 120
-- ----------- -- -----
Fiscal Year-End 1991...................................................... 14 1,504 8 940
1992 Activity:
Additions............................................................... 2 250 - (8)
-- ----------- -- -----
Fiscal Year-End 1992...................................................... 16 1,754 8 932
1993 Activity:
Additions............................................................... - 40 - -
-- ----------- -- -----
Fiscal Year-End 1993...................................................... 16 1,794 8 932
-- ----------- -- -----
-- ----------- -- -----
On December 31, 1993, four Homewood Suites hotels were under construction,
all of which will be licensee operated.
Homewood Suites hotels are currently located in 16 states and a hotel is
under construction in one additional state. Homewood Suites hotels feature
residential-style accommodations, which include a living room area (some with
fireplaces), separate bedroom (with a king size bed) and bath, and a fully-
equipped kitchen. The hotel buildings, generally two-or three-stories, are
centered around a central community building, called the Lodge, which affords
guests a high level of social interaction. Amenities include a limited
complimentary breakfast and a complimentary evening social hour, a convenience
store, shopping service, business center, outdoor pool, exercise center and
limited meeting facilities.
The Homewood Suites brand includes a smaller, modified prototype of its
standard hotel for use in suburban areas of major cities, as well as secondary
cities with active industrial or commercial areas. The modified prototype
reflects the signature design and amenities of a traditional Homewood Suites
hotel, but with fewer suites, a smaller Lodge and other construction
modifications that will require less land. There is currently one modified
prototype hotel under construction which will be licensee operated.
12
The following table sets forth information concerning system occupancy,
average daily rate per occupied suite and revenue per available suite for all
Homewood Suites hotels:
AVERAGE DAILY
OCCUPANCY RATE PER REVENUE PER
FISCAL YEAR RATE OCCUPIED SUITE AVAILABLE SUITE
- ---------------------------------------------------------- ------------- --------------- ---------------
1993.................................................... 75.8% $ 72.47 $ 54.91
1992.................................................... 71.9% $ 69.65 $ 50.10
1991.................................................... 65.2% $ 66.84 $ 43.56
LICENSING AND MANAGEMENT CONTRACT OPERATIONS
Revenues from licensing operations for all Embassy Suites, Hampton Inn and
Homewood Suites hotels operated under license from Embassy's hotel divisions
(referred to in this section as the "Company") consist of initial license
application fees and continuing royalties. The initial license agreement
application fee for an Embassy Suites license agreement is $500 per room, with a
minimum of $100,000, and $400 per room, with a minimum of $40,000, for each
Hampton Inn, Hampton Inn & Suites and Homewood Suites license agreement. The
license agreements provide for a four percent royalty based upon gross
rooms/suites revenues and also provide for a marketing and reservation
contribution.
In screening applicants for license agreements, the Company evaluates the
character, operations ability, experience and financial responsibility of each
applicant; the Company's prior business dealings, if any, with the applicant;
market feasibility of the proposed hotel location and other factors. The license
agreement establishes general requirements for service and quality of
accommodations. The Company provides certain training for licensee management
and makes regular inspections of licensed hotels.
License agreements for new hotels generally have a 20-year term. The
Company may terminate a license agreement if the licensee fails to timely cure a
breach of the license agreement. In certain instances, a license agreement may
be terminated by the licensee, but such termination generally requires a payment
to the Company.
Revenues from management contracts consist primarily of management fees
which typically are five percent of adjusted gross revenues of the hotel. The
contract terms governing management fees can vary depending on the size and
location of the hotel and other factors relative to the property.
Under the Company's management contracts, the Company, as the manager,
operates or supervises all aspects of the hotel's operations. The hotel owner is
generally responsible for all costs, expenses and liabilities incurred in
connection with operating the hotel including the expenses and salaries of all
hotel employees. The hotel owner also enters into a license agreement with the
Company and pays the royalty and marketing and reservation contributions as
provided in the license agreement. In addition, the hotel owner is often
required to set aside a certain percentage of hotel revenues for capital
replacement. The Company's management contracts typically have a term of 20
years and most give the Company specified renewal rights. The management
contract may be terminated by either party due to an uncured default by the
other party.
See the inside front cover of Book Two of the Annual Report, which page is
incorporated herein by reference, for revenues from licensing and management
contract operations.
13
TRADEMARKS
The following trademarks used herein are owned by the Company: Promus (R);
Harrah's (R); Bill's (R); Embassy Suites (R); The Embassy Suites Way(SM);
Hampton Inn (R); Hampton Inn & Suites(SM), Homewood Suites (R); Suite
Assurance (R); Harrah's Northern Star(SM); Harrah's Southern Star(SM); A Great
Time, Every Time(SM); and Harrah's Jazz Company(SM). The names "Harrah's",
"Embassy Suites", "Hampton Inn" and "Homewood Suites" are registered as service
marks in the United States and in certain foreign countries. The Company
considers all of these marks, and the associated name recognition, to be
valuable to its business.
The Company acquired the name "Embassy" (as used in connection with hotels)
in eleven countries in western Europe in 1991. The Company paid an initial fee
to acquire the name and will pay an additional fee for each hotel opened under
the name.
OTHER
TENNESSEE RESTAURANT COMPANY
The Company owns approximately 33% of the outstanding common stock of
Tennessee Restaurant Company ("TRC"), which owns Perkins Restaurants, Inc.
("Perkins"). Perkins owns a 50% limited partner's interest in Perkins Family
Restaurants, L.P., which operates a chain of free-standing restaurants offering
a family style menu. Pursuant to an agreement with the other principal owners of
TRC, Embassy does not maintain day-to-day operational control of TRC or any of
its affiliates. TRC also owns, on a fully diluted basis, approximately 76.3% of
the outstanding stock of Friendly Ice Cream Corporation ("Friendly"). The
trademarks Perkins (R) and Friendly's (R) are owned by Perkins and Friendly,
respectively.
COMPETITION
CASINO ENTERTAINMENT
Competitors within the casino entertainment industry generally compete on
the basis of facility features such as theme/decor, location within a market,
service or promotional activity. Harrah's competes throughout the casino
entertainment industry by providing high levels of service to guests and a high
level of interaction among employees and guests. In addition to creating this
people-oriented entertainment experience, each Harrah's property identifies
additional strategies and tactics based upon the customers and competitors that
are unique to each specific operating market. Comfortable, high quality and fun
surroundings are featured at every Harrah's operation. Harrah's targets the
broad middle-market gaming customer segment and does not actively seek to
attract the very high-end segment or the very low-end segment.
Harrah's competes with numerous casinos and casino hotels of varying
quality and size in the market areas where its properties are located, with
other resort and vacation areas, and with various other casino gaming businesses
such as riverboat casinos, Indian reservation casinos and limited stakes
casinos. In 1993, the Company estimates that Harrah's accounted for
approximately 7% of the total U.S. casino gaming industry's revenues, 8% of
gaming revenue in Nevada and 8.5% of Atlantic City's gaming revenues.
The Las Vegas market has seen the introduction of three mega-properties
adding approximately 10,000 new hotel rooms and well over 350,000 square feet of
gaming space in 1993. These new mega-properties, along with other existing
properties, offer many attractions in addition to casino gaming to bring
customers to their property, such as entertainment, shopping malls and theme
parks.
The Laughlin gaming market has changed significantly over the past three
years with the virtual doubling of available rooms. Harrah's competes with nine
other casinos in Laughlin. In 1993, approximately 1,100 rooms were added to the
market, with other competitors planning possible expansions in
14
the future. Historically, the Laughlin market has been served primarily by road
(car, bus and recreational vehicle) travel from either Arizona or California
residents. Competition in Laughlin centers largely on price of rooms and food
and beverage as few properties there offer any alternative entertainment
options.
Harrah's Atlantic City competes directly with 11 other casinos in Atlantic
City, and to some extent also competes with a large Indian casino in Ledyard,
Connecticut. Poker and simulcasting were legalized in 1993 in Atlantic City
resulting in limited expansion and casino floor reconfigurations within the
market by both competitors and Harrah's. The soft regional economy continued to
make it difficult for Atlantic City operators to maintain operating margins as
competition for market revenues intensified, leading to higher promotional
activities and discounting.
The Company competes with seven major casinos in the Reno area and with
five casinos in the Lake Tahoe area. To the Company's knowledge, five major
construction projects are planned for the Reno area in the next two years. One
project is a major bowling facility being built to accommodate the American
Bowling Congress and the Women's International Bowling Congress; the second
project will add 1,720 hotel rooms and 60,000 square feet of casino space; the
third will add approximately 250 hotel rooms and 12,000 square feet of casino
space; the fourth will add 300 hotel rooms and 10,000 square feet of casino
space; and the fifth will add 300 hotel rooms and 24,000 square feet of casino
space.
Legalization of casino gaming in states beyond Nevada and New Jersey has
created the opportunity for Harrah's to expand into new casino entertainment
markets. Harrah's' first riverboat casino opened in Joliet, Illinois, in May
1993 and its second opened in January 1994. In November 1993 Harrah's opened
dockside gaming facilities in Vicksburg and Tunica, Mississippi. Harrah's also
has riverboat projects under development in North Kansas City and Maryland
Heights (St. Louis), Missouri, and Shreveport, Louisiana, and is considering
additional riverboat projects in other markets.
In Joliet, Harrah's competes with two other licensees within 50 miles of
Chicago. Each licensee is allowed a maximum of 1,200 gaming positions on no more
than two riverboats, which are required to cruise on approved routes. The most
direct competition comes from another licensee near the City of Joliet which is
operating two riverboats. A second competitor operates two riverboats in nearby
Aurora, Illinois. A third competitor has been licensed to operate in Elgin,
Illinois and has reported it expects to open in 1994. Riverboat casinos have
also been approved in neighboring Indiana. Furthermore, there continues to be
discussion of legalizing casino gaming in downtown Chicago.
Harrah's Vicksburg faces competition from two dockside casinos in the city.
Another casino is expected to open in Vicksburg in the second half of 1994, and
additional competition is anticipated from an as yet unopened Indian facility in
Philadelphia, Mississippi. In Tunica County, there are currently six dockside
casinos operating including Harrah's. Some 10 to 15 additional dockside casinos
are planned for Tunica County including at least eight which have substantial
construction in progress.
Harrah's Black Hawk and Harrah's Central City each compete with numerous
gaming establishments in Black Hawk and Central City.
Harrah's Indian Gaming Division has signed development contracts with the
Ak-Chin Indian Community outside of Phoenix, Arizona. When this casino opens, it
will compete with tribal owned casinos in Arizona, one of which already operates
in the Phoenix area. Indian tribes in Arizona that own casinos are permitted to
have a specified number of electronic gaming devices depending on the tribal
population. However, any one tribal owned location is limited to a maximum of
500 electronic gaming devices and only certain types of table games are
permitted. Tribal owned casinos in Arizona will compete for guests with Las
Vegas and Laughlin casinos.
When the New Orleans Permanent Casino is completed, it will be one of the
largest casinos in the world offering approximately 200,000 square feet of
gaming space. Due to their size and nature both the New Orleans Permanent Casino
and the Temporary Casino are expected to compete with other major
15
casino destinations such as Las Vegas, as well as with 15 planned riverboat
casinos in Louisiana, including several in the New Orleans metropolitan area,
and dockside casinos in Mississippi.
Harrah's and its partner have been selected to develop a casino in
Auckland, New Zealand, Harrah's first international casino project. For a
minimum of five years after opening, this casino will have no competition in the
City of Auckland. It will compete to some extent with existing and future
casinos in Australia.
Harrah's believes it is well positioned to take advantage of the recent
trends of proliferation of jurisdictions which allow casino gaming, positive
consumer acceptance of casino gaming as an entertainment activity and increased
visitation to casino facilities. This trend also presents competitive issues for
the Company with regard to its existing and planned properties.
HOTELS
Intense competition among many chains exists for hotel guests, as well as
in the sale of hotel franchises and in obtaining management contracts. Promus'
hotels are in vigorous competition with a wide range of facilities offering
various types of lodging options and related services to the public. The
competition includes several large and moderate size chains and independent
hotels offering all-suite, upper and lower upscale, midscale, and upper and
lower economy accommodations.
The hotel industry saw improvement in 1993. With improving occupancies and
modest growth in average daily rate, revenue per available room in the industry
grew by more than 5% in 1993 based on data provided by the major firm that
tracks nationwide hotel statistics.
In 1993 all of the Company's hotel brands outperformed their respective
competitive market segments in revenue per available room/suite (RevPAR/S).
In 1993 Embassy Suites increased its RevPAS to $68.58 giving it a $5.15
premium over upscale competition. Embassy Suites also posted occupancy and
RevPAS premiums over the upscale all-suite segment of 2.8 percentage points and
$4.83 respectively.
Hampton Inns outperformed upper economy and midscale competition in 1993.
Hampton Inns achieved RevPAR premiums over upper economy and midscale
competition of $9.37 and $3.17, respectively. One out of every ten newly
constructed hotels opened in the U.S. in 1993 was a Hampton Inn hotel.
Homewood Suites posted a $5.87 RevPAR premium over competitive lower
upscale chains. There are several competitors in this segment including one
company with considerably more hotels than Homewood Suites.
CERTAIN MATTERS RELATING TO THE MERGER AGREEMENT WITH BASS
See information on pages 53 through 56, 58 and 59 of the Special Proxy
Statement, which pages are incorporated herein by reference, regarding certain
representations and warranties, indemnification agreements, insurance agreements
and a Tax Sharing Agreement that became effective as a result of the Merger
Agreement. These matters are further described in the Merger Agreement that is
attached as Annex I to the Special Proxy Statement and the Tax Sharing Agreement
that is attached as Annex II to the Special Proxy Statement, each of which
agreements is incorporated herein by reference. (See "Legal Proceedings" below
for a description of currently pending litigation brought by Bass.)
16
GOVERNMENTAL REGULATION
GAMING-NEVADA
The ownership and operation of casino gaming facilities in Nevada are
subject to: (i) the Nevada Gaming Control Act and the regulations promulgated
thereunder (collectively, "Nevada Act"); and (ii) various local regulations.
Promus' gaming operations are subject to the licensing and regulatory control of
the Nevada Gaming Commission ("Nevada Commission"), the Nevada State Gaming
Control Board ("Nevada Board"), the Clark County Liquor and Gaming Licensing
Board ("CCLGLB"), the City of Reno ("Reno"), and the Douglas County Sheriff's
Department ("Douglas"). The Nevada Commission, the Nevada State Gaming Control
Board, the CCLGLB, Reno, and Douglas 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) to provide 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 Promus' Nevada gaming operations.
Harrah's Club, Harrah's Las Vegas, Inc. and Harrah's Laughlin, Inc., each
an indirect subsidiary of Promus (hereinafter collectively referred to as the
"Gaming Subsidiaries"), are required to be licensed by the Nevada Gaming
Authorities to enable Promus to operate casinos at Harrah's Lake Tahoe,
including Bill's Lake Tahoe Casino, Harrah's Reno, Harrah's Las Vegas, and
Harrah's Laughlin. The gaming licenses require the periodic payment of fees and
taxes and are not transferable. Promus is registered with the Nevada Commission
as a publicly traded corporation ("Registered Corporation"), and as such, it is
required periodically to submit detailed financial and operating reports to the
Nevada Commission and furnish any other information which the Nevada Commission
may require. No person may become a stockholder of, or receive any percentage of
profits from, the Gaming Subsidiaries without first obtaining licenses and
approvals from the Nevada Gaming Authorities. Promus and the Gaming Subsidiaries
have obtained from the Nevada Gaming Authorities the various registrations,
approvals, permits and licenses required in order to engage in gaming activities
in Nevada.
Promus has been found suitable to be the sole shareholder of Embassy, which
in turn is registered as a publicly-traded corporation (by virtue of being the
obligor on certain outstanding debt securities) and has been found suitable to
be the sole shareholder of Harrah's. Harrah's is registered as an intermediary
company and has been found suitable to be the sole shareholder of Harrah's Club
and Harrah's Laughlin, Inc. In addition to its gaming license, Harrah's Club is
also licensed as a manufacturer and distributor of gaming devices, is registered
as an intermediary company and has been found suitable to be the sole
shareholder of Harrah's Las Vegas, Inc.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, Promus or the Gaming
Subsidiaries 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 Gaming Subsidiaries 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 Promus who are actively and directly involved in gaming activities of the
Gaming Subsidiaries may be required to 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.
17
The applicant for licensing or a finding of suitability must pay 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 Promus or the Gaming Subsidiaries, the companies involved
would have to sever all relationships with such person. In addition, the Nevada
Commission may require Promus or the Gaming Subsidiaries to terminate the
employment of any person who refuses to file appropriate applications. According
to the Nevada Act, determinations of suitability or of questions pertaining to
licensing are not subject to judicial review in Nevada.
Promus and the Gaming Subsidiaries are required to submit detailed
financial and operating reports to the Nevada Commission. Substantially all
material loans, leases, sales of securities and similar financing transactions
by the Gaming Subsidiaries must be reported to, or approved by, the Nevada
Commission.
If it were determined that the Nevada Act was violated by the Gaming
Subsidiaries, the gaming licenses they hold could be limited, conditioned,
suspended or revoked, subject to compliance with certain statutory and
regulatory procedures. In addition, the Gaming Subsidiaries, Promus, and the
persons involved could be subject to substantial fines for each separate
violation of the Nevada Act at the discretion of the Nevada Commission. Further,
a supervisor could be appointed by the Nevada Commission to operate Promus'
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 Promus' gaming operations.
Any beneficial holder of Promus' voting securities, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have his suitability as a beneficial holder of Promus' voting securities
determined if the Nevada 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 Promus'
voting securities to report the acquisition to the Nevada Commission. The Nevada
Act requires that beneficial owners of more than 10% of Promus' voting
securities apply to the Nevada Commission for a finding of suitability within
thirty days after the Chairman of the Nevada 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 Promus' voting securities may apply to the Nevada Commission for a
waiver of such finding of suitability if such institutional investor holds the
voting securities for investment purposes only. An institutional investor shall
not be deemed to hold voting securities for investment purposes unless the
voting securities were acquired and are 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 Promus, any change in Promus' corporate charter, bylaws, management, policies
or operations of Promus, or any of its gaming affiliates, or any other action
which the Nevada Commission finds to be inconsistent with holding Promus' voting
securities 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, policies or operations; and (iii) such other activities as the
Nevada Commission may determine to be consistent with such investment intent. If
the beneficial holder of voting securities who must be found suitable is a
18
corporation, partnership or trust, it must submit detailed business and
financial information including a list of beneficial owners. The applicant is
required to pay all costs of investigation.
Any person who fails or refuses to apply for a finding of suitability or a
license within thirty days after being ordered to do so by the Nevada Commission
or the Chairman of the Nevada 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 common stock of a
Registered Corporation beyond such period of time as may be prescribed by the
Nevada Commission may be guilty of a criminal offense. Promus 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 Promus or the Gaming
Subsidiaries, it: (i) pays that person any dividend or interest upon voting
securities of Promus; (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 his voting securities for cash at fair market value.
Additionally, the CCLGLB requires that any person who is required to be licensed
or found suitable by the Nevada Commission must file a license application with
the CCLGLB.
The Nevada 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 Nevada 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 Nevada 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.
Promus would normally be required to maintain a current stock ledger in
Nevada which may be examined by the Nevada Gaming Authorities at any time, but
it has received permission from the Nevada Gaming Commission to maintain its
stock ledgers in the State of Tennessee. 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.
Promus also is required to render maximum assistance in determining the identity
of the beneficial owner. The Nevada 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 Nevada Commission has not
imposed such a requirement on Promus.
Promus may not make a public offering of its securities without the prior
approval of the Nevada 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 Nevada Commission or the Nevada Board as to the accuracy or adequacy of the
prospectus or the investment merits of the securities. Any representation to the
contrary is unlawful.
Changes in control of Promus through merger, consolidation, stock or asset
acquisitions, management or consulting agreements, or any act or conduct by a
person whereby he obtains control, may not occur without the prior approval of
the Nevada Commission. Entities seeking to acquire control of a Registered
Corporation must satisfy the Nevada Board and Nevada Commission in a variety of
stringent standards prior to assuming control of such Registered Corporation.
The Nevada 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.
19
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 Nevada 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 environmental for the orderly governance of
corporate affairs. Approvals are, in certain circumstances, required from the
Nevada 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 the Registered
Corporation's stockholders for the purposes of acquiring control of the
Registered Corporation.
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. Nevada
licensees that hold a license as an operator of a slot route, or a
manufacturer's or distributor's license, also pay certain fees and taxes to the
State of Nevada.
Any person who is licensed, required to be licensed, registered, required
to be registered, or is under common control with such persons (collectively,
"Licensees"), and who proposes to become involved in a gaming venture outside of
Nevada is required to deposit with the Nevada Board, and thereafter maintain, a
revolving fund in the amount of $10,000 to pay the expenses of investigation of
the Nevada Board of their participation in such foreign gaming. The revolving
fund is subject to increase or decrease in the discretion of the Nevada
Commission. Thereafter, Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. Licensees are also subject to
disciplinary action by the Nevada 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.
GAMING-NEW JERSEY
As a holding company of Marina Associates ("Marina"), which holds a license
to operate Harrah's Atlantic City in New Jersey, Promus is subject to the
provisions of the New Jersey Casino Control Act (the "New Jersey Act"). The
ownership and operation of casino hotel facilities in Atlantic City, New Jersey,
are the subject of pervasive state regulation under the New Jersey Act and the
regulations adopted thereunder by the New Jersey Casino Control Commission (the
"New Jersey Commission"). The New Jersey Commission is empowered to regulate a
wide spectrum of gaming and non-gaming related activities and to approve the
form of ownership and financial structure of not only the casino licensee,
Marina, but also its intermediary and ultimate holding companies, including
Promus and Embassy. In addition to taxes imposed by the State of New Jersey on
all businesses, the New Jersey Act imposes certain fees and taxes on casino
licensees, including an 8% gross gaming revenue tax, an investment alternative
obligation of 1.25% (or an investment alternative tax of 2.5%) of gross gaming
revenue and various license fees.
20
No casino hotel facility may operate unless the appropriate licenses and
approvals are obtained from the New Jersey Commission, which has broad
discretion with regard to the issuance, renewal and revocation or suspension of
the non-transferable casino license (which licenses are issued initially for a
one-year period and renewable for a one-year period for the first two renewal
periods and two years thereafter), including the power to impose conditions
which are necessary to effectuate the purposes of the New Jersey Act. Each
applicant for a casino license must demonstrate, among other things, its
financial stability (including establishing ability to maintain adequate casino
bankroll, meet ongoing operating expenses, pay all local, state and federal
taxes, make necessary capital improvements and pay, exchange, refinance, or
extend all long and short term debt due and payable during the license term),
its financial integrity and responsibility, its reputation for good character,
honesty and integrity, the suitability of the casino and related facilities and
that it has sufficient business ability and casino experience to establish the
likelihood of creation or maintenance of a successful, efficient casino
operation. With the exception of licensed lending institutions and certain
"institutional investors" waived from the qualification requirements under the
New Jersey Act, each applicant is also required to establish the reputation of
its financial sources including, but not limited to, its financial backers,
investors, mortgagees and bond holders.
The New Jersey Act requires that all officers, directors and principal
employees of the casino licensee be licensed. In addition, each person who
directly or indirectly holds any beneficial interest or ownership of the casino
licensee and any person who in the opinion of the New Jersey Commission has the
ability to control the casino licensee must obtain qualification approval. Each
holding and intermediary company having an interest in the casino licensee must
also obtain qualification approval by meeting essentially the same standards as
that required of the casino licensee. All directors, officers and persons who
directly or indirectly hold any beneficial interest, ownership or control in any
of the intermediary or ultimate holding companies of the casino licensee may
have to seek qualification from the New Jersey Commission. Lenders,
underwriters, agents, employees and security holders of both equity and debt of
the intermediary and holding companies of the casino licensee and any other
person whom the New Jersey Commission deems appropriate may also have to seek
qualification from the New Jersey Commission. Since Promus and Embassy are
publicly-traded holding companies (as defined by the New Jersey Act), however,
the persons described in the two previous sentences may be waived from
compliance with the qualification process if the New Jersey Commission, with the
concurrence of the Director of the New Jersey Division of Gaming Enforcement,
determines that they are not significantly involved in the activities of the
Marina and, in the case of security holders, that they do not have the ability
to control Promus (or its subsidiaries) or elect one or more of its directors.
Any person holding 5% or more of a security in an intermediary or ultimate
holding company, or having the ability to elect one or more of the directors of
a company, is presumed to have the ability to control the company and thus may
be required to seek qualification unless the presumption is rebutted.
Notwithstanding this presumption of control, the New Jersey Act permits the
waiver of the qualification requirements for passive "institutional investors"
(as defined by the New Jersey Act), when such institutional holdings are for
investment purposes only and where such securities represent less than 10% of
the equity securities of a casino licensee's holding or intermediary companies
or debt securities of a casino licensee's holding or intermediary companies not
exceeding 20% of a company's total outstanding debt or 50% of an individual debt
issue. The waiver, which is subject to certain specified conditions including,
upon request, the filing of a certified statement that the investor has no
intention of influencing the affairs of the issuer, may be granted to an
"institutional investor" holding a higher percentage of such securities upon a
showing of good cause. If an "institutional investor" is granted a waiver of the
qualification requirements and subsequently changes its investment intent, the
New Jersey Act provides that no action other than divestiture may be taken by
the investor without compliance with the Interim Casino Authorization Act (the
"Interim Act") described below.
In the event a security holder of either equity or debt is required to
qualify under the New Jersey Act, the provisions of the Interim Act may be
triggered requiring, among other things, either: (i) the filing of a completed
application for qualification within thirty days after being ordered to do so,
which
21
application must include an approved Trust Agreement pursuant to which all
securities of Promus (or its respective subsidiaries) held by the security
holder must be placed in trust with a trustee who has been approved by the New
Jersey Commission; or (ii) the divestiture of all securities of Promus (or its
respective subsidiaries) within 120 days after the New Jersey Commission
determines that qualification is required or declines to waive qualification,
provided the security holder files a notice of intent to divest within 30 days
after the determination of qualification. If a security holder files an
application under the Interim Act, during the period the Trust Agreement remains
in place, such holder may, through the approved trustee, continue to exercise
all rights incident to the ownership of the securities with the exception that:
(i) the security holder may only receive a return on its investment in an amount
not to exceed the actual cost of the investment (as defined by the New Jersey
Act) until the New Jersey Commission finds such holder qualified; and (ii) in
the event the New Jersey Commission finds there is reasonable cause to believe
that the security holder may be found unqualified, the Trust Agreement will
become fully operative vesting the trustee with all rights incident to ownership
of the securities pending a determination on such holder's qualifications;
provided, however, that during the period the securities remain in trust, the
security holder may petition the New Jersey Commission to: (a) direct the
trustee to dispose of the trust property; and (b) direct the trustee to
distribute proceeds thereof to the security holder in an amount not to exceed
the lower of the actual cost of the investment or the value of the securities on
the date the Trust became operative. If the security holder is ultimately not
found to be qualified, the trustee is required to sell the securities and to
distribute the proceeds of the sale to the applicant in an amount not exceeding
the lower of the actual cost of the investment or the value of the securities on
the date the Trust became operative (if not already sold and distributed at the
direction of the security holder) and to distribute the remaining proceeds to
the Casino Revenue Fund. If the security holder is found qualified, the Trust
Agreement will be terminated.
The New Jersey Commission can find that any holder of the equity or debt
securities issued by Promus or its subsidiaries is not qualified to own such
securities. If a security holder of Promus or its subsidiaries is found
disqualified, the New Jersey Act provides that it is unlawful for the security
holder to: (i) receive any dividends or interest payment on such securities;
(ii) exercise, directly or indirectly, any rights conferred by the securities;
or (iii) receive any remuneration from the company in which the security holder
holds an interest. To implement these provisions, the New Jersey Act requires,
among other things, casino licensees and their holding companies to adopt
provisions in their certificate of incorporation providing for certain remedial
action in the event that a holder of any security of such company is found
disqualified. The required certificate of incorporation provisions vary
depending on whether such company is a publicly or privately traded company as
defined by the New Jersey Act. The Certificates of Incorporation of Promus and
Embassy (both "publicly-traded companies" as defined by the New Jersey Act)
contain provisions which provide Promus and Embassy, respectively, with the
right to redeem the securities of disqualified holders, if necessary, to prevent
the loss or to secure the reinstatement of any license or franchise held by
Promus or Embassy or their subsidiaries. The Certificates of Incorporation of
Promus and Embassy also contain provisions defining the redemption price and the
rights of a disqualified security holder. In the event a security holder is
disqualified, the New Jersey Commission is empowered to propose any necessary
action to protect the public interest, including the suspension or revocation of
the casino license of Marina. The New Jersey Act provides, however, that the New
Jersey Commission shall not take action against a casino licensee or its parent
companies with respect to the continued ownership of the security interest by
the disqualified holder, if the New Jersey Commission finds that: (i) such
company has a certificate of incorporation provision providing for the
disposition of such securities as discussed above; (ii) such company has made a
good faith effort to comply with any order requiring the divestiture of the
security interest held by the disqualified holder; and (iii) the disqualified
holder does not have the ability to control the casino licensee or its parent
companies or to elect one or more members to the board of directors of such
company. The Certificate of Incorporation of Embassy further provides that debt
securities issued by Embassy are held subject to the condition that if a holder
is found unsuitable by any governmental agency the corporation shall have the
right to redeem the securities.
22
If, at any time, it is determined that Marina or its holding companies have
violated the New Jersey Act or regulations promulgated thereunder or that such
companies cannot meet the qualification requirements of the New Jersey Act,
Marina could be subject to fines or its license could be suspended or revoked.
If Marina's license is suspended or revoked, the New Jersey Commission could
appoint a Conservator to operate and dispose of the casino hotel facilities of
Marina. A Conservator would be vested with title to the assets of Marina,
subject to valid liens, claims and encumbrances. The Conservator would be
required to act under the general supervision of the New Jersey Commission and
would be charged with the duty of conserving, preserving and, if permitted,
continuing the operation of the casino hotel. During the period of any such
conservatorship, the Conservator may not make any distributions of net earnings
without the prior approval of the New Jersey Commission. The New Jersey
Commission may direct that all or part of such net earnings be paid to the
Casino Revenue Fund, provided, however, that a suspended or former licensee is
entitled to a fair rate of return.
The New Jersey Commission granted Marina a plenary casino license in
connection with Harrah's Atlantic City in November 1981, and it has been renewed
since then. In May 1992, the New Jersey Commission renewed the license for a
two-year period and also found Promus, Embassy, Harrah's and Casino Holding
Company to be qualified as holding companies of Marina. A license renewal
hearing is scheduled for April 1994.
GAMING-ILLINOIS
The ownership and operation of a gaming riverboat in Illinois is subject to
extensive regulation under Illinois gaming laws and regulations. A five-member
Illinois Gaming Board is charged with such regulatory authority, including the
issuance of riverboat gaming licenses not to exceed ten in number. The granting
of a gaming license involves a preliminary approval procedure in which the
Illinois Gaming Board issues a preliminary finding of suitability to a license
applicant and effectively reserves a gaming license for such applicant. The
Board has issued all ten licenses or preliminary findings of suitability. The
Company's Joliet venture was issued a preliminary finding of suitability in 1992
and a license in 1993.
To obtain a gaming license (and a preliminary finding of suitability),
applicants must submit comprehensive application forms, be fingerprinted and
undergo an extensive background investigation by the Illinois Gaming Board.
Each license granted entitles a licensee to own and operate up to two
riverboats (with a combined maximum of 1,200 gaming positions) and equipment
thereon from a specific location. The duration of the license initially runs for
a period of three years (with a fee of $25,000 for the first year and $5,000 for
the following two years). Thereafter, the license is subject to renewal on an
annual basis upon payments of a fee of $5,000 and a determination by the
Illinois Gaming Board that the licensee continues to be eligible for an owner's
license pursuant to the Illinois legislation and the Illinois Gaming Board's
rules. A licensed owner is required to apply to the Illinois Gaming Board for,
and, if approved therefor, will receive, all licenses from the Illinois Gaming
Board necessary for the operation of a riverboat including a liquor license and
a license to prepare and serve food. All use, occupancy and excise taxes which
apply to food and beverages and all taxes imposed on the sale or use of tangible
property apply to sales aboard riverboats.
An applicant is ineligible to receive an owner's license if the applicant,
any of its officers, directors or managerial employees or any person who
participates in the management or operation of gaming operations: (i) has been
convicted of a felony; (ii) has been convicted of any violation under Article 28
of the Illinois Criminal Code or any similar statutes in any other jurisdiction;
(iii) has submitted an application which contains false information; or (iv) is
a member of the Illinois Gaming Board. In addition, an applicant is ineligible
to receive an owners' license if the applicant owns more than a 10% ownership
interest in an entity holding another Illinois owner's license, or if a license
of the applicant
23
issued under the Illinois legislation or a license to own or operate gaming
facilities in any other jurisdiction has been revoked.
In determining whether to grant a license, the Illinois Gaming Board
considers: (i) the character, reputation, experience and financial integrity of
the applicants; (ii) the type of facilities (including riverboat and docking
facilities) proposed by the applicant; (iii) the highest prospective total
revenue to be derived by the state from the conduct of riverboat gaming; (iv)
affirmative action plans of the applicant, including minority training and
employment; and (v) the financial ability of the applicant to purchase and
maintain adequate liability and casualty insurance. Municipal (or county, if an
operation is located outside of a municipality) approval of a proposed applicant
is required, and all documents, resolutions, and letters of support must be
submitted with the initial application.
A holder of a license shall be subject to the imposition of fines,
suspension or revocation of its license for any act that is injurious to the
public health, safety, morals, good order, and general welfare of the people of
the state of Illinois, or that would discredit or tend to discredit the Illinois
gaming industry or the state of Illinois, including without limitation: (i)
failing to comply with or make provision for compliance with the legislation,
the rules promulgated thereunder or any federal, state or local law or
regulation; (ii) failing to comply with any rule, order or ruling of the
Illinois Gaming Board or its agents pertaining to gaming; (iii) receiving goods
or services from a person or business entity who does not hold a supplier's
license but who is required to hold such license by the rules; (iv) being
suspended or ruled ineligible or having a license revoked or suspended in any
state or gaming jurisdiction; (v) associating with, either socially or in
business affairs, or employing persons of notorious or unsavory reputation or
who have extensive police records, or who have failed to cooperate with any
official constituted investigatory or administrative body and would adversely
affect public confidence and trust in gaming; and (vi) employing in any Illinois
riverboat's gaming operation any person known to have been found guilty of
cheating or using any improper device in connection with any game.
An ownership interest in a license or in a business entity, other than a
publicly held business entity which holds an owner's license, may not be
transferred without leave of the Illinois Gaming Board. In addition, an
ownership interest in a license or in a business entity, other than a publicly
held business entity, which holds either directly or indirectly an owner's
license, may not be pledged as collateral to other than a regulated bank or
saving and loan association without leave of the Illinois Gaming Board.
A person employed at a riverboat gaming operation must hold an occupational
license which permits the holder to perform only activities included within such
holder's level of occupation license or any lower level of occupation license.
In addition, the Illinois Gaming Board will issue suppliers licenses which
authorize the supplier licensee to sell or lease gaming equipment and supplies
to any licensee involved in the ownership and management of gaming operations.
Riverboat cruises are limited to a duration of four hours, and no gaming
may be conducted while the boat is docked, with the exceptions: (i) of 30-minute
time periods at the beginning of and at the end of a cruise while the passengers
are embarking and debarking (total gaming time is limited to four hours,
however, including the pre-and post-docking periods); and (ii) when weather or
mechanical problems prevent the boat from cruising. Minimum and maximum wagers
on games are set by the licensee and wagering may not be conducted with money or
other negotiable currency. No person under the age of 21 is permitted to wager,
and wagers may only be taken from a person present on a licensed riverboat. With
respect to electronic gaming devices, the payout percentage may not be less than
80% nor more than 100%.
The legislation imposes a 20% wagering tax on adjusted receipts from
gambling games. The tax imposed is to be paid by the licensed owner to the
Illinois Gaming Board on the day after the day when the wagers were made. Of the
proceeds of that tax, 25% goes to the local government where the home dock is
located, a small portion goes to the Illinois Gaming Board for administration
and enforcement expenses, and the remainder goes to the state education
assistance fund.
24
The legislation also requires that licensees pay a $2.00 admission tax for
each person admitted to a gaming cruise. Of this admission tax, the host
municipality or county receives $1.00. The licensed owner is required to
maintain public books and records clearly showing amounts received from
admission fees, the total amount of gross receipts and the total amount of
adjusted gross receipts.
GAMING-MISSISSIPPI
The ownership and operation of a gaming business in the State of
Mississippi is subject to extensive laws and regulations, including the
Mississippi Gaming Control Act (the "Mississippi Act") and the regulations (the
"Mississippi Regulations") promulgated thereunder by the Mississippi Gaming
Commission (the "Mississippi Commission"), which is empowered to oversee and
enforce the Mississippi Act. Gaming in Mississippi can be legally conducted only
on vessels of a certain minimum size in navigable waters within any county
bordering the Mississippi River or in waters of the State of Mississippi which
lie adjacent and to the south (principally in the Gulf of Mexico) of the
Counties of Hancock, Harrison and Jackson, provided that the county in question
has not voted by referendum not to permit gaming in that county. The voters in
Jackson County, the southeasternmost county of Mississippi, have voted not to
permit gaming in that county. However, gaming could be approved in Jackson
County in any subsequently held referendum. The underlying policy of the
Mississippi Act is to ensure that gaming operations in Mississippi are
conducted: (i) honestly and competitively; (ii) free of criminal and corruptive
influences; and (iii) in a manner which protects the rights of the creditors of
gaming operations.
The Mississippi Act requires that a person (including any corporation or
other entity) be licensed to conduct gaming activities in the State of
Mississippi. A license will be issued only for a specified location which has
been approved in advance as a gaming site by the Mississippi Commission. In
addition, a parent company of a company holding a license must register under
the Mississippi Act.
The Mississippi Act also requires that each officer or director of a gaming
licensee, or other person who exercises a material degree of control over the
licensee, either directly or indirectly, be found suitable by the Mississippi
Commission. In addition, any employee of a licensee who is directly involved in
gaming must obtain a work permit from the Mississippi Commission. The
Mississippi Commission will not issue a license or make a finding of suitability
unless it is satisfied, after an investigation paid for by the applicant, that
the persons associated with the gaming licensee or applicant for a license are
of good character, honesty and integrity, with no relevant or material criminal
record. In addition, the Mississippi Commission will not issue a license unless
it is satisfied that the licensee is adequately financed or has a reasonable
plan to finance its proposed operations from acceptable sources, and that
persons associated with the applicant have sufficient business probity,
competence and experience to engage in the proposed gaming enterprise. The
Mississippi Commission may refuse to issue a work permit to a gaming employee:
(i) if the employee has committed larceny, embezzlement or any crime of moral
turpitude, or has knowingly violated the Mississippi Act or Mississippi
Regulations; or (ii) for any other reasonable cause.
There can be no assurance that such persons will be found suitable by the
Mississippi Commission. An application for licensing, finding of suitability or
registration may be denied for any cause deemed reasonable by the issuing
agency. Changes in licensed positions must be reported to the issuing agency. In
addition to its authority to deny an application for a license, finding of
suitability or registration, the Mississippi Commission has jurisdiction to
disapprove a change in corporate position. If the Mississippi Commission were to
find a director, officer or key employee unsuitable for licensing or unsuitable
to continue having a relationship with the licensee, such entity would be
required to suspend, dismiss and sever all relationships with such person. The
licensee would have similar obligations with regard to any person who refuses to
file appropriate applications. Each gaming employee must obtain a work permit
which may be revoked upon the occurrence of certain specified events.
25
Any individual who is found to have a material relationship to, or material
involvement with, Promus may be required to submit to an investigation in order
to be found suitable or be licensed as a business associate of any subsidiary
holding a gaming license. Key employees, controlling persons or others who
exercise significant influence upon the management or affairs of Promus may be
deemed to have such a relationship or involvement.
The Mississippi Commission has the power to deny, limit, condition, revoke
and suspend any license, finding of suitability or registration, or to fine any
person, as it deems reasonable and in the public interest, subject to an
opportunity for a hearing. The Mississippi Commission may fine any licensee or
person who was found suitable up to $100,000 for each violation of the
Mississippi Act or the Mississippi Regulations which is the subject of an
initial complaint, and up to $250,000 for each such violation which is the
subject of any subsequent complaint. The Mississippi Act provides for judicial
review of any final decision of the Mississippi Commission by petition to a
Mississippi Circuit Court, but the filing of such petition does not necessarily
stay any action taken by the Mississippi Commission pending a decision by the
Circuit Court.
Each gaming licensee must pay a license fee to the State of Mississippi
based upon "gaming receipts" (generally defined as gross receipts less payouts
to customers as winnings). The license fee equals four percent of gaming
receipts of $50,000 or less per month, six percent of gaming receipts over
$50,000 and up to $134,000 per month, and 8 percent of gaming receipts over
$134,000. The foregoing license fees are allowed as a credit against Mississippi
State income tax liability for the year paid. A gaming operator may also be
subject to local, municipal or county taxes equal to one-tenth of the license
fee due to the State of Mississippi, as set forth above (.4 percent, .6 percent
and .8 percent, respectively). An additional license fee, based upon the number
of games conducted or planned to be conducted on the gaming premises, is payable
to the State of Mississippi annually in advance. Based upon Promus' activities
in Tunica and Vicksburg, this additional license fee is expected to be
approximately $81,200, plus $100 for each game in excess of 35 games at each
site. In addition to the state and local fees imposed under the Mississippi Act,
taxes and fees also may be assessed by municipalities and counties in amounts
varying from jurisdiction to jurisdiction. Warren County and the City of
Vicksburg have the authority to impose taxes on gaming receipts in an amount up
to 3.2 percent in the aggregate.
The Company also is subject to certain audit and record-keeping
requirements, primarily intended to ensure compliance with the Mississippi Act,
including compliance with the provisions relating to the payment of license
fees.
Under the Mississippi Regulations, a person is prohibited from acquiring
control of Promus without prior approval of the Mississippi Commission. Promus
also is prohibited from consummating a plan of recapitalization proposed by
management in opposition to an attempted acquisition of control of Promus and
which involves the issuance of a significant dividend to Common Stock holders,
where such dividend is financed by borrowings from financial institutions or the
issuance of debt securities. In addition, Promus is prohibited from repurchasing
any of its voting securities under circumstances (subject to certain exemptions)
where the repurchase involves more than one percent of Promus' outstanding
Common Stock at a price in excess of 110 percent of the then-current market
value of Promus' Common Stock from a person who owns and has for less than one
year owned more than three percent of Promus' outstanding Common Stock, unless
the repurchase has been approved by a majority of Promus' shareholders voting on
the issue (excluding the person from whom the repurchase is being made) or the
offer is made to all other shareholders of Promus.
Under the Mississippi Regulations, a gaming license may not be held by a
publicly held corporation, although an affiliated corporation, such as Promus,
may be publicly held so long as Promus registers with and gets the approval of
the Mississippi Commission. Promus must obtain prior approval from the
Mississippi Commission for any subsequent public offering of the securities of
Promus if any part of the proceeds from that offering are intended to be used to
pay for or reduce debt used to pay for the construction, acquisition or
operation of any gaming facility in Mississippi. In addition, in order to
register with the Mississippi Commission as a publicly held holding corporation,
Promus must provide further documentation which is satisfactory to the
Mississippi Commission, which includes all documents filed with the Securities
and Exchange Commission.
26
Any person who, directly or indirectly, or in association with others,
acquires beneficial ownership of more than 5% of the Common Stock of Promus must
notify the Mississippi Commission of this acquisition. Regardless of the amount
of securities owned, any person who has any beneficial ownership in the Common
Stock of Promus may be required to be found suitable if the Mississippi
Commission has reason to believe that such ownership would be inconsistent with
the declared policies of the State of Mississippi. Any person who is required to
be found suitable must apply for a finding of suitability from the Mississippi
Commission within 30 days after being requested to do so, and must deposit with
the State Tax Commission a sum of money which is adequate to pay the anticipated
investigatory costs associated with such finding. Any person who is found not to
be suitable by the Mississippi Commission shall not be permitted to have any
direct or indirect ownership in Promus' Common Stock. Any person who is required
to apply for a finding of suitability and fails to do so, or who fails to
dispose of his or her interest in Promus' Common Stock if found unsuitable, is
guilty of a misdemeanor. If a finding of suitability with respect to any person
is not applied for where required, or if it is denied or revoked by the
Mississippi Commission, Promus is not permitted to pay such person for services
rendered, or to employ or enter into any contract with such person.
Promus will be required to maintain current stock ledgers in the State of
Mississippi which may be examined by a representative of the Mississippi
Commission 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 Mississippi Commission. A failure to make such
disclosure may be grounds for finding the record holder unsuitable. Promus also
is required to render maximum assistance in determining the identity of the
beneficial owner.
Because Promus will be licensed to conduct gaming in the State of
Mississippi, neither Promus nor any subsidiary may engage in gaming activities
in Mississippi while also conducting gaming operations outside of Mississippi
without approval of the Mississippi Commission. The Mississippi Commission has
approved the conduct of gaming in all jurisdictions in which Promus had ongoing
operations or approved projects as of November 1993, but will need to approve
any future gaming operations outside of Mississippi. There can be no assurance
that such approvals can be obtained. The failure to obtain such approvals could
have a materially adverse effect on Promus.
GAMING-COLORADO
The ownership and operation of limited gaming facilities in the State of
Colorado are subject to extensive state and local regulation. In Colorado, the
two casinos managed and partially owned by subsidiaries of Promus (Harrah's
Central City and Harrah's Black Hawk) are subject to licensing by and regulatory
control of both the State of Colorado Limited Gaming Control Commission and the
State of Colorado Division of Gaming (hereinafter collectively referred to as
the "Colorado Gaming Authorities"). As Promus is a public company, the casinos
must comply with specific rules relating to public companies involved in limited
gaming. The Colorado Gaming Authorities examine and decide upon the suitability
of persons owning any interest in a limited gaming establishment, as well as
those persons associated with such owners. Persons employed in connection with
gaming operations must also be licensed as either "key employees" or "support
employees." The State of Colorado Limited Gaming Control Commission also has the
power to levy substantial taxes with respect to gaming revenues, and with
respect to gaming devices. The licenses held by Harrah's Central City and
Harrah's Black Hawk are not transferable, and must be renewed on an annual
basis.
A Colorado constitutional amendment passed in November 1990, legalized
limited stakes gaming ($5.00 or less per bet) in three Colorado cities: Central
City, Black Hawk, and Cripple Creek. The constitutional amendment restricts
limited gaming to the commercially zoned districts of each respective city. At
each limited gaming location, no more than thirty-five percent (35%) of the
total square footage of a building, and no more than fifty percent (50%) of the
square footage of any single floor may be used for limited gaming purposes. The
Colorado Gaming Authorities have broad power to insure compliance with the
statute and regulations currently in force in the State of Colorado. The
Colorado
27
Gaming Authorities may inspect, without notice, any premises where gaming is
being conducted, and may seize, impound, or remove any gaming device. The
statute and regulations require licensees to maintain certain minimum operating,
security and payoff procedures, as well as books and records that are audited on
an annual basis.
There are specific reporting procedures and approval requirements for
transfers of interests and other involvement with publicly traded corporations
directly or indirectly involved in limited gaming in the State of Colorado. In
addition to the reporting requirements, certain provisions must be included in
the Articles of Organization or other similar chartering documents of any entity
licensed as either an operator or retailer in the State of Colorado. The State
of Colorado Limited Gaming Control Commission may require that any individual
who has a material relationship to or a material involvement with a licensee, or
otherwise, must apply for a finding of suitability by the Commission, or apply
for a key employee license. If an individual or person has been deemed to be
unsuitable by the State of Colorado Limited Gaming Control Commission, the
Commission may require a licensee to pursue all lawful efforts to require that
the unsuitable person relinquish all voting securities in addition to certain
other powers granted to the Commission.
The Colorado Gaming Authorities have full and complete access to any
records of a licensee, as well as individuals associated with licensees,
investigate the background and conduct of licensees and their employees, and are
empowered to bring disciplinary actions against licensees. The Colorado Gaming
Authorities have the power to investigate the background of creditors of
licensees as well. No interest in a licensee, once approved by the Commission,
may be alienated in any fashion without the prior approval of the State of
Colorado Limited Gaming Control Commission. Any person or entity may not have an
interest in more than three retail gaming licenses.
All persons, places or practices connected with limited gaming must be
"suitable" as determined by the Colorado Gaming Authorities. In this regard, the
burden is always on any applicant to prove by clear and convincing evidence that
the applicant is qualified for the licenses applied for. Thus, licensees must be
able to demonstrate that any equity holder, or any person providing financing in
connection with the establishment or operation of a licensee, must be: (i) of
good moral character; (ii) a person whose prior activities, criminal record,
reputation, habits and associations do not pose a threat to the public interests
of the State of Colorado; (iii) a person who has not served a sentence upon a
conviction of a felony or been under the supervision of a probation department
within ten years prior to the date of application; (iv) and, a person who has
not seriously or repeatedly violated the provisions of the "Limited Gaming Act
of 1991" in Colorado. At the request of the Colorado Gaming Authorities, any
person connected with limited gaming must disclose personal background and
financial information, including criminal records, and any and all other
information requested by the Colorado Gaming Authorities.
The constitutional amendment gave the State of Colorado Limited Gaming
Control Commission the power to tax up to forty percent (40%) of the adjusted
gross proceeds received by a licensee from limited gaming. Effective October 1,
1993, the tax schedule for the gaming year (October 1, 1993 to September 30,
1994) is as follows:
ADJUSTED GROSS PROCEEDS PERCENTAGE TAX
- ----------------------------------------------------------------------------- -------------------
Up to $1,000,000............................................................. 2%
$1,000,001 to $2,000,000..................................................... 8%
$2,000,001 to $3,000,000..................................................... 15%
$3,000,001 and over.......................................................... 18%
For the same gaming year, the State gaming device fee is One Hundred Dollars
($100) per gaming device for the year. In addition, local device fees are
assessed by both Central City and Black Hawk. In Central City the current device
fee is Five Hundred Eighty-Two Dollars and Fifty Cents ($582.50) per device per
six months. In Black Hawk Two Hundred Dollars ($200) per device per quarter is
the current device fee.
Changes in this regulatory scheme could adversely affect the operation of
the Colorado properties.
28
GAMING-OTHER
The Company has been granted a gaming license by the State of Louisiana in
connection with its riverboat casino project which is under development in
Shreveport. The Company will be subject to the regulations of such gaming
authority which will be extensive.
The Company has applied for a gaming license in Missouri and is negotiating
a gaming operating contract in New Orleans, Louisiana in connection with its
projects that are currently under development. In the event the Company's
applications are approved, the Company will be subject to extensive regulations
regarding these projects.
The Company and its joint venture partner have been granted a gaming
license in connection with the development of a casino entertainment facility in
Auckland, New Zealand and will also be subject to extensive regulations in that
jurisdiction.
HOTEL LICENSING
A number of states regulate the licensing of hotels and restaurants and the
granting of liquor licenses by requiring registration, disclosure statements and
compliance with specific standards of conduct. In addition, various federal and
state regulations mandate certain disclosures and other practices with respect
to the sales of license agreements and the licensor/licensee relationship. The
Company's operations have not been materially affected by such legislation and
regulations, but the Company cannot predict the effect of future legislation.
FUEL SHORTAGES AND COSTS; WEATHER
Although gasoline supplies are now in relative abundance, gasoline
shortages and price increases may have adverse effects on the hotel business of
Promus. The business of Harrah's in Nevada and Atlantic City is also sensitive
to the cost and availability of gasoline. Access to the Lake Tahoe and Reno
areas of northern Nevada and Atlantic City, New Jersey, may be restricted from
time to time during the winter months by adverse weather conditions which can
cause road closures. Such closures have at times adversely affected operating
results at Harrah's Lake Tahoe, Harrah's Reno, Bill's Lake Tahoe Casino and
Harrah's Atlantic City.
EMPLOYEE RELATIONS
Promus, through its subsidiaries, has approximately 25,300 employees. Labor
relations with employees are good.
Promus' subsidiaries have collective bargaining agreements covering
approximately 3,000 employees. These agreements relate to certain casino, hotel
and restaurant employees at Harrah's Atlantic City and Harrah's Las Vegas.
Approximately 2,500 of these 3,000 employees are covered by collective
bargaining agreements expiring in 1994. Negotiations for successor agreements
will begin later this year prior to the expiration of the current contracts.
ITEM 3. LEGAL PROCEEDINGS.
Bass Public Limited Company, Bass International Holdings N.V., Bass
(U.S.A.) Incorporated, Holiday Corporation and Holiday Inns, Inc. (collectively
"Bass") v. The Promus Companies Incorporated ("Promus"). A complaint was filed
in the United States District Court for the Southern District of New York
against Promus on February 6, 1992, under Civil Action No. 92 Civ. 0969(SWK).
The complaint alleges violation of Rule 10b-5 of the federal securities laws,
intentional and negligent misrepresentation, breach of express warranties,
breach of contract, and express and equitable indemnification. The complaint
generally alleges breaches of representations and warranties under the Merger
Agreement with respect to the 1990 spin-off of Promus and acquisition of the
Holiday Inn hotel business
29
by Bass, violation of the federal securities laws due to such alleged breaches,
and breaches of the Tax Sharing Agreement between Bass and Promus entered into
at the closing of the Merger Agreement. The complaint seeks an unspecified
amount of damages, unspecified punitive or exemplary damages, and declaratory
relief. The Company believes that it has complied with all applicable laws and
agreements with Bass in connection with the Merger and is defending its position
vigorously. Promus has filed (a) an answer denying, and asserting affirmative
defenses to, the substantive allegations of the complaint and (b) counterclaims
alleging that Bass has breached the Tax Sharing Agreement and agreements
ancillary to the Merger Agreement. The counterclaims request unspecified
compensatory damages, injunctive and declaratory relief and Promus' costs,
including reasonable attorneys fees and expenses. On April 17, 1992, Bass filed
a motion seeking to disqualify the Company's outside counsel in the litigation,
Latham & Watkins, on various grounds. That motion was denied by the trial court
on January 7, 1994. Discovery has begun, but no trial date has been set.
Certain tax matters. In connection with the Spin-off, Promus is liable,
with certain exceptions, for taxes of Holiday and its subsidiaries for all
pre-merger tax periods. Bass is obligated under the terms of the Tax Sharing
Agreement to pay Promus the amount of any tax benefits realized from pre-merger
tax periods of Holiday and its subsidiaries. All federal income taxes and
interest assessed by the Internal Revenue Service ("IRS") for the 1978 through
1984 tax years were paid during 1992. The federal income taxes and interest
thereon associated with the agreed issues from the IRS audit of the 1985 and
1986 tax years were paid in 1991. Negotiations with the IRS to resolve disputed
issues for the 1985 and 1986 tax years were concluded and settlement reached
during fourth quarter 1993. Final payment of the federal income taxes and
related interest due under the settlement is expected to be made during second
quarter 1994. The IRS has completed its examination of Holiday's federal income
tax returns for 1987 through the Spin-off date and has issued its proposed
adjustments to those returns. Federal income taxes and related interest assessed
on agreed issues were paid subsequent to year-end. The total liability of
approximately $23.7 million for the federal income tax and interest payments to
be made, as discussed above, was included in current liabilities on December 31,
1993. A protest of all unagreed issues for the 1987 through Spin-off periods was
filed with the IRS during the third quarter of 1993 and negotiations to resolve
disputed issues are currently expected to begin during the second quarter of
1994. Final resolution of the disputed issues is not expected to have a
materially adverse effect on Promus' consolidated financial position or its
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
30
EXECUTIVE OFFICERS OF THE REGISTRANT
POSITIONS AND OFFICES HELD AND PRINCIPAL
OCCUPATIONS OR EMPLOYMENT DURING PAST 5
NAME AND AGE YEARS
- ----------------------------------- ------------------------------------------
Michael D. Rose (52)............... Chairman of the Board and Chief Executive
Officer of Promus since November 1989.
President of Promus (1989-1991). Chief
Executive Officer (1981-1990), Chairman
of the Board (1984-1990) and President
(1988-1990) of Holiday. Effective April
29, 1994, Mr. Philip G. Satre will
become Chief Executive Officer of
Promus. Mr. Rose will continue as
Chairman of the Board. Mr. Rose also is
a director of Ashland Oil, Inc., First
Tennessee National Corporation and
General Mills, Inc.
Philip G. Satre (44)............... Director, President and Chief Operating
Officer of Promus since April 1991.
Director and Senior Vice President of
Promus (1989-1991). President (since
1984) and Chief Executive Officer
(1984-1991) of Harrah's and Senior Vice
President (1987-1990) and a Director
(1988-1990) of Holiday. Effective April
29, 1994, Mr. Satre will become Chief
Executive Officer of Promus in addition
to his position as President. He also is
a director of Goody's Family Clothing,
Inc.
John M. Boushy (39)................ Senior Vice President, Information
Technology and Corporate Marketing of
Promus since June 1993. Vice President,
Strategic Marketing of Harrah's April
1989 to June 1993.
Charles A. Ledsinger, Jr. (44)..... Senior Vice President and Chief Financial
Officer of Promus since August 1990.
Treasurer of Promus from November 1989
to February 1991. Vice President of
Promus from November 1989 to August
1990. Vice President, Project Finance
(1986-1990) of Holiday. He also is a
director of Perkins Management Company,
Inc., a privately-held general partner
of Perkins Family Restaurants, L.P., a
publicly-traded limited partnership.
Ben C. Peternell (48).............. Senior Vice President, Corporate Human
Resources and Communications of Promus
since November 1989. Senior Vice
President, Corporate Human Resources
(1985-1990) of Holiday.
Colin V. Reed (46)................. Senior Vice President, Corporate
Development of Promus since May 1992.
Vice President, Corporate Development of
Promus from November 1989 to May 1992.
Vice President (1988-1990) of Holiday.
He also is a director of Sodak Gaming,
Inc.
E. O. Robinson, Jr. (54)........... Senior Vice President and General Counsel
of Promus since April 1993 and Secretary
of Promus since November 1989. Vice
President and Associate General Counsel
of Promus from November 1989 to April
1993. Vice President (1988-1990) of
Holiday.
31
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.
Information as to the principal markets in which the Company's Common Stock
is traded and the high and low prices of such stock for the last two years is
set forth on the inside back cover of Book Two of the Annual Report, which
information is incorporated herein by reference. On February 26, 1993, the
Company's Board of Directors authorized a two-for-one stock split (the "First
Stock Split"), in the form of a stock dividend, which was effected by the
distribution on March 29, 1993 of one additional share of Common Stock for each
share of Common Stock owned by stockholders of record on March 8, 1993. On
October 29, 1993, the Company's Board of Directors authorized a three-for-two
stock split (the "Second Stock Split"), in the form of a stock dividend, which
was effected by the distribution on November 29, 1993 of one additional share
Common Stock for each two shares of Common Stock owned by stockholders of record
on November 8, 1993. All references herein to dividends paid, numbers of common
shares, per share prices and earnings per share amounts have been restated to
give retroactive effect to the First Stock Split and the Second Stock Split.
The approximate number of holders of record of the Company's Common Stock
as of March 4, 1994, is as follows:
APPROXIMATE NUMBER
TITLE OF CLASS OF HOLDERS OF RECORD
- ----------------------------------------------------------------------- ---------------------
Common Stock, Par Value $1.50 per share................................ 16,755
The Company paid a special, one-time $10 (retroactively adjusted for the
First Stock Split and the Second Stock Split) per share dividend to its common
stockholders on February 22, 1990. The Company does not presently intend to
declare any other cash dividends. The terms of the Company's Bank Facility
substantially limit the Company's ability to pay cash dividends on Common Stock
and limitations are also contained in agreements covering other debt of the
Company. See "Management's Discussion and Analysis--Intercompany Dividend
Restriction" on page 9 of Book Two of the Annual Report and Note 6 to the
financial statements on pages 16 and 17 of Book Two of the Annual Report,
which pages are incorporated herein by reference. When permitted under the
terms of the Bank Facility and the other debt, the declaration and payment of
dividends is at the discretion of the Board of Directors of the Company. The
Board of Directors of the Company intends to reevaluate its dividend policy in
the future in light of the Company's results of operations, financial
condition, cash requirements, future prospects and other factors deemed
relevant by the Board of Directors. There can be no assurance that any cash
dividends on Common Stock will be paid in the future.
ITEM 6. SELECTED FINANCIAL DATA.
See the information for the years 1989 through 1993 set forth under
"Selected Financial Data" in Book Two of the Annual Report on page 24, which
page is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
See the information set forth in Book Two of the Annual Report on pages 2
through 9, which pages are incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
See the information set forth in Book Two of the Annual Report on pages 10
through 24, which pages are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable
32
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS.
DIRECTORS
See the information regarding the names, ages, positions and prior business
experience of the directors of the Company set forth on pages 4 through 6 of the
Proxy Statement, which pages are incorporated herein by reference.
EXECUTIVE OFFICERS
See "Executive Officers of the Registrant" on page 31 in Part I hereof.
ITEM 11. EXECUTIVE COMPENSATION.
See the information set forth in the Proxy Statement on pages 6 and 7
thereof entitled "Compensation of Directors" and the information on pages 13
through 23 thereof. The information on pages 6 and 7 of the Proxy Statement
entitled "Compensation of Directors" and the information on pages 18 through 23
of the Proxy Statement entitled "Summary Compensation Table," "Option Grants in
the Last Fiscal Year," "Aggregated Option Exercises in 1993 and December 31,
1993, Option Values," and "Certain Employment Arrangements" are incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
See the information set forth in the Proxy Statement on page 3 thereof
entitled "Share Ownership of Directors and Executive Officers" and on pages 24
and 25 thereof entitled "Certain Stockholders," which information on said pages
is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
See the information set forth in the Proxy Statement entitled "Certain
Transactions" on pages 23 and 24 thereof, which information is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. Financial statements (including related notes to consolidated
financial statements)* filed as part of this report are listed below:
Report of Independent Public Accountants
Consolidated Balance Sheets as of December 31, 1993 and December 31,
1992.
Consolidated Statements of Income for the Fiscal Years Ended December
31, 1993, December 31, 1992, and January 3, 1992.
Consolidated Statements of Stockholders' Equity for the Fiscal Years
Ended December 31, 1993, December 31, 1992, and January 3, 1992.
Consolidated Statements of Cash Flows for the Fiscal Years Ended
December 31, 1993, December 31, 1992, and January 3, 1992.
- ---------------
* Incorporated by reference from pages 10 through 23 of Book Two of the Annual
Report.
33
2. Schedules for the fiscal years ended December 31, 1993, December 31,
1992, and January 3, 1992, are as follows:
NO.
- -----
II -Consolidated amounts receivable from related parties and underwriters,
promoters, and employees other than related parties
III -Condensed financial information of registrant
V -Consolidated property and equipment
VI -Consolidated accumulated depreciation and amortization of property and
equipment
VIII -Consolidated valuation and qualifying accounts
X -Consolidated supplementary income statement information
Schedules I, IV, VII, IX, XI, XII, XIII and XIV are not applicable and have
therefore been omitted.
3. Exhibits (footnotes appear on pages 38 and 39):
NO.
- -------
3(1) -Certificate of Incorporation of The Promus Companies Incorporated. (1)
3(2) -Bylaws of The Promus Companies Incorporated, as amended. (16)
4(1) -Rights Agreement dated as of February 7, 1990, between The Promus
Companies Incorporated and The Bank of New York as Rights Agent. (12)
4(2) -Offering Circular dated February 9, 1988, for $200,000,000 Holiday
Inns, Inc. 8 5/8% Notes due 1993 and $200,000,000 9% Notes due 1995;
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Irrevocable Letter of Credit dated February 25, 1988, by The
Sumitomo Bank, Limited, New York Branch. (3)
4(3) -Indenture Supplement No. 1 dated as of February 7, 1990, under
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Amendment No. 1 dated February 7, 1990, to Irrevocable Letter
of Credit dated February 25, 1988, by The Sumitomo Bank, Limited, New
York Branch. (12)
4(4) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and Commerce Union Bank (now
Sovran Bank/Central South), Trustee; Prospectus dated March 5, 1987,
for $900,000,000 Holiday Inns, Inc. 10 1/2% Senior Notes due 1994. (4)
4(5) -First Supplemental Indenture dated as of January 12, 1990, with respect
to the 10 1/2% Senior Notes due 1994, among Sovran Bank/Central South,
as trustee, Holiday Corporation, as guarantor, The Promus Companies
Incorporated and Holiday Inns, Inc., as issuer; Second Supplemental
Indenture dated as of February 7, 1990, with respect to the 10 1/2%
Senior Notes due 1994, among Holiday Inns, Inc., Holiday Corporation,
Embassy Suites, Inc., The Promus Companies Incorporated and Sovran
Bank/Central South; Form of Note for 10 1/2% Senior Notes due 1994.
(12)
4(6) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and LaSalle National Bank,
Trustee; Prospectus dated March 5, 1987, for $500,000,000 Holiday Inns,
Inc. 11% Subordinated Debentures due 1999. (5)
4(7) -First Supplemental Indenture dated as of January 8, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation and LaSalle National Bank. (3)
4(8) -Second Supplemental Indenture dated as of February 23, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation, Guarantor, and LaSalle National Bank. (3)
34
NO.
- -------
4(9) -Third Supplemental Indenture dated as of January 17, 1990, with respect
to the 11% Subordinated Debentures due 1999, among LaSalle National
Bank, as trustee, Holiday Corporation, as guarantor, The Promus
Companies Incorporated and Holiday Inns, Inc., as issuer; Fourth
Supplemental Indenture dated as of February 7, 1990, with respect to
the 11% Subordinated Debentures due 1999, among Holiday Inns, Inc.,
Holiday Corporation, Embassy Suites, Inc., The Promus Companies
Incorporated and LaSalle National Bank; Form of Debenture for 11%
Subordinated Debentures due 1999. (12)
4(10) -Letter to Bank of New York dated March 18, 1993 constituting
Certificate under Section 12 of the Rights Agreement dated as of
February 7, 1990. (11)
4(11) -Interest Swap Agreement between Bank of America National Trust and
Savings Association and Embassy Suites, Inc. dated May 14, 1993. (6)
4(12) -Interest Swap Agreement between NationsBank of North Carolina, N.A. and
Embassy Suites, Inc. dated May 18, 1993. (6)
4(13) -First Supplemental Indenture dated as of July 15, 1987, among Irving
Trust Company, as resigning trustee with respect to the 1999 Notes,
Indiana National Bank as successor trustee with respect to the 1999
Notes and Holiday Inns, Inc.; Second Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, between
Holiday Inns, Inc., and Irving Trust Company, as trustee with respect
to 8 3/8% Notes due 1996; Third Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, among
Holiday Inns, Inc., Irving Trust Company, as resigning trustee with
respect to the 8 3/8% Notes due 1996, and LaSalle National Bank as
successor trustee with respect to the 8 3/8% Notes due 1996; Fourth
Supplemental Indenture dated as of February 23, 1988, under Indenture
dated as of January 15, 1984, between Holiday Inns, Inc. and LaSalle
National Bank, as trustee with respect to the 8 3/8% Notes due 1996.
(3)
4(14) -Fifth Supplemental Indenture dated as of January 23, 1990, with respect
to the 8 3/8% Notes due 1996, among LaSalle National Bank, as trustee,
The Promus Companies Incorporated and Holiday Inns, Inc., as issuer;
Sixth Supplemental Indenture dated as of February 7, 1990, with respect
to the 8 3/8% Notes due 1996, among Holiday Inns, Inc., Embassy Suites,
Inc., The Promus Companies Incorporated and LaSalle National Bank; Form
of Note for 8 3/8% Notes due 1996. (12)
4(15) -Indenture dated as of April 1, 1992, with respect to the 10 7/8% Senior
Subordinated Notes due 2002, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 10 7/8% Senior Subordinated Notes due
2002. (18)
4(16) -Indenture dated as of August 1, 1993, with respect to the 8 3/4% Senior
Subordinated Notes due 2000, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 8 3/4% Senior Subordinated Notes due
2000. (6)
4(17) -Interest Swap Agreement between The Sumitomo Bank, Limited and Embassy
Suites, Inc. dated October 22, 1992; Interest Swap Agreement between
The Bank of Nova Scotia and Embassy Suites, Inc. dated October 22,
1992; Interest Swap Agreement between The Nippon Credit Bank and
Embassy Suites, Inc. dated October 22, 1992; (18)
10(1) -Amended and Restated Agreement and Plan of Merger among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass (U.S.A.) Hotels, Incorporated (a Delaware corporation)
and Bass (U.S.A.) Hotels, Incorporated (a Tennessee corporation), dated
as of August 24, 1989. (1)
10(2) -First Amendment to the Amended and Restated Agreement and Plan of
Merger among Holiday Corporation, Holiday Inns, Inc., The Promus
Companies Incorporated, Bass plc and Bass (U.S.A.) Hotels,
Incorporated, dated as of February 7, 1990. (2)
10(3) -Tax Sharing Agreement dated as of February 7, 1990, among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass European Holdings, N.V., Bass (U.S.A.), Inc. and Bass
(U.S.A.) Hotels, Incorporated. (12)
+10(4) -Form of Indemnification Agreement entered into by The Promus Companies
Incorporated and each of its directors and executive officers. (1)
+10(5) -The Promus Companies Incorporated 1990 Stock Option Plan. (12)
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
35
NO.
- -------
+10(6) -The Promus Companies Incorporated 1990 Restricted Stock Plan. (12)
+10(7) -The Promus Companies Incorporated Savings and Retirement Plan Trust
Agreement. (12)
+10(8) -Amendment to The Promus Companies Incorporated Savings and Retirement
Plan dated May 1, 1991. (15)
+10(9) -Financial Counseling Plan of The Promus Companies Incorporated as
amended February 25, 1993. (11)
+10(10) -Form of Severance Agreement dated July 30, 1993, entered into with E.
O. Robinson, Jr. and John M. Boushy. (22)
10(11) -Credit Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., The Promus Companies Incorporated, the Banks parties thereto,
Marina Associates and Bankers Trust Company, as Administrative Agent.
(19)
10(12) -Amended and Restated Reimbursement Agreement, dated as of July 22,
1993, among Embassy Suites, Inc., The Promus Companies Incorporated,
Marina Associates and The Sumitomo Bank, Limited, New York Branch. (19)
10(13) -Master Collateral Agreement, dated as of July 22, 1993, among The
Promus Companies Incorporated, Embassy Suites, Inc., the other
Collateral Grantors parties thereto, Bankers Trust Company, as
Administrative Agent, and Bankers Trust Company as Collateral Agent.
(19)
10(14) -Security Agreement dated as of July 22, 1993, among Embassy Suites,
Inc., the Collateral Grantors parties thereto and Bankers Trust
Company, as Collateral Agent. (19)
10(15) -Deed of Trust, Leasehold Deed of Trust, Assignment, Assignment of
Leases and Rents, Security Agreement and Financing Statement, dated as
of July 22, 1993, from Embassy Suites, Inc., Harrah's Laughlin, Inc.,
and Harrah's Reno Holding Company, Inc., the Grantors, to First
American Title Company of Nevada, as Trustee, for the benefit of
Bankers Trust Company, as Beneficiary. (19)
10(16) -Mortgage, Leasehold Mortgage, Assignment, Assignment of Leases and
Rents and Security Agreement, dated as of July 22, 1993, from Marina
Associates and Embassy Suites, Inc., the Mortgagors, to Bankers Trust
Company, as Collateral Agent and the Mortgagee. (19)
10(17) -Pledge Agreement, dated as of July 22, 1993, between The Promus
Companies Incorporated and Bankers Trust Company, as Collateral Agent.
(19)
10(18) -Pledge Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., ESI Equity Development Corporation, Harrah's, Harrah's Club,
Casino Holding Company, and Bankers Trust Company, as the General
Collateral Agent, and Bank of America Nevada as the Nevada Collateral
Agent. (19)
10(19) -Form of License Agreement for Hampton Inns. (7)
10(20) -Form of License Agreement for Hampton Inns revised 1988. (8)
10(21) -Form of License Agreement for Hampton Inns revised 1991. (15)
10(22) -Form of License Agreement for Hampton Inns revised 1992. (18)
10(23) -Form of License Agreement for Embassy Suites. (9)
10(24) -Form of License Agreement for Embassy Suites revised 1989. (12)
10(25) -Form of License Agreement for Embassy Suites revised 1990. (13)
10(26) -Form of License Agreement for Embassy Suites revised 1991. (15)
10(27) -Form of License Agreement for Embassy Suites revised 1992. (18)
10(28) -Form of Short-Term License Agreement for Embassy Suites. (12)
10(29) -Form of Short-Term License Agreement for Embassy Suites revised 1990.
(13)
10(30) -Form of Short-Term License Agreement for Embassy Suites revised 1991.
(15)
10(31) -Form of Short-Term License Agreement for Embassy Suites revised 1992.
(18)
10(32) -Form of License Agreement for Homewood Suites. (3)
10(33) -Form of License Agreement for Homewood Suites revised 1992. (18)
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
36
NO.
- -------
**10(34) -Form of License Agreement for Homewood Suites revised 1993.
**10(35) -Form of License Agreement for Embassy Suites revised 1993.
**10(36) -Form of Short-Term License Agreement for Embassy Suites revised 1993.
**10(37) -Form of License Agreement for Hampton Inns revised 1993.
**10(38) -Form of License Agreement for Hampton Inn & Suites.
10(39) -Management Agreement dated as of December 17, 1986, between Hampton
Inns, Inc. and Hampton/GHI Associates No. 1. (10)
10(40) -Form of Management Agreement between Embassy Suites, Inc. and
affiliates of General Electric Pension Trust. (10)
+10(41) -Employment Agreement dated August 1, 1987 between Holiday Corporation
and Michael D. Rose; Amendment to Employment Agreement dated as of
January 31, 1990 between The Promus Companies Incorporated and Michael
D. Rose. (12)
+10(42) -Amended and Restated Severance Agreement dated as of May 1, 1992
between The Promus Companies Incorporated and Michael D. Rose. (18)
+10(43) -Summary Plan Description of Executive Term Life Insurance Plan. (18)
+10(44) -Forms of Stock Option (1990 Stock Option Plan). (12)
+10(45) -Revised Forms of Stock Option (1990 Stock Option Plan). (18)
+10(46) -Form of The Promus Companies Incorporated's Annual Bonus Plan, as
amended, for Managers and Executives. (13)
+10(47) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (12)
+10(48) -Deferred Compensation Plan dated October 16, 1991. (15)
+10(49) -Form of Deferred Compensation Agreement. (12)
+10(50) -Form of Deferred Compensation Agreement revised November 1991. (15)
+10(51) -Executive Deferred Compensation Plan. (12)
+10(52) -First Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1990. (13)
+10(53) -Second Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1991. (15)
+10(54) -Third Amendment to Executive Deferred Compensation Plan, dated as of
October 29, 1992. (18)
+10(55) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (18)
+10(56) -First Amendment to Escrow Agreement dated January 31, 1990 among
Holiday Corporation, certain subsidiaries thereof and Sovran Bank, as
escrow agent. (12)
+10(57) -Escrow Agreement dated February 6, 1990 between The Promus Companies
Incorporated, certain subsidiaries thereof, and Sovran Bank, as escrow
agent. (12)
+10(58) -Form of Amended and Restated Severance Agreement dated November 5,
1992, entered into with Charles A. Ledsinger, Jr., Ben C. Peternell,
Philip G. Satre and Colin V. Reed. (18)
+10(59) -Form of memorandum agreement dated July 2, 1991, eliminating stock
appreciation rights under stock options held by Charles A. Ledsinger,
Jr., Ben C. Peternell and Philip G. Satre. (14)
+10(60) -The Promus Companies Incorporated Amended and Restated Savings and
Retirement Plan dated as of February 6, 1990. (18)
+10(61) -Administrative Regulations, Long Term Compensation Plan (Restricted
Stock Plan and Stock Option Plan), dated as of January 1, 1992. (17)
+10(62) -Amendment dated October 29, 1992 to The Promus Companies Incorporated
Savings and Retirement Plan Trust Agreement; Amendment dated September
21, 1992 to The Promus Companies Incorporated Savings and Retirement
Plan Trust Agreement (18)
+10(63) -Revised Form of Stock Option. (21)
+10(64) -The Promus Companies Incorporated 1990 Stock Option Plan (as amended
as of April 30, 1993). (20)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
37
NO.
- -------
**10(65)-Limited Partnership Agreement of Des Plaines Limited Partnership
between Harrah's Illinois Corporation and John Q. Hammons, dated
February 28, 1992; First Amendment to Limited Partnership Agreement of
Des Plaines Limited Partnership dated as of October 5, 1992.
+**10(66)-Amendment to Escrow Agreement dated as of October 29, 1993 among The
Promus Companies Incorporated, certain subsidiaries thereof, and
NationsBank, formerly Sovran Bank.
**10(67)-Amended and Restated Partnership Agreement of Harrah's Jazz Company,
dated as of March 15, 1994, among Harrah's New Orleans Investment
Company, New Orleans/Louisiana Development Corporation and Grand Palais
Casino, Inc.; First Amendment to the Amended and Restated Partnership
Agreement of Harrah's Jazz Company, effective as of March 15, 1994.
10(68) -Form of Rivergate Ground Lease by and among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(69) -Form of General Development Agreement among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(70) -Form of Temporary Casino Lease by and among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(71) -Form of Casino Management Agreement between Harrah's Jazz Company and
Harrah's New Orleans Management Company. (23)
**11 -Computations of per share earnings.
**12 -Computations of ratios.
**13 -Portions of Annual Report to Stockholders for the fiscal year ended
December 31, 1993. (24)
**21 -List of subsidiaries of The Promus Companies Incorporated.
99(1) -Proxy Statement--Information Statement--Prospectus dated December 13,
1989 of Holiday Corporation, The Promus Companies Incorporated and Bass
Public Limited Company. (12)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
FOOTNOTES
(1) Incorporated by reference from the Company's Registration Statement on Form
10, File No. 1-10410, filed on December 13, 1989.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated February 16, 1990, File No. 1-10410.
(3) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 1, 1988, filed March 31, 1988, File
No. 1-8900.
(4) Incorporated by reference from Holiday Inns, Inc.'s Registration Statement
on Form S-3, File No. 33-11770, filed February 24, 1987.
(5) Incorporated by reference from Holiday Inns, Inc's Registration Statement
on Form S-3, File No. 33-11163, filed December 31, 1986.
(6) Incorporated by reference from the Company's and Embassy Suites, Inc.'s
Amendment No. 2 to Form S-4 Registration Statement, File No. 33-49509-01,
filed July 16, 1993.
(7) Incorporated by reference from Holiday Inns, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 30, 1983, filed March 21, 1984,
File No. 1-4804.
(8) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended December 30, 1988, filed March 30, 1989,
File No. 1-8900.
(9) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 3, 1986, filed March 28, 1986, File
No. 1-8900.
(10) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 2, 1987, filed March 27, 1987, File
No. 1-8900.
38
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410.
(12) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 29, 1989, filed March 28, 1990, File No.
1-10410.
(13) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1990, filed March 21, 1991, File No.
1-10410.
(14) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 1991, filed November 8, 1991, File No.
1-10410.
(15) Incorporated by reference from Amendment No. 2 to the Company's and
Embassy's Registration Statement on Form S-1, file No. 33-43748, filed
March 18, 1992.
(16) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1992, filed March 26, 1992, File No.
1-10410.
(17) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410.
(18) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, filed March 12, 1993, File No.
1-10410.
(19) Incorporated by reference from the Company's Current Report on Form 8-K
filed August 6, 1993, File No. 1-10410.
(20) Incorporated by reference from Post-Effective Amendment No. 1 to the
Company's Form S-8 Registration Statement, File No. 33-32864-01, filed
July 22, 1993.
(21) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993, filed August 12, 1993, File No.
1-10410.
(22) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, filed November 12, 1993, File No.
1-10410.
(23) Incorporated by reference from Amendment No. 1 to Form S-1 Registration
Statement of Harrah's Jazz Company and Harrah's Jazz Finance Corp.,
File No. 33-73370, filed February 22, 1994.
(24) Filed herewith to the extent provisions of such report are specifically
incorporated herein by reference.
(b) The following Reports on Form 8-K were filed during the fourth quarter
of 1993 and thereafter through March 24, 1994: NONE
39
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 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.
THE PROMUS COMPANIES INCORPORATED
Dated: March 28, 1994 By: MICHAEL D. ROSE
..................................
(Michael D. Rose, Chairman
and Chief Executive Officer)
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 IN THE CAPACITIES AND ON THE DATES INDICATED.
Signature Title Date
- ------------------------------------- ------------------------ --------------
JAMES L. BARKSDALE Director March 28, 1994
.....................................
(James L. Barksdale)
JAMES B. FARLEY Director March 28, 1994
.....................................
(James B. Farley)
JOE M. HENSON Director March 28, 1994
.....................................
(Joe M. Henson)
MICHAEL D. ROSE Director and Chief March 28, 1994
..................................... Executive Officer
(Michael D. Rose)
WALTER J. SALMON Director March 28, 1994
.....................................
(Walter J. Salmon)
PHILIP G. SATRE Director, President and March 28, 1994
..................................... Chief Operating
(Philip G. Satre) Officer
BOAKE A. SELLS Director March 28, 1994
.....................................
(Boake A. Sells)
RONALD TERRY Director March 28, 1994
.....................................
(Ronald Terry)
EDDIE N. WILLIAMS Director March 28, 1994
.....................................
(Eddie N. Williams)
SHIRLEY YOUNG Director March 28, 1994
.....................................
(Shirley Young)
CHARLES A. LEDSINGER, JR. Chief Financial Officer March 28, 1994
.....................................
(Charles A. Ledsinger, Jr.)
MICHAEL N. REGAN Controller and Principal March 28, 1994
..................................... Accounting Officer
(Michael N. Regan)
40
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To The Promus Companies Incorporated:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in The Promus Companies Incorporated 1993
annual report to stockholders, incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 8, 1994. Our audits were made for
the purpose of forming an opinion on those statements taken as a whole. The
schedules listed under Item 14(a)2 on page 34 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
financial statements. These schedules have been subjected to the auditing
procedures applied in the audit of the basic 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 financial statements taken as a
whole.
ARTHUR ANDERSEN & CO.
Memphis, Tennessee,
February 8, 1994.
41
SCHEDULE II
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------------------
BALANCE AT
DEDUCTIONS END OF PERIOD
-------------------------- --------------------------
BALANCE AT
BEGINNING OF AMOUNTS AMOUNTS
NAME OF DEBTOR PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT NOT CURRENT
- ---------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Clyde E. Culp, III................... $ 124 $ - $ 124 $ - $ - $ -
Charles A. Ledsinger, Jr............. 126 - 126 - - -
Craig H. Norville.................... 120 351 120 - 351 -
Philip G. Satre...................... 240 - 240 - - -
Kevin O. Servatius................... - 112 - - 112 -
FISCAL YEAR ENDED DECEMBER 31, 1992
Clyde E. Culp, III................... $ - $ 124 $ - $ - $ 124 $ -
Charles A. Ledsinger, Jr............. - 191 65 - 126 -
Craig H. Norville.................... - 120 - - 120 -
Philip G. Satre...................... - 358 118 - 240 -
FISCAL YEAR ENDED JANUARY 3, 1992 $ - $ - $ - $ - $ - $ -
S-1
SCHEDULE III
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEETS
(IN THOUSANDS)
DECEMBER 31,
------------------------
1993 1992
----------- -----------
ASSETS
Cash.................................................................................... $ - $ -
Investments in and advances to subsidiaries (eliminated in consolidation)............... 535,707 427,275
Organizational costs.................................................................... 302 573
----------- -----------
$ 536,009 $ 427,848
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Accrued taxes, including federal income taxes........................................... $ (28) $ (82)
----------- -----------
Commitments and contingencies-see page S-5
Stockholders' equity
Common stock, $1.50 par value, authorized-120,000,000 shares, outstanding-102,258,442
and 101,882,082 shares (excluding 25,251 and 44,442 shares held in treasury)....... 153,388 101,882
Capital surplus....................................................................... 201,035 229,913
Retained earnings..................................................................... 187,203 100,857
Deferred compensation related to restricted stock..................................... (5,589) (4,722)
----------- -----------
536,037 427,930
----------- -----------
$ 536,009 $ 427,848
----------- -----------
----------- -----------
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
S-2
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
(IN THOUSANDS)
FISCAL YEAR ENDED
--------------------------------------
DECEMBER 31, DECEMBER 31, JANUARY 3,
1993 1992 1992
------------ ------------ ----------
Revenues................................................................. $ - $ - $ -
Costs and expenses....................................................... 319 458 402
------------ ------------ ----------
Loss before income taxes and equity in subsidiaries' continuing
earnings............................................................... (319) (458) (402)
Income tax benefit..................................................... 112 155 137
------------ ------------ ----------
Loss before equity in subsidiaries' continuing earnings.................. (207) (303) (265)
Equity in subsidiaries' continuing earnings.............................. 92,000 51,721 30,276
------------ ------------ ----------
Income before extraordinary items........................................ 91,793 51,418 30,011
Extraordinary items, net of tax benefit (provision) of $3,415 and $(753)
(Note 8)............................................................... (5,447) 1,074 -
------------ ------------ ----------
Net income............................................................... $ 86,346 $ 52,492 $ 30,011
------------ ------------ ----------
------------ ------------ ----------
The accompanying Notes to Financial Statements are an integral part of these
statements.
S-3
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
FISCAL YEAR ENDED
----------------------------------------
DECEMBER 31, DECEMBER 31, JANUARY 3,
1993 1992 1992
------------ ------------ ------------
Cash flows from operating activities
Net income.......................................................... $ 86,346 $ 52,492 $ 30,011
Adjustments to reconcile net income to cash flows from operating
activities
Extraordinary items............................................ 8,862 (1,827) -
Amortization................................................... 271 265 276
Equity in undistributed continuing earnings of subsidiaries.... (92,000) (51,721) (30,276)
Dividend received from subsidiary.............................. - 500 -
Net change in working capital accounts......................... (3,479) 791 (11)
------------ ------------ ------------
Cash flows from operating activities........................ - 500 -
------------ ------------ ------------
Cash flows used in investing activities
Advances and capital contributions to subsidiaries.................. - (500) (126,080)
------------ ------------ ------------
Cash flows provided by financing activities
Proceeds from issuance of stock, net of issue costs of $6,920....... - - 126,080
------------ ------------ ------------
Net change in cash.................................................... - - -
Cash, beginning of period............................................. - - -
------------ ------------ ------------
Cash, end of period................................................... $ - $ - $ -
------------ ------------ ------------
------------ ------------ ------------
The accompanying Notes to Financial Statements are an integral part of these
statements.
S-4
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 1--BASIS OF ORGANIZATION
The Promus Companies Incorporated (Promus), a Delaware corporation, is a
holding company, the principal assets of which are the capital stock of two
subsidiaries, Embassy Suites, Inc. (Embassy) and Aster Insurance Ltd. (Aster).
These condensed financial statements should be read in conjunction with the
consolidated financial statements of Promus and subsidiaries.
NOTE 2--FISCAL YEAR
As of the beginning of fiscal 1992, Promus changed from a fiscal year to a
calendar year for financial reporting purposes. The impact of this change on
Promus' financial statements was immaterial.
NOTE 3--ORGANIZATIONAL COSTS
Organizational costs are being amortized on a straight-line basis over a
five year period.
NOTE 4--OWNERSHIP OF ASTER
The value of Promus' investment in Aster has been reduced below zero.
Promus' negative investment in Aster at December 31, 1993 and 1992 was $12.8
million and $10.9 million, respectively, and is included in investments in and
advances to subsidiaries on the accompanying balance sheets. In addition, Promus
has guaranteed the future payment by Aster of certain insurance-related
liabilities.
NOTE 5--LONG-TERM DEBT
Promus has no long-term debt obligations. Promus has guaranteed certain
long-term debt obligations of Embassy.
NOTE 6--STOCKHOLDERS' EQUITY
On October 29, 1993, Promus' Board of Directors approved a three-for-two
stock split (the October split), in the form of a stock dividend, effected by a
distribution on November 29, 1993, of one additional share for each two shares
owned by stockholders of record on November 8, 1993. The October split followed
a two-for-one split, also effected as a stock dividend, approved by the Board on
February 26, 1993, and distributed on March 29, 1993. The $1.50 par value per
share of Promus' common stock was unchanged by these splits. The par value of
the additional shares issued as a result of these splits was capitalized into
common stock on the accompanying balance sheets by means of a transfer from
capital surplus. All references in these financial statements to numbers of
common shares and earnings per share have been restated to give retroactive
effect to both stock splits.
During the second quarter of 1993, Sodak Gaming, Inc. (Sodak), in which a
subsidiary of Embassy owns an equity investment, completed an initial public
offering of its common stock. As required by equity accounting rules, Embassy's
subsidiary increased the carrying value of its investment in Sodak by an amount
equal to its pro rata share of the proceeds of Sodak's offering, approximately
$6.4 million. A corresponding increase was recorded in the combination of the
subsidary's capital surplus and
S-5
SCHEDULE III (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1993
NOTE 6--STOCKHOLDERS' EQUITY (CONTINUED)
deferred income tax liability accounts. As a result of this activity, Promus
increased its investment in Embassy and its capital surplus by approximately
$3.8 million.
In addition to its common stock, Promus has the following classes of stock
authorized but unissued:
Preferred stock, $100 par value, 150,000 shares authorized
Special stock, 5,000,000 shares authorized-
Series B, $1.125 par value
NOTE 7--INCOME TAXES
Promus files a consolidated tax return with its subsidiaries.
During 1992, Promus and its subsidiaries adopted Statement of Financial
Accounting Standards No. 109, Accounting for Income Taxes. The provisions of the
statement were applied retroactively to the Spin-off date (February 7, 1990),
and the cumulative effect of this change in accounting for income taxes of
approximately $9.5 million was charged against stockholders' equity. There were
no changes in the amounts of previously reported income from continuing
operations or net income resulting from the application of this statement.
NOTE 8--EXTRAORDINARY ITEMS
Promus' equity in Embassy's net extraordinary items for fiscal 1993 and
1992 was as follows:
1993 1992
--------- ---------
Loss on early extinguishments of debt............................................ $ (8,862) $ (5,558)
Gain on forgiveness of joint venture debt........................................ - 4,353
Gain due to discounting of debt at extinguishment................................ - 3,032
--------- ---------
(8,862) 1,827
Income tax benefit (provision)................................................... 3,415 (753)
--------- ---------
Extraordinary items, net of income taxes....................................... $ (5,447) $ 1,074
--------- ---------
--------- ---------
S-6
SCHEDULE V
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- -----------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -----------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE AT
BEGINNING OF ADDITIONS CHANGES ADD CLOSE OF
DESCRIPTION PERIOD AT COST(A) RETIREMENTS (DEDUCT) PERIOD
- -----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Owned
Land and land rights......................... $ 203,392 $ 7,459 $ (6,862) $ (276) $ 203,713
Buildings, riverboats, improvements and
other...................................... 1,004,858 110,067 (55,270) 448 1,060,103
Furniture, fixtures and equipment............ 371,768 93,439 (35,707) 44 429,544
------------- ----------- ----------- ----------- -------------
1,580,018 210,965 (97,839) 216 1,693,360
Construction-in-progress..................... 53,370 25,488 (509) (104) 78,245
Property held for future use(B).............. 42,641 - - (99) 42,542
------------- ----------- ----------- ----------- -------------
1,676,029 236,453 (98,348) 13 1,814,147
------------- ----------- ----------- ----------- -------------
Leased
Buildings, improvements and other............ 4,993 15 - - 5,008
Furniture, fixtures and equipment............ 2,508 3,007 (87) (150) 5,278
------------- ----------- ----------- ----------- -------------
7,501 3,022 (87) (150) 10,286
------------- ----------- ----------- ----------- -------------
Totals.................................. $ 1,683,530 $ 239,475 $ (98,435) $ (137) $ 1,824,433
------------- ----------- ----------- ----------- -------------
------------- ----------- ----------- ----------- -------------
- ---------------
(A) Principally construction of new casino facilities and refurbishment of
existing casino and hotel properties, including transfers from
construction-in-progress.
(B) Land held for future development or disposition is included in property held
for future use and amounted to $42.1 million, net of an $11.0 million
reserve for property dispositions.
S-7
SCHEDULE V (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- -------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- -------------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE AT
BEGINNING OF ADDITIONS CHANGES ADD CLOSE OF
DESCRIPTION PERIOD AT COST(A) RETIREMENTS (DEDUCT) PERIOD
- -------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1992
Owned
Land and land rights........................... $ 199,108 $ 4,736 $ (559) $ 107 $ 203,392
Buildings, riverboats, improvements and
other........................................ 935,225 70,543 (910) - 1,004,858
Furniture, fixtures and equipment.............. 335,107 42,393 (6,198) 466 371,768
------------- ----------- ----------- ----------- -------------
1,469,440 117,672 (7,667) 573 1,580,018
Construction-in-progress....................... 54,404 (195) (369) (470) 53,370
Property held for future use(B)................ 42,641 - - - 42,641
------------- ----------- ----------- ----------- -------------
1,566,485 117,477 (8,036) 103 1,676,029
------------- ----------- ----------- ----------- -------------
Leased
Buildings, improvements and other.............. 5,169 - - (176) 4,993
Furniture, fixtures and equipment.............. 1,703 551 - 254 2,508
------------- ----------- ----------- ----------- -------------
6,872 551 - 78 7,501
------------- ----------- ----------- ----------- -------------
Totals.................................... $ 1,573,357 $ 118,028 $ (8,036) $ 181 $ 1,683,530
------------- ----------- ----------- ----------- -------------
------------- ----------- ----------- ----------- -------------
- ---------------
(A) Principally refurbishment and expansion of casino and hotel properties,
including transfers from construction-in-progress.
(B) Land held for future development or disposition is included in property held
for future use and amounted to $41.4 million, which is net of an $11.0
million reserve for property dispositions.
S-8
SCHEDULE V (CONTINUED)
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------------------------------
BALANCE AT OTHER BALANCE AT
BEGINNING OF ADDITIONS CHANGES ADD CLOSE OF
DESCRIPTION PERIOD AT COST(A) RETIREMENTS (DEDUCT)(B) PERIOD
- ----------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED JANUARY 3, 1992
Owned
Land and land rights........................ $ 186,602 $ 12,590 $ (100) $ 16 $ 199,108
Buildings, riverboats, improvements and
other..................................... 781,546 158,991 (5,572) 260 935,225
Furniture, fixtures and equipment........... 283,530 57,785 (7,237) 1,029 335,107
------------- ----------- ----------- ----------- -------------
1,251,678 229,366 (12,909) 1,305 1,469,440
Construction-in-progress.................... 110,070 (60,562) (907) 5,803 54,404
Property held for future use(C)............. 39,314 4,106 (110) (669) 42,641
------------- ----------- ----------- ----------- -------------
1,401,062 172,910 (13,926) 6,439 1,566,485
------------- ----------- ----------- ----------- -------------
Leased
Buildings, improvements and other........... 4,864 305 - - 5,169
Furniture, fixtures and equipment........... 1,415 356 (92) 24 1,703
------------- ----------- ----------- ----------- -------------
6,279 661 (92) 24 6,872
------------- ----------- ----------- ----------- -------------
Totals................................. $ 1,407,341 $ 173,571 $ (14,018) $ 6,463 $ 1,573,357
------------- ----------- ----------- ----------- -------------
------------- ----------- ----------- ----------- -------------
- ---------------
(A) Principally refurbishment and expansion of casino and hotel properties,
including transfers from construction-in-progress.
(B) Principally transfers from deferred charges of $7.8 million, partially
offset by the transfer to investments in nonconsolidated affiliates of $1.0
million in assets contributed to a joint venture.
(C) Land held for future development or disposition is included in property held
for future use and amounted to $41.4 million, which is net of an $11.0
million reserve for property dispositions.
S-9
SCHEDULE VI
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED ACCUMULATED DEPRECIATION AND AMORTIZATION
OF PROPERTY AND EQUIPMENT
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
- ----------------------------------------------------------------------------------------------------------------------------
ESTIMATED ADDITIONS OTHER
USEFUL BALANCE AT CHARGED TO CHANGES BALANCE AT
LIFE IN BEGINNING COSTS AND ADD CLOSE OF
DESCRIPTION YEARS OF PERIOD EXPENSES RETIREMENTS (DEDUCT) PERIOD
- ----------------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Owned
Buildings, riverboats, improvements and
other.................................. 5-40 $ 200,279 $ 33,649 $ (8,559) $ 28 $ 225,397
Furniture, fixtures and equipment........ 3-15 228,734 45,759 (21,049) 102 253,546
----------- ----------- ----------- ----------- -----------
429,013 79,408 (29,608) 130 478,943
----------- ----------- ----------- ----------- -----------
Leased
Buildings, improvements and other........ 4-35 4,513 114 - - 4,627
Furniture, fixtures and equipment........ 1-10 1,513 1,193 (16) (29) 2,661
----------- ----------- ----------- ----------- -----------
6,026 1,307 (16) (29) 7,288
----------- ----------- ----------- ----------- -----------
Totals.............................. $ 435,039 $ 80,715 $ (29,624) $ 101 $ 486,231
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED DECEMBER 31, 1992
Owned
Buildings, riverboats, improvements and
other.................................. 5-40 $ 169,821 $ 32,402 $ (965) $ (979) $ 200,279
Furniture, fixtures and equipment........ 2-15 193,285 38,621 (4,562) 1,390 228,734
----------- ----------- ----------- ----------- -----------
363,106 71,023 (5,527) 411 429,013
----------- ----------- ----------- ----------- -----------
Leased
Buildings, improvements and other........ 4-40 4,254 291 - (32) 4,513
Furniture, fixtures and equipment........ 2-10 969 391 - 153 1,513
----------- ----------- ----------- ----------- -----------
5,223 682 - 121 6,026
----------- ----------- ----------- ----------- -----------
Totals.............................. $ 368,329 $ 71,705 $ (5,527) $ 532 $ 435,039
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED JANUARY 3, 1992
Owned
Buildings, riverboats, improvements and
other.................................. 10-40 $ 141,016 $ 27,318 $ (237) $ 1,724 $ 169,821
Furniture, fixtures and equipment........ 3-15 164,402 37,537 (6,923) (1,731) 193,285
----------- ----------- ----------- ----------- -----------
305,418 64,855 (7,160) (7) 363,106
----------- ----------- ----------- ----------- -----------
Leased
Buildings, improvements and other........ 4-40 3,735 519 - - 4,254
Furniture, fixtures and equipment........ 2-10 648 570 (256) 7 969
----------- ----------- ----------- ----------- -----------
4,383 1,089 (256) 7 5,223
----------- ----------- ----------- ----------- -----------
Totals.............................. $ 309,801 $ 65,944 $ (7,416) $ - $ 368,329
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
S-10
SCHEDULE VIII
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
- ---------------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- ---------------------------------------------------------------------------------------------------------------------
ADDITIONS
------------------------
CHARGED
BALANCE AT TO COSTS CHARGED DEDUCTIONS BALANCE AT
BEGINNING AND TO OTHER FROM CLOSE OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS RESERVES PERIOD
- ---------------------------------------------------------------------------------------------------------------------
FISCAL YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful accounts
Current........................................ $ 11,598 $ 6,022 $ - $ 6,756(A) $ 10,864
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Long-term...................................... $ 644 $ - $ - $ - $ 644
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Allowance for losses on property dispositions..... $ 12,744 $ (128)(B) $ - $ 1,616(C) $ 11,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful accounts
Current........................................ $ 12,710 $ 5,543 $ - $ 6,655(A) $ 11,598
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Long-term...................................... $ 1,696 $ 175 $ - $ 1,227 $ 644
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Allowance for losses on property dispositions..... $ 12,934 $ (190)(B) $ - $ - $ 12,744
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
FISCAL YEAR ENDED JANUARY 3, 1992
Allowance for doubtful accounts
Current........................................ $ 12,611 $ 6,421 $ (703) $ 5,619(A) $ 12,710
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Long-term...................................... $ 1,378 $ 57 $ 359 $ 98 $ 1,696
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Allowance for losses on property dispositions..... $ 13,107 $ (173)(B) $ - $ - $ 12,934
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
- ---------------
(A) Uncollectible accounts written off, net of amounts recovered.
(B) Amortization of reserve balance.
(C) Write-off at time of property dispositions.
S-11
SCHEDULE X
THE PROMUS COMPANIES INCORPORATED
CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
(IN THOUSANDS)
- ----------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B
- ----------------------------------------------------------------------------------------------------------------
ITEM CHARGED TO COSTS AND EXPENSES
- ----------------------------------------------------------------------------------------------------------------
FISCAL YEAR
-------------------------------
1993 1992 1991
--------- --------- ---------
Maintenance and repairs........................................................ $ 24,624 $ 23,665 $ 18,506
Taxes other than payroll and income taxes
Gaming taxes................................................................. 72,077 55,576 53,811
Property taxes............................................................... 19,152 18,993 16,186
Miscellaneous taxes.......................................................... 4,661 2,408 1,396
Advertising.................................................................... 33,071 31,366 25,930
S-12
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports dated February 8, 1994, included in or incorporated by reference
in this Form 10-K for the year ended December 31, 1993, into the Company's
previously filed Registration Statements File Nos. 33-32863, 33-32864 and
33-32865.
ARTHUR ANDERSEN & CO.
Memphis, Tennessee,
March 28, 1994.
EXHIBIT INDEX
NO.
- -------
3(1) -Certificate of Incorporation of The Promus Companies Incorporated. (1)
3(2) -Bylaws of The Promus Companies Incorporated, as amended. (16)
4(1) -Rights Agreement dated as of February 7, 1990, between The Promus
Companies Incorporated and The Bank of New York as Rights Agent. (12)
4(2) -Offering Circular dated February 9, 1988, for $200,000,000 Holiday
Inns, Inc. 8 5/8% Notes due 1993 and $200,000,000 9% Notes due 1995;
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Irrevocable Letter of Credit dated February 25, 1988, by The
Sumitomo Bank, Limited, New York Branch. (3)
4(3) -Indenture Supplement No. 1 dated as of February 7, 1990, under
Indenture dated as of February 15, 1988, among Holiday Inns, Inc.,
Holiday Corporation and Sumitomo Bank of New York Trust Company,
Trustee; Amendment No. 1 dated February 7, 1990, to Irrevocable Letter
of Credit dated February 25, 1988, by The Sumitomo Bank, Limited, New
York Branch. (12)
4(4) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and Commerce Union Bank (now
Sovran Bank/Central South), Trustee; Prospectus dated March 5, 1987,
for $900,000,000 Holiday Inns, Inc. 10 1/2% Senior Notes due 1994. (4)
4(5) -First Supplemental Indenture dated as of January 12, 1990, with respect
to the 10 1/2% Senior Notes due 1994, among Sovran Bank/Central South,
as trustee, Holiday Corporation, as guarantor, The Promus Companies
Incorporated and Holiday Inns, Inc., as issuer; Second Supplemental
Indenture dated as of February 7, 1990, with respect to the 10 1/2%
Senior Notes due 1994, among Holiday Inns, Inc., Holiday Corporation,
Embassy Suites, Inc., The Promus Companies Incorporated and Sovran
Bank/Central South; Form of Note for 10 1/2% Senior Notes due 1994.
(12)
4(6) -Indenture dated as of March 30, 1987, between Holiday Inns, Inc.,
Issuer, Holiday Corporation, Guarantor, and LaSalle National Bank,
Trustee; Prospectus dated March 5, 1987, for $500,000,000 Holiday Inns,
Inc. 11% Subordinated Debentures due 1999. (5)
4(7) -First Supplemental Indenture dated as of January 8, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation and LaSalle National Bank. (3)
4(8) -Second Supplemental Indenture dated as of February 23, 1988, under
Indenture dated as of March 30, 1987, among Holiday Inns, Inc., Holiday
Corporation, Guarantor, and LaSalle National Bank. (3)
4(9) -Third Supplemental Indenture dated as of January 17, 1990, with respect
to the 11% Subordinated Debentures due 1999, among LaSalle National
Bank, as trustee, Holiday Corporation, as guarantor, The Promus
Companies Incorporated and Holiday Inns, Inc., as issuer; Fourth
Supplemental Indenture dated as of February 7, 1990, with respect to
the 11% Subordinated Debentures due 1999, among Holiday Inns, Inc.,
Holiday Corporation, Embassy Suites, Inc., The Promus Companies
Incorporated and LaSalle National Bank; Form of Debenture for 11%
Subordinated Debentures due 1999. (12)
4(10) -Letter to Bank of New York dated March 18, 1993 constituting
Certificate under Section 12 of the Rights Agreement dated as of
February 7, 1990. (11)
4(11) -Interest Swap Agreement between Bank of America National Trust and
Savings Association and Embassy Suites, Inc. dated May 14, 1993. (6)
4(12) -Interest Swap Agreement between NationsBank of North Carolina, N.A. and
Embassy Suites, Inc. dated May 18, 1993. (6)
NO.
- -------
4(13) -First Supplemental Indenture dated as of July 15, 1987, among Irving
Trust Company, as resigning trustee with respect to the 1999 Notes,
Indiana National Bank as successor trustee with respect to the 1999
Notes and Holiday Inns, Inc.; Second Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, between
Holiday Inns, Inc., and Irving Trust Company, as trustee with respect
to 8 3/8% Notes due 1996; Third Supplemental Indenture dated as of
January 8, 1988, under Indenture dated as of January 15, 1984, among
Holiday Inns, Inc., Irving Trust Company, as resigning trustee with
respect to the 8 3/8% Notes due 1996, and LaSalle National Bank as
successor trustee with respect to the 8 3/8% Notes due 1996; Fourth
Supplemental Indenture dated as of February 23, 1988, under Indenture
dated as of January 15, 1984, between Holiday Inns, Inc. and LaSalle
National Bank, as trustee with respect to the 8 3/8% Notes due 1996.
(3)
4(14) -Fifth Supplemental Indenture dated as of January 23, 1990, with respect
to the 8 3/8% Notes due 1996, among LaSalle National Bank, as trustee,
The Promus Companies Incorporated and Holiday Inns, Inc., as issuer;
Sixth Supplemental Indenture dated as of February 7, 1990, with respect
to the 8 3/8% Notes due 1996, among Holiday Inns, Inc., Embassy Suites,
Inc., The Promus Companies Incorporated and LaSalle National Bank; Form
of Note for 8 3/8% Notes due 1996. (12)
4(15) -Indenture dated as of April 1, 1992, with respect to the 10 7/8% Senior
Subordinated Notes due 2002, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 10 7/8% Senior Subordinated Notes due
2002. (18)
4(16) -Indenture dated as of August 1, 1993, with respect to the 8 3/4% Senior
Subordinated Notes due 2000, among The Bank of New York, as trustee,
The Promus Companies Incorporated, as guarantor, and Embassy Suites,
Inc., as issuer; Form of Note for 8 3/4% Senior Subordinated Notes due
2000. (6)
4(17) -Interest Swap Agreement between The Sumitomo Bank, Limited and Embassy
Suites, Inc. dated October 22, 1992; Interest Swap Agreement between
The Bank of Nova Scotia and Embassy Suites, Inc. dated October 22,
1992; Interest Swap Agreement between The Nippon Credit Bank and
Embassy Suites, Inc. dated October 22, 1992; (18)
10(1) -Amended and Restated Agreement and Plan of Merger among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass (U.S.A.) Hotels, Incorporated (a Delaware corporation)
and Bass (U.S.A.) Hotels, Incorporated (a Tennessee corporation), dated
as of August 24, 1989. (1)
10(2) -First Amendment to the Amended and Restated Agreement and Plan of
Merger among Holiday Corporation, Holiday Inns, Inc., The Promus
Companies Incorporated, Bass plc and Bass (U.S.A.) Hotels,
Incorporated, dated as of February 7, 1990. (2)
10(3) -Tax Sharing Agreement dated as of February 7, 1990, among Holiday
Corporation, Holiday Inns, Inc., The Promus Companies Incorporated,
Bass plc, Bass European Holdings, N.V., Bass (U.S.A.), Inc. and Bass
(U.S.A.) Hotels, Incorporated. (12)
10(4) -Form of Indemnification Agreement entered into by The Promus Companies
Incorporated and each of its directors and executive officers. (1)
10(5) -The Promus Companies Incorporated 1990 Stock Option Plan. (12)
10(6) -The Promus Companies Incorporated 1990 Restricted Stock Plan. (12)
10(7) -The Promus Companies Incorporated Savings and Retirement Plan Trust
Agreement. (12)
10(8) -Amendment to The Promus Companies Incorporated Savings and Retirement
Plan dated May 1, 1991. (15)
NO.
- -------
+10(9) -Financial Counseling Plan of The Promus Companies Incorporated as
amended February 25, 1993. (11)
+10(10) -Form of Severance Agreement dated July 30, 1993, entered into with E.
O. Robinson, Jr. and John M. Boushy. (22)
10(11) -Credit Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., The Promus Companies Incorporated, the Banks parties thereto,
Marina Associates and Bankers Trust Company, as Administrative Agent.
(19)
10(12) -Amended and Restated Reimbursement Agreement, dated as of July 22,
1993, among Embassy Suites, Inc., The Promus Companies Incorporated,
Marina Associates and The Sumitomo Bank, Limited, New York Branch. (19)
10(13) -Master Collateral Agreement, dated as of July 22, 1993, among The
Promus Companies Incorporated, Embassy Suites, Inc., the other
Collateral Grantors parties thereto, Bankers Trust Company, as
Administrative Agent, and Bankers Trust Company as Collateral Agent.
(19)
10(14) -Security Agreement dated as of July 22, 1993, among Embassy Suites,
Inc., the Collateral Grantors parties thereto and Bankers Trust
Company, as Collateral Agent. (19)
10(15) -Deed of Trust, Leasehold Deed of Trust, Assignment, Assignment of
Leases and Rents, Security Agreement and Financing Statement, dated as
of July 22, 1993, from Embassy Suites, Inc., Harrah's Laughlin, Inc.,
and Harrah's Reno Holding Company, Inc., the Grantors, to First
American Title Company of Nevada, as Trustee, for the benefit of
Bankers Trust Company, as Beneficiary. (19)
10(16) -Mortgage, Leasehold Mortgage, Assignment, Assignment of Leases and
Rents and Security Agreement, dated as of July 22, 1993, from Marina
Associates and Embassy Suites, Inc., the Mortgagors, to Bankers Trust
Company, as Collateral Agent and the Mortgagee. (19)
10(17) -Pledge Agreement, dated as of July 22, 1993, between The Promus
Companies Incorporated and Bankers Trust Company, as Collateral Agent.
(19)
10(18) -Pledge Agreement, dated as of July 22, 1993, among Embassy Suites,
Inc., ESI Equity Development Corporation, Harrah's, Harrah's Club,
Casino Holding Company, and Bankers Trust Company, as the General
Collateral Agent, and Bank of America Nevada as the Nevada Collateral
Agent. (19)
10(19) -Form of License Agreement for Hampton Inns. (7)
10(20) -Form of License Agreement for Hampton Inns revised 1988. (8)
10(21) -Form of License Agreement for Hampton Inns revised 1991. (15)
10(22) -Form of License Agreement for Hampton Inns revised 1992. (18)
10(23) -Form of License Agreement for Embassy Suites. (9)
10(24) -Form of License Agreement for Embassy Suites revised 1989. (12)
10(25) -Form of License Agreement for Embassy Suites revised 1990. (13)
10(26) -Form of License Agreement for Embassy Suites revised 1991. (15)
10(27) -Form of License Agreement for Embassy Suites revised 1992. (18)
10(28) -Form of Short-Term License Agreement for Embassy Suites. (12)
10(29) -Form of Short-Term License Agreement for Embassy Suites revised 1990.
(13)
10(30) -Form of Short-Term License Agreement for Embassy Suites revised 1991.
(15)
10(31) -Form of Short-Term License Agreement for Embassy Suites revised 1992.
(18)
10(32) -Form of License Agreement for Homewood Suites. (3)
10(33) -Form of License Agreement for Homewood Suites revised 1992. (18)
- ---------------
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
NO.
- -------
**10(34) -Form of License Agreement for Homewood Suites revised 1993.
**10(35) -Form of License Agreement for Embassy Suites revised 1993.
**10(36) -Form of Short-Term License Agreement for Embassy Suites revised 1993.
**10(37) -Form of License Agreement for Hampton Inns revised 1993.
**10(38) -Form of License Agreement for Hampton Inn & Suites.
10(39) -Management Agreement dated as of December 17, 1986, between Hampton
Inns, Inc. and Hampton/GHI Associates No. 1. (10)
10(40) -Form of Management Agreement between Embassy Suites, Inc. and
affiliates of General Electric Pension Trust. (10)
+10(41) -Employment Agreement dated August 1, 1987 between Holiday Corporation
and Michael D. Rose; Amendment to Employment Agreement dated as of
January 31, 1990 between The Promus Companies Incorporated and Michael
D. Rose. (12)
+10(42) -Amended and Restated Severance Agreement dated as of May 1, 1992
between The Promus Companies Incorporated and Michael D. Rose. (18)
+10(43) -Summary Plan Description of Executive Term Life Insurance Plan. (18)
+10(44) -Forms of Stock Option (1990 Stock Option Plan). (12)
+10(45) -Revised Forms of Stock Option (1990 Stock Option Plan). (18)
+10(46) -Form of The Promus Companies Incorporated's Annual Bonus Plan, as
amended, for Managers and Executives. (13)
+10(47) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (12)
+10(48) -Deferred Compensation Plan dated October 16, 1991. (15)
+10(49) -Form of Deferred Compensation Agreement. (12)
+10(50) -Form of Deferred Compensation Agreement revised November 1991. (15)
+10(51) -Executive Deferred Compensation Plan. (12)
+10(52) -First Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1990. (13)
+10(53) -Second Amendment to Executive Deferred Compensation Plan, dated as of
October 25, 1991. (15)
+10(54) -Third Amendment to Executive Deferred Compensation Plan, dated as of
October 29, 1992. (18)
+10(55) -Forms of Restricted Stock Award (1990 Restricted Stock Plan). (18)
+10(56) -First Amendment to Escrow Agreement dated January 31, 1990 among
Holiday Corporation, certain subsidiaries thereof and Sovran Bank, as
escrow agent. (12)
+10(57) -Escrow Agreement dated February 6, 1990 between The Promus Companies
Incorporated, certain subsidiaries thereof, and Sovran Bank, as escrow
agent. (12)
+10(58) -Form of Amended and Restated Severance Agreement dated November 5,
1992, entered into with Charles A. Ledsinger, Jr., Ben C. Peternell,
Philip G. Satre and Colin V. Reed. (18)
+10(59) -Form of memorandum agreement dated July 2, 1991, eliminating stock
appreciation rights under stock options held by Charles A. Ledsinger,
Jr., Ben C. Peternell and Philip G. Satre. (14)
+10(60) -The Promus Companies Incorporated Amended and Restated Savings and
Retirement Plan dated as of February 6, 1990. (18)
+10(61) -Administrative Regulations, Long Term Compensation Plan (Restricted
Stock Plan and Stock Option Plan), dated as of January 1, 1992. (17)
+10(62) -Amendment dated October 29, 1992 to The Promus Companies Incorporated
Savings and Retirement Plan Trust Agreement; Amendment dated September
21, 1992 to The Promus Companies Incorporated Savings and Retirement
Plan Trust Agreement (18)
+10(63) -Revised Form of Stock Option. (21)
+10(64) -The Promus Companies Incorporated 1990 Stock Option Plan (as amended
as of April 30, 1993). (20)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
NO.
- -------
**10(65)-Limited Partnership Agreement of Des Plaines Limited Partnership
between Harrah's Illinois Corporation and John Q. Hammons, dated
February 28, 1992; First Amendment to Limited Partnership Agreement of
Des Plaines Limited Partnership dated as of October 5, 1992.
+**10(66)-Amendment to Escrow Agreement dated as of October 29, 1993 among The
Promus Companies Incorporated, certain subsidiaries thereof, and
NationsBank, formerly Sovran Bank.
**10(67)-Amended and Restated Partnership Agreement of Harrah's Jazz Company,
dated as of March 15, 1994, among Harrah's New Orleans Investment
Company, New Orleans/Louisiana Development Corporation and Grand Palais
Casino, Inc.; First Amendment to the Amended and Restated Partnership
Agreement of Harrah's Jazz Company, effective as of March 15, 1994.
10(68) -Form of Ground Lease by and among Harrah's Jazz Company, Rivergate
Development Corporation and the City of New Orleans. (23)
10(69) -Form of General Development Agreement among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(70) -Form of Temporary Casino Lease by and among Harrah's Jazz Company,
Rivergate Development Corporation and the City of New Orleans. (23)
10(71) -Form of Casino Management Agreement between Harrah's Jazz Company and
Harrah's New Orleans Management Company. (23)
**11 -Computations of per share earnings.
**12 -Computations of ratios.
**13 -Portions of Annual Report to Stockholders for the fiscal year ended
December 31, 1993. (24)
**21 -List of subsidiaries of The Promus Companies Incorporated.
99(1) -Proxy Statement--Information Statement--Prospectus dated December 13,
1989 of Holiday Corporation, The Promus Companies Incorporated and Bass
Public Limited Company. (12)
- ---------------
** Filed herewith
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
FOOTNOTES
(1) Incorporated by reference from the Company's Registration Statement on Form
10, File No. 1-10410, filed on December 13, 1989.
(2) Incorporated by reference from the Company's Current Report on Form 8-K
dated February 16, 1990, File No. 1-10410.
(3) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 1, 1988, filed March 31, 1988, File
No. 1-8900.
(4) Incorporated by reference from Holiday Inns, Inc.'s Registration Statement
on Form S-3, File No. 33-11770, filed February 24, 1987.
(5) Incorporated by reference from Holiday Inns, Inc's Registration Statement
on Form S-3, File No. 33-11163, filed December 31, 1986.
(6) Incorporated by reference from the Company's and Embassy Suites, Inc.'s
Amendment No. 2 to Form S-4 Registration Statement, File No. 33-49509-01,
filed July 16, 1993.
(7) Incorporated by reference from Holiday Inns, Inc.'s Annual Report on Form
10-K for the fiscal year ended December 30, 1983, filed March 21, 1984,
File No. 1-4804.
(8) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended December 30, 1988, filed March 30, 1989,
File No. 1-8900.
(9) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 3, 1986, filed March 28, 1986, File
No. 1-8900.
(10) Incorporated by reference from Holiday Corporation's Annual Report on Form
10-K for the fiscal year ended January 2, 1987, filed March 27, 1987, File
No. 1-8900.
(11) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1993, filed May 13, 1993, File No. 1-10410.
(12) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 29, 1989, filed March 28, 1990, File No.
1-10410.
(13) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 28, 1990, filed March 21, 1991, File No.
1-10410.
(14) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 27, 1991, filed November 8, 1991, File No.
1-10410.
(15) Incorporated by reference from Amendment No. 2 to the Company's and
Embassy's Registration Statement on Form S-1, file No. 33-43748, filed
March 18, 1992.
(16) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended January 3, 1992, filed March 26, 1992, File No.
1-10410.
(17) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended March 31, 1992, filed May 13, 1992, File No. 1-10410.
(18) Incorporated by reference from the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1992, filed March 12, 1993, File No.
1-10410.
(19) Incorporated by reference from the Company's Current Report on Form 8-K
filed August 6, 1993, File No. 1-10410.
(20) Incorporated by reference from Post-Effective Amendment No. 1 to Form S-8
Registration Statement, File No. 33-32864-01, filed July 22, 1993.
(21) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1993, filed August 12, 1993, File No.
1-10410.
(22) Incorporated by reference from the Company's Quarterly Report on Form 10-Q
for the quarter ended September 30, 1993, filed November 12, 1993, File No.
1-10410.
(23) Incorporated by reference from Amendment No. 1 to Form S-1 Registration
Statement, File No. 33-73370, filed February 22, 1994.
(24) Filed herewith to the extent provisions of such report are specifically
incorporated herein by reference.