Back to GetFilings.com
1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1993
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ................ to ................
Commission File Number 1-3427
HILTON HOTELS CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2058176
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NUMBER)
9336 CIVIC CENTER DRIVE 90210
BEVERLY HILLS, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Registrant's telephone number, including area code: (310) 278-4321
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- --------------------
Common Stock, par value $2.50 per share New York, Pacific
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: YES /X/ NO / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. /X/
Based upon the February 28, 1994 New York Stock Exchange closing price of
$72.625 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $2.3 billion.
On that date, there were 47,952,194 shares of Common Stock issued and
outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1993 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation and its majority and wholly-owned subsidiaries
are collectively referred to as "Hilton" or the "Company," unless the context
indicates otherwise. The Company is primarily engaged in the ownership and
management of hotels and hotel-casinos. All of these properties are located in
the United States, with the exception of six international hotels and two
hotel-casinos operated by the Company's wholly-owned subsidiary, Conrad
International Hotels Corporation and its subsidiaries ("Conrad").
On February 1, 1994, Hilton owned or leased and operated 23 hotels and
managed 43 hotels partially or wholly-owned by others. In addition, 170 hotels
were operated under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names
by others pursuant to franchises granted by a subsidiary of Hilton.
Seven of the hotels have substantial gaming operations, five of which are
wholly-owned by the Company and are located in Nevada and the other two hotels
are partially owned by the Company and are located in Australia and Turkey. The
Company's hotel-casinos accounted for approximately 62%, 70% and 71% of its
total operating income in 1991, 1992 and 1993, respectively. For additional
information, see the Ten Year Summary on pages 50 and 51 in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1993 (the "1993
Stockholders Report"), which report is included as Exhibit 13 hereto and, to the
extent specific references are made thereto, incorporated herein by such
references.
The Company, through a wholly-owned subsidiary, is also engaged in the sale
of furniture, furnishings, equipment and supplies to hotels, motels and inns
throughout the United States and, through a 51%-owned company, is engaged in the
operation of a computerized reservation system for use by Hilton and others.
Hilton was organized in the State of Delaware on May 29, 1946. Its
principal executive offices are located at 9336 Civic Center Drive, Beverly
Hills, California 90210, and its telephone number is (310) 278-4321.
RECENT DEVELOPMENTS
Since January 1, 1993, the Company took advantage of various opportunities
to expand its business, the most significant of which included the selection of
Conrad and its partners to develop a hotel-casino in Windsor, Ontario, Canada,
the opening of a riverboat casino in New Orleans, Louisiana, development of
riverboat casinos in Kansas City, Missouri, the acquisition of a resort on the
Big Island of Hawaii, the development of two new vacation ownership resorts and
the addition of three managed Hilton hotels and two Conrad hotels.
In December 1993, the government of Ontario, Canada selected a consortium,
of which Conrad owns a 33% interest, to develop and operate a 300-room
hotel-casino in Windsor, Ontario. Hilton, through Conrad, will co-manage the
property, which will feature a 75,000 square foot casino. The Windsor project
will open on a permanent basis in early 1996, with a temporary 60,000 square
foot casino scheduled to open in spring 1994.
In February 1994, the Company commenced operation of the "Hilton Queen of
New Orleans," a riverboat casino located adjacent to the New Orleans Hilton
Riverside & Towers. The initial 1,500 passenger vessel has a 20,000 square foot
casino and is wholly-owned by the Company. This interim riverboat is being
leased to a joint venture, of which the Company owns a 50% interest, until the
permanent riverboat is completed. In late 1994, the interim riverboat will be
replaced with a permanent vessel owned by the joint venture that will have a
30,000 square foot casino and accommodate 2,400 passengers.
In 1993, the Company was named the exclusive developer of two riverboat
casinos within the city limits of Kansas City, Missouri on the Missouri River.
The Company will own a 90% interest in these riverboats. The first vessel will
feature a 20,000 square foot casino and accommodate 1,500 passengers. Subject to
voter approval in April 1994 of a constitutional amendment authorizing games of
chance in Missouri and a city-wide riverboat gaming proposal in Kansas City, and
the receipt of all required gaming licenses, this vessel is scheduled to open in
late summer 1994. The second vessel is scheduled to commence operation in
mid-1995 and will feature a 30,000 square foot casino and carry 2,000
passengers.
3
During 1993, Hilton and its partners acquired the 1,241-room Hyatt Regency
Waikoloa resort on the Big Island of Hawaii, which sits on a 62-acre site.
Hilton manages and owns a 13.3% interest in this property, which has been
renamed the Hilton Waikoloa Village.
Also in 1993, the Company, through its 50% owned Hilton Grand Vacations
Company, commenced development of a 200-unit vacation ownership resort adjacent
to the Flamingo Hilton-Las Vegas and a 360-unit resort at Sea World Village in
Orlando, Florida. The Las Vegas property is scheduled for completion in early
1995 and the first phase of the Orlando project is anticipated to be completed
in summer 1995.
During 1993, Hilton became the manager of three additional domestic
properties, the 1,000-suite Innisbrook Hilton Resort in Tarpon Springs, Florida,
the 405-room Brunswick Hilton in East Brunswick, New Jersey and the 376-room
Newark Airport Hilton in Newark, New Jersey. Also in 1993, Conrad opened the
269-room Conrad Brussels in Brussels, Belgium. Conrad was selected by the
National Bank of Greece to manage the 565-room Astir Palace Hotel in
Vouliagmeni, Greece, near Athens. Conrad has applied for a license to operate a
casino at the Astir Palace resort property.
The Company has also continued its ongoing program of monitoring and
improving its franchise operations. The Company added four franchises to its
system in 1993, while 14 franchise arrangements were terminated, many due to
noncompliance with the Company's standards.
For a description of the Company's planned expansion activities, see "Hotel
Operations -- Expansion Program" and "Gaming Operations -- Expansion Program"
below.
INDUSTRY SEGMENTS
Hilton's revenues and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned or leased
hotels, management and franchise fees and operating income from unconsolidated
affiliates and (ii) hotel-casino operations. For financial data relating to the
Company's hotel and hotel-casino operations for the three years ended December
31, 1993, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 46 and 47 in the 1993 Stockholders Report.
The Company re-entered the international arena in November 1985, with the
opening of a hotel-casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
the French West Indies, England, Ireland, Hong Kong, Turkey, Belgium and Greece.
To date, the amounts of revenues, operating profits and identifiable assets
attributable to geographic areas, other than the United States, have not been
material.
HOTEL OPERATIONS
OWNED HOTELS
On February 1, 1994, the following hotels were owned in fee and operated by
Hilton:
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1994
- -------------------------- ------------------ --------- -----------------
Atlanta Airport Hilton 501
Atlanta, Georgia(1) (1989) 1960 $50,000,000
Palmer House Hilton 1,639
Chicago, Illinois(2) (1925; 1945) 1988 --
Flamingo Hilton-Las Vegas 3,034
Las Vegas, Nevada (various dates 1971 --
through 1990)
Las Vegas Hilton 3,174
Las Vegas, Nevada (various dates 1971 --
through 1981)
Flamingo Hilton-Laughlin 2,000
Laughlin, Nevada (1990) 1990 --
2
4
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1994
- --------------------------- ------------------ --------- -----------------
New Orleans Airport Hilton 312
New Orleans, Louisiana(1) (1989) 1959 $32,000,000
Waldorf-Astoria 1,410
New York, New York(3) (1931) 1977 --
Portland Hilton 455
Portland, Oregon (1963) 1963 --
Flamingo Hilton-Reno 604
Reno, Nevada(4) (1978) 1981 --
Reno Hilton 2,001
Reno, Nevada (1978) 1992 --
Hilton Garden Inn 195
Southfield, Michigan(5) (1988) 1993 --
Hilton Suites 224
Auburn Hills, Michigan (1991) 1991 --
Hilton Suites 203
Brentwood, Tennessee (1989) 1989 --
Hilton Suites 230
Orange, California (1989) 1989 --
Hilton Suites 226
Phoenix, Arizona (1990) 1990 --
- ------------
(1) The Atlanta Airport Hilton and the New Orleans Airport Hilton were closed
and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.
(2) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
February 1988.
(3) The Company operated the Waldorf-Astoria under a lease from February 1950
until April 1977.
(4) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.
(5) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.
LEASED HOTELS
Hilton leases the land upon which eight hotels have been built. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 47 in the 1993
Stockholders Report. Hilton, in all cases, owns all furniture and equipment, is
responsible for repairs, maintenance, operating expenses and lease rentals, and
retains complete managerial discretion over operations. Generally, Hilton pays a
percentage rental based on the gross revenues of the facility, but in some
instances the rental is a fixed amount.
3
5
On February 1, 1994, the following hotels were leased and operated by
Hilton:
NUMBER OF
ROOMS (YEAR OF
INITIAL
COMPLETION
AND YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
- ----------------------------- ----------------- --------------------------------------------
Logan Airport Hilton 541 2014, with renewal options aggregating 25
Boston, Massachusetts(1) (1959; 1988) years under specified circumstances
O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)
Oakland Airport Hilton 362 2033
Oakland, California (1970; 1970)
Pittsburgh Hilton & Towers 714 2004, with renewal options aggregating 30
Pittsburgh, Pennsylvania (1959; 1959) years
San Diego Hilton Beach 354 2019
& Tennis Resort (1962; 1965)
San Diego, California
San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)
Seattle Airport Hilton 173 2004, with renewal options aggregating 30
Seattle, Washington (1961; 1961) years
Tarrytown Hilton 236 2003, with renewal options aggregating 40
Tarrytown, New York(3) (1961; 1993) years
- ------------
(1) The Company managed and was a joint venture partner with respect to the
Logan Airport Hilton from 1975 until July 1988, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
(2) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.
(3) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
During the three years ended December 31, 1993, Hilton paid aggregate
rentals, including rentals attributable to the properties listed in the above
table, of $8,700,000, $9,500,000 and $11,300,000, respectively. For information
relating to minimum rental commitments in the future, see "Leases" in the Notes
to the Company's Consolidated Financial Statements on page 47 in the 1993
Stockholders Report.
MANAGED HOTELS
On February 1, 1994, Hilton operated 35 domestic hotels and eight
international hotels under management agreements. Under its standard management
arrangement, Hilton operates a hotel for the benefit of its owner, which either
owns or leases the hotel and the personal property, and Hilton's fee is
generally based on a percentage of the hotel's gross revenues plus an
incremental incentive fee based on operating performance.
Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an interest of
up to 50%. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 39 and 40 in
the 1993 Stockholders Report.
4
6
The Company has also agreed to provide loans or investments to the owners
of certain managed hotels under specified circumstances. See "Commitments and
Contingent Liabilities" in the Notes to the Company's Consolidated Financial
Statements on page 48 in the 1993 Stockholders Report.
On February 1, 1994, the following hotels were operated by Hilton under
management agreements:
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------ ---------------------- ------------------------------------
DOMESTIC
Anaheim Hilton & Towers 1,576 2004, with renewal options
Anaheim, California(3) (1984) aggregating approximately 55
years, subject to certain
termination rights
Anchorage Hilton 591 2006, with renewal options
Anchorage, Alaska (various dates aggregating 20 years
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10
Atlanta, Georgia (1976) years
Beverly Hilton 581 2007, with renewal options
Beverly Hills, California (1955; 1967) aggregating 20 years
Chicago Hilton & Towers 1,543 2005, with renewal options
Chicago, Illinois(1) (various dates aggregating 20 years
through 1986)
Brunswick Hilton 405 2013, subject to certain termination
East Brunswick, New Jersey(3) (1989) rights
Hilton Hawaiian Village 2,540 1997, with renewal options
Honolulu, Hawaii(2) (various dates aggregating 20 years
through 1988)
Long Beach Hilton 398 2012, with renewal options
Long Beach, California (1992) aggregating 20 years, subject to
certain termination rights
Los Angeles Airport Hilton & Towers 1,279 1999, with renewal options
Los Angeles, California (1983) aggregating 10 years, subject to
certain termination rights
Los Angeles Hilton & Towers 900 1998, subject to certain termination
Los Angeles, California (1952) rights
McLean Hilton 457 2007, with renewal options
McLean, Virginia(1) (1987) aggregating 20 years
Fontainebleau Hilton Resort & Spa 1,206 1998, with a renewal option for 10
Miami, Florida (1954) years, subject to certain
termination rights
Miami Airport Hilton & Marina 500 2004, with renewal options
Miami, Florida(1) (1983) aggregating 20 years
Minneapolis Hilton & Towers 814 2012, with renewal options
Minneapolis, Minnesota(3) (1992) aggregating 20 years, subject to
certain termination rights
Newark Airport Hilton 376 2003
Newark, New Jersey(3) (1988)
New Orleans Hilton Riverside 1,602 2007, with a renewal option for 10
& Towers (1977; 1983) years
New Orleans, Louisiana(1)(3)
New York Hilton & Towers 1,952 1995
New York, New York(2) (1963)
Novi Hilton 236 2002, subject to certain termination
Novi, Michigan(3) (1985) rights
Turtle Bay Hilton & Country Club 486 2004, with a renewal option for 10
Oahu, Hawaii (1972) years
5
7
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------ ---------------------- ------------------------------------
Hilton at Walt Disney World 813 2003, with renewal options
Orlando, Florida(3) (1983) aggregating 20 years, subject to
certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10
Pasadena, California (1970) years, subject to certain
termination rights
The Pointe Hilton on South Mountain 636 2012, with renewal options
Phoenix, Arizona (1986) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Squaw Peak 574 2012, with renewal options
Phoenix, Arizona (1977) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Tapatio Cliffs 584 2012, with renewal options
Phoenix, Arizona (1982) aggregating 20 years, subject to
certain termination rights
Rye Town Hilton 438 1995
Rye Brook, New York(2) (1973; 1978)
Hilton Palacio del Rio 482 1998, with a renewal option for 10
San Antonio, Texas (1968) years
San Antonio Airport Hilton 387 2001, subject to certain termination
San Antonio, Texas(3) (1982) rights
San Francisco Hilton on Hilton 1,890 2005, with a renewal option for 10
Square (various dates years
San Francisco, California(2) through 1988)
Hilton at Short Hills 300 2007, with renewal options
Short Hills, New Jersey (1988) aggregating 20 years, subject to
certain termination rights
Innisbrook Hilton Resort 1,000 2013, subject to certain termination
Tarpon Springs, Florida(3) (1972) rights
Hilton Waikoloa Village 1,241 2013, subject to certain termination
Waikoloa, Hawaii(1) (1988) rights
Capital Hilton 541 2005, with a renewal option for 10
Washington, D.C.(2) (1943; 1985) years
Washington Hilton & Towers 1,123 1995
Washington, D.C.(2) (1965)
Hilton Suites 212 2009, with renewal options
Oakbrook Terrace, Illinois(2)(3) (1989) aggregating 20 years
Hilton Garden Inn 152 2012, subject to certain termination
Valencia, California(1) (1991) rights
INTERNATIONAL
Conrad Brussels 269 2013, with renewal options
Brussels, Belgium (1993) aggregating 20 years
Conrad Dublin 190 2010, with renewal options
Dublin, Ireland(1)(3) (1989) aggregating 20 years
Conrad Hong Kong 513 2021
Hong Kong(1) (1990)
Conrad Istanbul 627 2011, with a renewal option for 20
Istanbul, Turkey(1)(3) (1992) years
Conrad London 159 2016, with renewal options
London, England(3) (1990) aggregating 20 years
Conrad & Jupiters Casino 605 2001
Gold Coast, (1986)
Queensland, Australia(1)
6
8
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
- ------------------------------------ ---------------------- ------------------------------------
La Belle Creole 156 2009, with renewal options
St. Martin, French West Indies (1989) aggregating 10 years
Astir Palace Hotel 565 2013, with renewal options
Vouliagmeni, Greece (1961 through 1984) aggregating 10 years, subject to
certain termination rights
- ------------------
(1) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 39 and 40 in the 1993
Stockholders Report.
(2) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See note 1 above.
(3) Hilton has made loans to the owners of each of the referenced properties.
FRANCHISE HOTELS
Pursuant to franchises granted by the Company, franchise hotels are
operated under the "Hilton," "Hilton Garden Inn" or "Hilton Suites" names. The
franchise hotels operated under the "Hilton" name are generally smaller than the
full service hotels owned, leased or managed by Hilton and average approximately
250 rooms in size. Franchise hotels bearing the "Hilton Garden Inn" name are
approximately 150 to 200 rooms in size and utilize a modular design constructed
around a courtyard containing an indoor or outdoor swimming pool. The "Hilton
Suites" properties operated pursuant to franchise agreements utilize an
all-suites design with approximately 200 to 250 suites. In each instance, Hilton
approves the plan for and the location of franchise hotels and assists in their
design.
On February 1, 1994, there were 170 franchise hotels operated by others
under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names. In general,
each franchisee pays Hilton an initial fee based on the number of rooms in a
franchise hotel and a continuing fee based on a percentage of the facility's
room revenues. Although Hilton does not directly participate in the management
or operation of franchise hotels, it does periodically inspect those facilities
to ensure that Hilton's standards are maintained and renders advice with respect
to hotel operations.
EXPANSION PROGRAM
Hilton has taken a deliberate approach to developing new domestic hotel
properties due to the significant overbuilding in the hotel industry. At
present, there are no Company owned domestic hotels under construction. Hilton
intends to expand its operation of hotels primarily through conversion of
existing hotels into management and franchise properties. The Company will
invest in new domestic hotel projects or conversion properties where the return
on investment meets the Company's criteria.
The Company is actively exploring international hotel opportunities, with
particular emphasis on city center business hotels and resort hotels. These
international properties will generally be operated under the Conrad name
pursuant to long-term management agreements. In certain instances, the Company
may invest in or make advances to the entity that owns and/or operates a hotel.
The Company has entered into management contracts to operate the following three
new hotels in the Pacific Rim, each of which is scheduled to open in 1996-97:
the 321-room Conrad Surabaya in Surabaya, Indonesia; the 700-room Conrad Jakarta
in Jakarta, Indonesia; and the 600-room Conrad Kuala Lumpur in Kuala Lumpur,
Malaysia.
Negotiations relating to the management of other international hotels are
in varying stages and, in certain instances, letters of intent for management
contracts have been executed. However, no assurances can be given that
management contracts for such other hotels will be executed or that such other
hotels will be constructed and, thereafter, operated by the Company.
The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally.
7
9
Certain countries have also restricted, from time to time, the repatriation of
funds. The Company considers the foregoing factors, among others, when
evaluating a management and/or investment opportunity abroad, but the Company
can give no assurances that changes in law or governmental policy will not
adversely affect international operations in the future.
TERRITORIAL RESTRICTIONS
Hilton has entered into various agreements which restrict its right to
operate hotels in various areas, including those hereinafter described which, in
management's opinion, represent the most significant restrictions to which the
Company is subject. In addition, pursuant to an agreement entered into at the
time of Hilton's distribution on December 1, 1964 to its stockholders of all the
issued and outstanding capital stock of Hilton International Co., as
subsequently amended, Hilton may not operate facilities outside the United
States identified as "Hilton" hotels and Hilton International Co. may not
operate facilities within the continental United States identified as "Hilton"
hotels. The Company's international hotel and hotel-casino operations are
conducted under the Conrad name. See "Hotel Operations," "Gaming
Operations -- International Hotel-Casinos" and Item 3 below. Subject to the
foregoing restrictions as to the use of the "Hilton" name, Hilton and Hilton
International Co. can compete in all, and do compete in certain, markets. The
Compass computerized reservation system utilized by Hilton and Hilton
International Co. provides information as to their respective hotels, if any, in
each market. See "Additional Information -- Computer Systems" and "Reservation
System."
The Company has entered into agreements with The Prudential Insurance
Company of America ("Prudential") which provide (a) that, except for the
Waldorf-Astoria and the New York Hilton & Towers (or the ownership, operation
and management of substitute hotels having substantially the same number of
rooms) and a hotel with not more than 1,600 rooms, the Company would not own,
operate, manage or otherwise have an interest in any hotel or similar
establishment in the Borough of Manhattan, (b) that, except for the Washington
Hilton & Towers and the Capital Hilton (or the ownership, operation and
management of substitute hotels having substantially the same number of rooms),
the Company would not own, operate, manage or otherwise have an interest in any
other hotel or similar establishment in the District of Columbia, (c) that the
Company would not own, operate, manage or otherwise have an interest in any
additional hotels or similar establishments within a radius of 20 miles of the
Rye Town Hilton, except that certain areas within said 20 mile radius have been
excluded from the territorial restriction, and (d) that, except for the Chicago
Hilton & Towers, the Palmer House Hilton, the O'Hare Hilton and specified other
properties, the Company would not manage or operate, or possess an ownership
interest in, or license or franchise, any hotel in Chicago, except the ownership
and/or management of a hotel with less than 800 rooms at the O'Hare
International Airport and a hotel with not more than 400 rooms at any other
location in Chicago.
PROPERTY TRANSACTIONS
In 1993, the Company recorded a $4,500,000 net pretax loss from property
transactions primarily as a result of the demolition of certain facilities at
the Flamingo Hilton-Las Vegas to permit further expansion at that property.
Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenues and
a favorable return on stockholders' equity.
FOREIGN CURRENCY TRANSACTIONS
In 1993, the Company recorded a $1,300,000 loss from foreign currency
transactions primarily as a result of exchange adjustments arising from the
remeasurement of the Company's operations at the Conrad Istanbul in Istanbul,
Turkey into U.S. dollars. International operations are subject to certain
economic and political risks, including foreign currency fluctuations. The
Company monitors its foreign operations and, where appropriate, adopts hedging
strategies to minimize the impact of changing economic and political
environments.
8
10
GAMING OPERATIONS
NEVADA HOTEL-CASINOS
The Company owns and operates five hotel-casinos in the State of Nevada:
the 3,174-room Las Vegas Hilton, the 3,034-room Flamingo Hilton-Las Vegas, the
2,000-room Flamingo Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room
Flamingo Hilton-Reno. Each of the Company's hotel-casinos has gaming,
convention, dining, shopping, entertainment and, with the exception of the
Flamingo Hilton-Reno, indoor and outdoor recreational facilities. A variety of
popular entertainment is featured in theaters and lounges at each hotel.
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1993, the Las
Vegas Hilton added a new 362-foot high sign and completed remodeling of the
showroom for theater-style seating and presentation of Andrew Lloyd Webber's
"Starlight Express." The Flamingo Hilton-Las Vegas renovated the casino and the
race and sports book. The Flamingo Hilton-Laughlin also renovated the casino and
refurbished the pool and recreation deck. At the Reno Hilton, the Company has
completed an extensive renovation of all guest rooms and corridors and replaced
windows, exterior lighting and signage. The Flamingo Hilton-Reno enlarged the
casino by 3,000 square feet, renovated the valet concourse and hotel entrance
and created a new open space known as Flamingo Plaza.
The space utilized by the Company's casinos in Nevada, in terms of
approximate square feet, is as follows: Las Vegas Hilton -- 67,000 square feet
(inclusive of 33,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 73,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 65,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 100,000 square feet
(inclusive of 12,000 square feet attributable to the race and sports book); and
Flamingo Hilton-Reno -- 48,000 square feet (inclusive of 2,500 square feet
attributable to the race and sports book).
Each of the hotel-casinos is open 24 hours a day, seven days a week for
gaming activities. Games operated in these casinos include "21," Craps,
Roulette, Big "6," Baccarat, Poker, Keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.
It is impracticable for Hilton's hotel-casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment in the hotels, and occupancy rates in the hotels and in the Las
Vegas, Laughlin and Reno markets. The amount of revenues from gaming operations
varies depending upon the amount of gaming activity as well as variations in the
odds for different games and the factor of chance. Casino activities are
conducted by experienced personnel who are supervised at all times.
As in the case of any business extensively involved in the handling of
cash, gaming operations at the Company's hotel-casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all five Nevada properties are monitored by computers.
The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las
Vegas, the Flamingo Hilton-Reno and the Reno Hilton invite V.I.P. customers to
their casinos and may pay for or reimburse the cost of their air transportation
and provide them with complimentary rooms, food and beverage. In addition, the
Las Vegas Hilton, the Flamingo Hilton-Reno and the Reno Hilton have instituted
special flight programs, pursuant to which free air transportation on Company
owned or chartered aircraft and complimentary rooms, food and beverage are
provided to groups or selected persons. These persons either have established
casino credit limits or cash on deposit in the casinos and have previously
evidenced a willingness to put substantial amounts at risk
9
11
at the casinos. The special flight programs are sometimes referred to as
junkets. The Las Vegas Hilton, the Flamingo Hilton-Reno and the Reno Hilton
hosted 22, 34 and 17 special flight programs in 1993, compared to 44, 44 and 12
such programs in 1992, respectively.
Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations of the State of Nevada and its
agencies. As is customary in the Nevada gaming industry, activities are
conducted on a credit as well as a cash basis, in accordance with procedures
established and supervised by management. Fluctuations in collecting casino
receivables could have a material effect on results of operations of these
properties. An allowance is provided for estimated uncollectible casino
receivables. Casino receivables aggregated $44,100,000, subject to a $12,200,000
(approximately 28%) reserve, at December 31, 1991; $47,000,000, subject to a
$14,400,000 (approximately 31%) reserve, at December 31, 1992; and $47,900,000,
subject to a $7,600,000 (approximately 16%) reserve, at December 31, 1993.
INTERNATIONAL HOTEL-CASINOS
The Company, through Conrad, manages two international hotel-casinos: the
605-room Conrad & Jupiters Casino in Queensland, Australia and the 627-room
Conrad Istanbul in Istanbul, Turkey.
The Company has an ownership interest of 19.9% in the Conrad & Jupiters
Casino, which has a 70,000 square foot casino featuring table games and slot
machines similar to those offered at the Company's hotel-casinos in Nevada. This
property has the exclusive rights to conduct casino gaming on Queensland's Gold
Coast through 1995.
The Company has a 25% ownership interest in the Conrad Istanbul, which
opened in 1992. This hotel-casino includes a 12,000 square foot casino featuring
table games and slot machines similar to those offered at the Company's casinos
in Nevada and Australia.
RIVERBOAT CASINO
In February 1994, the Company commenced operation of the "Hilton Queen of
New Orleans," a riverboat casino located adjacent to the New Orleans Hilton
Riverside & Towers. The initial 1,500 passenger vessel has a 20,000 square foot
casino featuring table games and slot machines similar to those offered at the
Company's hotel-casinos. This interim riverboat is wholly-owned by the Company
and is being leased to a joint venture, of which the Company owns a 50%
interest, until the permanent riverboat is completed. In late 1994, the interim
riverboat will be replaced with a permanent vessel owned by the joint venture
that will have a 30,000 square foot casino and accommodate 2,400 passengers.
EXPANSION PROGRAM
At the Las Vegas Hilton, the Company plans to construct three new luxury
suites for premium players which are expected to be completed by late 1994. The
Company has also commenced an exterior rehabilitation and landscaping project at
the Las Vegas Hilton. An extensve renovation project is planned at the Flamingo
Hilton-Las Vegas, which will include construction of a new 600-room tower, new
meeting and ballroom facilities and a themed recreation area, and additional
public space and parking. At the Flamingo Hilton-Laughlin, the Company plans to
expand the casino to add 300 new slot machines and to replace exterior signage.
At the Reno Hilton, the Company plans to make public space improvements, add a
new race and sports book and enlarge the registration area. The Flamingo
Hilton-Reno plans to remodel the buffet and coffee shop, relocate Keno and build
a new sports bar at the race and sports book.
During 1993, the Company approved plans to develop vacation ownership
resorts in Las Vegas, Nevada and Orlando, Florida. The Company, through its 50%
owned Hilton Grand Vacations Company joint venture, is constructing a 200-unit
vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas, which is
scheduled for completion in early 1995.
In December 1993, the Provincial Government of Ontario, Canada awarded a
consortium, of which Conrad owns a 33% interest, the exclusive right to develop
and manage Ontario's first casino in Windsor,
10
12
located across from Detroit, Michigan. This venture will develop and operate a
300-room hotel-casino, which will be co-managed by Conrad. The hotel-casino will
contain a 75,000 square foot casino, off-track betting, entertainment and
meeting facilities. The Windsor project is scheduled to open on a permanent
basis in early 1996, with a temporary 60,000 square foot casino scheduled to
open in spring 1994.
The government of Queensland, Australia has designated the owner of the
Conrad & Jupiters Casino to own and develop a new 136-room hotel-casino project
to be known as the Conrad Treasury in Brisbane, Australia. This property, which
will feature a 65,000 square foot casino, will be managed by Conrad and will
have the exclusive right to conduct casino gaming in Brisbane for a ten year
period. Conrad will have a 19.9% equity interest in this project, which is
scheduled to open in early 1995.
In addition, the government of Uruguay has selected Conrad and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, will
include a 35,000 square foot casino. Conrad will manage and have a 20% equity
interest in the hotel-casino. Subject to obtaining satisfactory financing, the
hotel-casino is scheduled for completion in early 1996.
In October 1993, Conrad entered into an agreement to develop and operate a
700-room hotel-casino in Cairo, Egypt. This property will feature a 17,000
square foot European-style casino. Conrad will manage and have a 10% equity
interest in the hotel-casino, which is scheduled to open in early 1997.
In 1993, the Company was named the exclusive developer of two riverboat
casinos within the city limits of Kansas City, Missouri on the Missouri River.
The Company will own a 90% interest in these riverboats. The first vessel will
feature a 20,000 square foot casino and accommodate 1,500 passengers. Subject to
voter approval in April 1994 of a constitutional amendment authorizing games of
chance in Missouri and a city-wide riverboat gaming proposal in Kansas City, and
the receipt of all required gaming licenses, this vessel is scheduled to open in
late summer 1994. The second vessel is scheduled to commence operation in
mid-1995 and will feature a 30,000 square foot casino and carry 2,000
passengers.
In 1993, the Company and its partners filed a gaming application seeking
licensing approval in Indiana for a riverboat casino project in Michigan City,
Indiana.
In 1991, the New Jersey Casino Control Commission granted the Company's
request for a Statement of Compliance, finding that the Company satisfies all
non-facility related criteria for a casino license in Atlantic City, New Jersey.
At present, the Company does not own, nor has the Company entered into any
agreement to manage, a hotel-casino property in Atlantic City. See "Additional
Information -- Regulation and Licensing -- New Jersey Gaming Laws."
ADDITIONAL INFORMATION
VACATION OWNERSHIP
The Company owns a 50% interest in a joint venture called Hilton Grand
Vacations Company ("HGVC"), which currently operates 11 vacation ownership
resorts in Florida. During 1993, HGVC commenced development of a 200-unit
vacation ownership resort adjacent to the Flamingo Hilton-Las Vegas and a
360-unit resort at Sea World Village in Orlando, Florida. The Las Vegas resort
is scheduled for completion in early 1995 and the first phase of the Orlando
project is anticipated to be completed in summer 1995. See "Gaming
Operations -- Expansion Program" above. HGVC is also actively seeking new
development and acquisition opportunities in other resort locations.
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly-owned subsidiary, Hilton Equipment Corporation,
and through its Hotels Division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies primarily to hotels
owned, leased or managed by Hilton and, to a lesser extent, to hotels franchised
by Hilton or owned and operated by others. The revenues of this operation depend
primarily on the number of new hotels operated or franchised by Hilton and on
refurbishing and remodeling of existing Hilton hotels.
11
13
COMPUTER SYSTEMS
Compass Computer Services, Inc. ("Compass"), 50% of which is owned by
Hilton and the balance by Budget Rent-A-Car, Inc., operates a computerized
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets. Compass
is being managed by Litton Computer Services.
RESERVATION SYSTEM
The Compass computerized reservation system is presently utilized by
Hilton Service Corporation, the operator of a worldwide system of reservation
offices for hotels operated by Hilton, Hilton International Co., their
affiliates and others. Hilton Service Corporation is owned 51% by Hilton and
49% by Hilton International Co.
MARKETING
Hotel occupancy at Hilton's metropolitan and airport properties is derived
primarily from the convention and meeting market and the business traveler
market (businesspersons traveling as individuals or in small groups). Hotel
occupancy at the Company's resort properties is derived primarily from the tour
and travel market (tourists traveling either as individuals or in groups) and
the convention and meeting market. Hotel occupancy at the Company's
hotel-casinos is derived primarily from the convention and meeting market, the
tour and travel market and junket and V.I.P. programs. As indicated under
"Additional Information -- Business Risks" below, these sources of business are
sensitive to general economic and other conditions. In addition, the Company
participates in certain joint marketing programs with business partners in the
airline, car rental and cruise line industries.
STATISTICAL DATA
For information regarding the Company's properties, number of available
rooms, occupancy ratios and management and franchise fees, see the Ten Year
Summary on pages 50 and 51 in the 1993 Stockholders Report.
BUSINESS RISKS
In 1993, the Company was unable to increase prices to keep pace with the
rate of inflation due to the recessionary environment exacerbated by excess
industry capacity. The Company's business could also be adversely affected by
increases in transportation and fuel costs. In addition, the Company's future
operating results could be adversely impacted by continued industry overcapacity
and weak demand.
Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Since 1990, occupancy ratios at the Company's hotels have been
adversely impacted by the decrease in travel resulting from the effects of
recession in the U.S. economy and by excess industry capacity.
COMPETITION
Hilton believes it is one of the largest operators of hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. Hilton hotels also compete generally with facilities offering
similar services and located in cities and other locations where Hilton hotels
are not present. The Company's precise competitive position in most areas in
which its hotels are located cannot be determined from the information and data
available to Hilton.
To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. In this regard, recent
capacity additions have increased competition in all segments of the Las Vegas
market. Three of the Company's competitors recently opened large new theme
casinos in Las Vegas. Such new capacity additions to the Las Vegas market could
adversely impact the Company's gaming
12
14
income. In addition, the business of Hilton's Nevada hotel-casinos might be
adversely affected if gaming operations of the type conducted in Nevada were to
be permitted under the laws of other states, particularly California. The
legalization of casino gaming in Atlantic City, New Jersey has had an impact on
the Company's Nevada hotel-casinos. The recent legalization of riverboat gaming
in a number of states and the operation of casino gaming on American Indian
tribal lands could also impact the Company's hotel-casinos in Nevada.
REGULATION AND LICENSING
Each of the Company's hotel-casinos and riverboats is subject to extensive
regulation under laws, rules and supervisory procedures, primarily in the
jurisdiction where located or docked. Some jurisdictions, however, empower their
regulators to investigate participation by licensees in gaming outside their
jurisdiction and require access to and periodic reports respecting such gaming
activities. Violations of laws in one jurisdiction could result in disciplinary
action in other jurisdictions.
Nevada Gaming Laws. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno, are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Las Vegas. The Gaming Commission,
the Control Board, the CCB and the City of Las Vegas are collectively referred
to as the "Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) the provision of a source of state and local
revenues through taxation and licensing fees. Change in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.
The Company's subsidiaries which operate the casinos (the "Licensees") are
required to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable. The
Company is registered by the Gaming Commission as a publicly-traded corporation
("Registered Corporation") and, as such, it is required periodically to submit
detailed financial and operating reports to the Gaming Commission and furnish
any other information which the Gaming Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, the
Licensees without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and the Licensees have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or the
Licensees in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of the Licensees must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of the Company
who are actively and directly involved in gaming activities of the Licensees may
be required to 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
13
15
investigation. The applicant for licensing or a finding of suitability must pay
for all the costs of the investigation. Changes in licensed positions must be
reported to the Nevada Gaming Authorities and, in addition to their authority to
deny an application for a finding of suitability or licensure, the Nevada Gaming
Authorities have jurisdiction to disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Licensees, the companies involved would
have to sever all relationships with such person. In addition, the Gaming
Commission may require the Company or the Licensees to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and the Licensees are required to submit detailed financial and
operating reports to the Gaming Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by the Licensees
must be reported to, or approved by, the Gaming Commission.
If it were determined that the Nevada Act was violated by the Licensees,
the gaming licenses they hold could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Licensees, the Company and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Gaming Commission. Further, a supervisor could be
appointed by the Gaming Commission to operate the Company's gaming properties
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
properties) could be forfeited to the State of Nevada. Limitation, conditioning
or suspension of any gaming license or the appointment of a supervisor could
(and revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's Common Stock, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have such person's suitability as a beneficial holder of the Company's
Common Stock determined if the Gaming Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's Common Stock to report the acquisition to the Gaming Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
Common Stock apply to the Gaming Commission for a finding of suitability within
thirty days after the Chairman of the Control Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional investor,"
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of the Company's Common Stock may apply to the Gaming Commission for a
waiver of such finding of suitability if such institutional investor holds the
Common Stock for investment purposes only. An institutional investor shall not
be deemed to hold the Common Stock for investment purposes unless the Common
Stock was acquired and is held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Gaming Commission finds to be
inconsistent with holding the Company's Common Stock for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and (iii) such
other activities as the Gaming Commission may determine to be consistent with
such investment intent. If the beneficial holder of voting securities who must
be found suitable is a corporation, partnership or trust, it must submit
detailed business and financial information including a list of beneficial
owners. The applicant is required to pay all costs of investigation. Barron
Hilton, the Company's largest stockholder, has been found suitable as a
controlling stockholder of the Company.
14
16
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Gaming Commission or
by the Chairman of the Control Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Company's Common
Stock beyond such period of time as may be prescribed by the Gaming Commission
may be guilty of a criminal offense. The Company is subject to disciplinary
action if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company or the Licensees,
the Company (i) pays that person any dividend or interest upon voting securities
of the Company, (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person, (iii) pays
remuneration in any form to that person for services rendered or otherwise or
(v) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities for cash at fair market value. Additionally,
the CCB has taken the position that it has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming license.
The Gaming Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Gaming Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Gaming Commission, it (i) pays to the unsuitable person any dividend,
interest or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Gaming
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Gaming Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company was granted approval on
August 26, 1993 to make public offerings of securities for a period of one year,
subject to certain reporting requirements and the authority of the Chairman of
the Control Board to issue an interlocutory stop order for good cause.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Gaming Commission has established a regulatory scheme to
ameliorate the potentially
15
17
adverse effects of these business practices upon Nevada's gaming industry and to
further Nevada's policy to: (i) assure the financial stability of corporate
gaming operators and their affiliates; (ii) preserve the beneficial aspects of
conducting business in the corporate form; and (iii) promote a neutral
environment for the orderly governance of corporate affairs. Approvals are, in
certain circumstances, required from the Gaming Commission before the Company
can make exceptional repurchases of voting securities above the current market
price thereof and before a corporate acquisition opposed by management can be
consummated. The Nevada Act also requires prior approval of a plan of
recapitalization proposed by the Company's Board of Directors in response to a
tender offer made directly to its stockholders for the purpose of acquiring
control of the Company.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.
The Company and its affiliates and Licensees, who propose to become
involved in a gaming venture outside of Nevada, are required to deposit with the
Control Board, and thereafter maintain, a revolving fund in the amount of
$10,000 to pay the expenses of investigation of the Control Board of their
participation in such foreign gaming. The revolving fund is subject to increase
or decrease in the discretion of the Gaming Commission. Thereafter, the Company
and its affiliates and Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. These entities are also subject to
disciplinary action by the Gaming Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
Louisiana Gaming Laws. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Riverboat Gaming Commission (the "Commission") and the
Louisiana Riverboat Gaming Enforcement Division (the "Division"), a department
within the Louisiana State Police. The Division is responsible for investigating
the background of all applicants seeking a riverboat gaming license, issuing the
license and enforcing the laws, rules and regulations relating to riverboat
gaming activities.
The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Division. This requires the filing of an extensive
application to the Division disclosing personal, financial, criminal, business
and other information. On October 13, 1993, the Division issued a riverboat
gaming license to the Queen of New Orleans, a joint venture of which the Company
owns a 50% interest. The Company's joint venture commenced riverboat gaming
operations in New Orleans, Louisiana on February 10, 1994.
The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Division approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
The Commission must approve all security holders of the licensee and may
find any such security holder not qualified to own those securities. Louisiana
law may require that the charter or bylaws of the licensee provide that its
securities are held subject to the condition that, if a holder is found to be
disqualified by the Commission, the holder must dispose of the securities of the
licensee. If a security holder of a licensee is found disqualified, it will be
unlawful for the security holder to (i) receive any dividend or interest with
regard to the
16
18
securities, (ii) exercise, directly or indirectly, any rights conferred by the
securities or (iii) receive any remuneration from the licensee for services
rendered or otherwise. The Commission may impose similar approval requirements
on holders of securities of any intermediary or holding company of the licensee,
but may waive those requirements with respect to holders of publicly-traded
securities of intermediary and holding companies if such holders do not have the
ability to control the publicly-traded corporation or elect one or more
directors thereof.
New Jersey Gaming Laws. The ownership and operation of hotel-casino
facilities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act (the "Act"). No hotel-casino
facility may operate unless various licenses and approvals are obtained from New
Jersey regulatory authorities, including the Casino Control Commission (the
"Commission"). The Commission is authorized under the Act to adopt regulations
covering a broad spectrum of gaming and gaming related activities and to
prescribe the methods and forms of applications for licenses.
The Act permits an applicant to request a Statement of Compliance from the
Commission finding that it satisfies one or more of the eligibility criteria for
licensure. The Statement of Compliance request may be made prior to the
construction or acquisition of a casino in Atlantic City. It is only after all
eligibility criteria are met that a casino license may be issued. On February 4,
1991, the Company and a New Jersey subsidiary filed applications with the
Commission for a casino license under the Act. At the conclusion of the
application investigation, the Company requested a Statement of Compliance
regarding all non-facility related criteria. On June 26, 1991, the Commission
granted the Company's request for a Statement of Compliance. The Company does
not now own, nor has the Company entered into any agreement to manage, a
hotel-casino in Atlantic City. The Company filed the license application in
contemplation of possibly owning and/or operating a hotel-casino in Atlantic
City.
In order to be granted a casino license under the Act, officers and
directors of a licensee and its employees who are employed in hotel or casino
operations in Atlantic City are required to be licensed or approved by the
Commission. In addition, all contracts and leases entered into by a licensee
would be subject to approval and certain enterprises which transact business
with the licensee would themselves have to be licensed. New Jersey law also
authorizes the Commission to approve security holders of a licensee in the
manner described above under the caption "Louisiana Gaming Laws."
Queensland Gaming Laws. Queensland, Australia, like Nevada and New Jersey,
has comprehensive laws and regulations governing the conduct of casino gaming.
All persons connected with the ownership and operation of a casino, including
the Company, its subsidiary that manages the Conrad & Jupiters Casino and
certain of their principal stockholders, directors and officers, must be found
suitable and licensed. A casino license once issued remains in force until
surrendered or cancelled. Queensland law defines the grounds for cancellation
and, in such event, an administrator may be appointed to assume control of the
hotel-casino complex. The Queensland authorities have conducted an investigation
of, and have found suitable, the Company and its subsidiary.
Turkey Gaming Laws. Turkey has laws and regulations governing the
establishment and operation of casino gaming. The Turkish Ministry of Tourism
inspects all casino premises prior to the commencement of operations and
conducts random inspections of ongoing casino operations. Under Turkish gaming
laws, access to casinos is limited to persons carrying a foreign passport or to
Turkish citizens receiving a permit from the Ministry of Tourism. The casino
located in the Conrad Istanbul has been authorized to conduct casino operations
by the Turkish Ministry of Tourism.
IRS Regulations. The Internal Revenue Service ("IRS") requires operators
of casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for Keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain Keno, Bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.
17
19
Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates, or has applied for
licensing to operate, casinos require the reporting of currency transactions in
excess of $10,000 occurring within a gaming day, including identification of the
patron by name and social security number. This reporting obligation commenced
in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States which are exempt from the ambit of IRS
regulations.
Other Laws and Regulations. Each of the hotels and hotel-casinos operated
by the Company is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. Management believes that the Company has
obtained all required licenses and permits and its businesses are conducted in
substantial compliance with applicable laws.
EMPLOYEES
At February 1, 1994, Hilton employed approximately 43,000 persons, of whom
approximately 22,000 are covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel industry
generally. Although strikes of short duration have from time to time occurred at
certain of Hilton's facilities, Hilton believes its employee relations are
satisfactory.
ITEM 2. PROPERTIES
Hilton considers its hotels to be leading establishments with respect to
desirability of location, size, facilities, physical condition, quality and
variety of services offered in most of the areas in which they are located.
Obsolescence arising from age and condition of facilities is a factor in the
hotel industry. Accordingly, Hilton expends, and intends to continue to expend,
substantial funds to maintain its facilities in first-class condition in order
to remain competitive.
Hotels owned and operated, leased and managed by Hilton are briefly
described under Item 1 and, in particular, under the captions "Hotel Operations"
and "Gaming Operations." In addition, contemplated additions to, and major
refurbishing and remodeling of, existing hotels and new hotels presently under
construction that will be operated by Hilton are briefly described under the
captions "Hotel Operations -- Expansion Program" and "Gaming
Operations -- Expansion Program" under Item 1.
ITEM 3. LEGAL PROCEEDINGS
In management's opinion, disposition of pending litigation against the
Company, including the lawsuits described under "Commitments and Contingent
Liabilities" in the Notes to the Company's Consolidated Financial Statements on
page 48 in the 1993 Stockholders Report, is not expected to have a material
effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
18
20
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company:
POSITIONS AND OFFICES
NAME WITH THE COMPANY AGE
- ---- --------------------------------------- ---
Barron Hilton Chairman of the Board and Chief 66
Executive Officer and, until February
1993, President
Raymond C. Avansino, Jr. President and Chief Operating Officer 50
since February 1993
Eric M. Hilton Vice Chairman of the Board since May 60
1993, Executive Vice President --
International Operations from May 1992
until May 1993, President, Conrad
International Hotels Corporation from
January 1990 until May 1993, and Senior
Vice President -- Real Estate
Development, International until May
1992
Carl T. Mottek Executive Vice President -- Operations, 65
and President, Hilton Hotels Division
William C. Lebo, Jr. Senior Vice President and General 50
Counsel
F. Michael O'Brien Senior Vice President -- Gaming and 53
Hotel Development since January 1994,
and from May 1992 until January 1994,
Senior Vice President -- Corporate
Properties
Michael A. Ribero Senior Vice President -- Marketing and 37
Strategic Planning since January 1994,
and prior thereto, Senior Vice
President -- Marketing
Maurice J. Scanlon Senior Vice President -- Finance 59
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1989. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related, except that Messrs. Barron and Eric Hilton are brothers.
Similar information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 12, 1994 (the "Proxy Statement"). The Company expects to file the Proxy
Statement with the Securities and Exchange Commission prior to April 30, 1994,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
19
21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "HLT." Information regarding sales
prices, dividend payments and record holders with respect to the Company's
Common Stock is set forth under "Supplementary Financial Information" in the
Notes to the Company's Consolidated Financial Statements on page 48 in the 1993
Stockholders Report, which information is incorporated herein by reference.
On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a market value of twice the Right's exercise price.
Following the acquisition by a person or group of beneficial ownership of
30% or more of the Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership of
20% or more of the Company's Common Stock, the Rights are redeemable for one
cent per Right at the option of the Company's Board of Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
The full text of the Plan has been filed as Exhibit 4.5 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.5.
ITEM 6. SELECTED FINANCIAL DATA
See the Company's Ten Year Summary on pages 50 and 51 in the 1993
Stockholders Report and "Segments of Business" in the Notes to the Company's
Consolidated Financial Statements on pages 46 and 47 in the 1993 Stockholders
Report.
The ratio of earnings to fixed charges for the five years ended December
31, 1993 is as follows: 1993 - 2.7 to 1; 1992 - 2.9 to 1; 1991 - 2.6 to 1;
1990 - 2.8 to 1; and 1989 - 2.4 to 1. The computation of the aforesaid ratios is
set forth in Exhibit 12 hereto.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 28 through 33 in the 1993 Stockholders Report.
20
22
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the 1993 Stockholders Report on the pages
indicated, which information is incorporated herein by reference.
PAGE
-----
Report of independent public accountants.................................... 49
Consolidated statements of income for the three years ended December 31,
1993..................................................................... 34
Consolidated balance sheets as of December 31, 1993 and 1992................ 35
Consolidated statements of cash flows for the three years ended December 31,
1993..................................................................... 36
Consolidated statements of stockholders' equity for the three years ended
December 31, 1993........................................................ 37
Notes to consolidated financial statements.................................. 38
Segment data for the five years ended December 31, 1993 contained in the Ten
Year Summary............................................................. 50
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers" in Part I. Other
information respecting certain executive officers, as well as the required
information for directors, will be contained in the Proxy Statement, and
reference is expressly made thereto for the specific information incorporated
herein by the aforesaid reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Common Stock
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Election of
Directors -- Certain Relationships and Interests in Certain Transactions" and
"Compensation Committee Interlocks and Insider Participation" in the Proxy
Statement, and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
21
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
The index to consolidated financial statements and supplementary data is
set forth under Item 8 on page 21 hereof.
2. Financial Statement Schedules:
PAGE
-----
Report of Independent Public Accountants......................................... 23
Schedule I -- Marketable Securities -- Other Security Investments............ 24
Schedule II -- Amounts Receivable from Related Parties and Underwriters,
Promoters, and Employees Other Than Related Parties............ 25
Schedule V -- Property and Equipment......................................... 26
Schedule VI -- Accumulated Depreciation of Property and Equipment............. 27
Schedule VII -- Guarantees of Securities of Other Issuers...................... 28
Schedule VIII -- Valuation and Qualifying Accounts.............................. 29
Schedule X -- Supplementary Income Statement Information..................... 30
Supplemental Note to Consolidated Financial Statements........................... 31
All other schedules are inapplicable or the required information is
included elsewhere herein.
(B) REPORTS ON FORM 8-K
None.
(C) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.
22
24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
SUPPLEMENTAL SCHEDULES AND SUPPLEMENTAL NOTE
To Hilton Hotels Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
2, 1994. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedules I, II, V, VI, VII, VIII
and X and the supplemental note to consolidated financial statements as shown on
pages 24 through 31 are the responsibility of the company's management and are
presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic consolidated financial
statements. The supplemental schedules and the supplemental note to the
consolidated financial statements have been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial data required to be
set forth therein in relation to the basic consolidated financial statements
taken as a whole.
ARTHUR ANDERSEN & CO.
Los Angeles, California
February 2, 1994
23
25
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE I -- MARKETABLE SECURITIES -- OTHER SECURITY INVESTMENTS
AT DECEMBER 31, 1993
(IN MILLIONS)
AMOUNT
INCLUDED IN
PRINCIPAL MARKET BALANCE
NAME AMOUNT COST VALUE SHEET
- ---- --------- ------ ------ -----------
Cash....................................................... $ -- -- -- 34.0
Certificates of Deposit.................................... .5 .5 .5 .5
Eurodollar Deposits........................................ 3.4 3.4 3.4 3.4
Unit Trusts................................................ 5.5 5.5 5.5 5.5
Commercial Paper........................................... 12.7 12.6 12.7 12.7
Money Market Preferred Stock............................... 65.0 65.0 65.0 65.0
Government Agency.......................................... 112.5 112.5 112.5 112.5
Taxable Auction Preferred Stock............................ 143.5 143.4 143.4 143.4
Accrued Interest........................................... -- -- -- 3.4
-------
Total Cash and Equivalents.............................. $ 380.4
-------
-------
Certificates of Deposit.................................... $ 3.1 3.4 3.1 3.1
Floating Rate Notes........................................ 5.0 5.0 5.0 5.0
U.S. Treasuries............................................ 10.0 10.7 10.2 10.0
Government Agency.......................................... 33.8 33.7 33.6 33.8
Medium Term Notes.......................................... 46.0 48.2 46.2 46.2
-------
Total Temporary Investments............................. $ 98.1
-------
-------
Medium Term Notes.......................................... $ 5.0 5.0 5.0 5.0
Asset Backed Obligations................................... 26.1 27.5 26.1 26.1
Floating Rate Notes........................................ 32.5 32.6 32.5 32.5
-------
Total Long-Term Investments............................. $ 63.6
-------
-------
24
26
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- AMOUNTS RECEIVABLE FROM RELATED PARTIES AND
UNDERWRITERS, PROMOTERS, AND EMPLOYEES OTHER THAN RELATED PARTIES
AT DECEMBER 31, 1993
(IN THOUSANDS)
BALANCE AT
DEDUCTIONS END OF PERIOD
BALANCE AT ------------------------- -------------------
BEGINNING AMOUNTS AMOUNTS NON-
NAME OF DEBTOR OF PERIOD ADDITIONS COLLECTED WRITTEN OFF CURRENT CURRENT
- ------------------------------ ----------- --------- --------- ----------- ------- -------
Barron Hilton(1).............. $ -- 707 (707) -- -- --
Michael A. Ribero(2).......... 114 12 -- -- -- 126
- ------------
(1) Represents amounts reimbursed by Mr. Hilton to the Company during 1993
pursuant to an agreement with respect to investments in the Earthwinds
Hilton Project, a manned helium balloon system designed for a non-stop
circumnavigation of the earth. The Company is a sponsor of the Earthwinds
Hilton Project and will share in revenues generated by the project.
(2) Due August 5, 1998. Interest rate is 11% per annum, compounded annually,
subject to certain limitations. Note is secured by a Deed of Trust.
25
27
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE V -- PROPERTY AND EQUIPMENT
(IN MILLIONS)
BALANCE AT BALANCE AT
BEGINNING ADDITIONS SALES AND TRANSFERS END OF
OF PERIOD AT COST RETIREMENTS AND OTHER PERIOD
---------- --------- ----------- --------- ----------
YEAR ENDED DECEMBER 31, 1993
Land................................. $ 145.9 -- (.7) -- 145.2
Buildings and leasehold
improvements...................... 1,294.0 9.9 (20.1) 83.1 1,366.9
Furniture and equipment.............. 430.0 50.2 (30.8) 7.7 457.1
Property held for sale or
development....................... 13.6 -- -- -- 13.6
-------- ------- --------- ------- --------
1,883.5 60.1 (51.6) 90.8 1,982.8
Construction in progress............. 41.1 96.9 -- (78.0) 60.0
-------- ------- --------- ------- --------
Total................................ $1,924.6 157.0 (51.6) 12.8(A) 2,042.8
-------- ------- --------- ------- --------
-------- ------- --------- ------- --------
YEAR ENDED DECEMBER 31, 1992
Land................................. $ 131.1 14.8 -- -- 145.9
Buildings and leasehold
improvements...................... 1,159.7 71.9 (1.0) 63.4 1,294.0
Furniture and equipment.............. 396.5 50.1 (28.9) 12.3 430.0
Property held for sale or
development....................... 13.6 -- -- -- 13.6
-------- ------- --------- ------- --------
1,700.9 136.8 (29.9) 75.7 1,883.5
Construction in progress............. 32.8 85.4 -- (77.1) 41.1
-------- ------- --------- ------- --------
Total................................ $1,733.7 222.2 (29.9) (1.4)(B) 1,924.6
-------- ------- --------- ------- --------
-------- ------- --------- ------- --------
YEAR ENDED DECEMBER 31, 1991
Land................................. $ 128.3 .2 -- 2.6 131.1
Buildings and leasehold
improvements...................... 1,125.8 3.8 (7.7) 37.8 1,159.7
Furniture and equipment.............. 383.6 25.7 (19.3) 6.5 396.5
Property held for sale or
development....................... 14.2 -- (.6) -- 13.6
-------- ------- --------- ------- --------
1,651.9 29.7 (27.6) 46.9 1,700.9
Construction in progress............. 31.4 48.3 -- (46.9) 32.8
-------- ------- --------- ------- --------
Total................................ $1,683.3 78.0 (27.6) -- 1,733.7
-------- ------- --------- ------- --------
-------- ------- --------- ------- --------
- ------------
(A) Represents the transfer of assets from purchased properties.
(B) Represents an abandoned project.
26
28
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE VI -- ACCUMULATED DEPRECIATION OF PROPERTY AND EQUIPMENT
(IN MILLIONS)
BALANCE AT BALANCE AT
BEGINNING CURRENT SALES AND END OF
OF PERIOD DEPRECIATION RETIREMENTS OTHER PERIOD
---------- ------------ ----------- ----- ----------
YEAR ENDED DECEMBER 31, 1993
Buildings and leasehold
improvements....................... $351.4 58.0 (15.5) 7.1 401.0
Furniture and equipment............... 199.0 53.8 (30.0) 1.5 224.3
------ ------ -------- ---- ------
Total................................. $550.4 111.8 (45.5) 8.6 (A) 625.3
------ ------ -------- ---- ------
------ ------ -------- ---- ------
YEAR ENDED DECEMBER 31, 1992
Buildings and leasehold
improvements....................... $302.0 50.4 (1.0) -- 351.4
Furniture and equipment............... 177.9 49.8 (28.7) -- 199.0
------ ------ ------- ---- ------
Total................................. $479.9 100.2 (29.7) -- 550.4
------ ------ ------ ---- ------
------ ------ ------ ---- ------
YEAR ENDED DECEMBER 31, 1991
Buildings and leasehold
improvements....................... $262.6 47.0 (7.6) -- 302.0
Furniture and equipment............... 149.8 47.0 (18.9) -- 177.9
------ ------ ------- ---- ------
Total................................. $412.4 94.0 (26.5) -- 479.9
------ ------ ------- ---- ------
------ ------ ------- ---- ------
- ---------------
(A) Represents the transfer of accumulated depreciation from purchased
properties.
27
29
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE VII -- GUARANTEES OF SECURITIES OF OTHER ISSUERS
AT DECEMBER 31, 1993
(IN MILLIONS)
TITLE OF
ISSUE OF
EACH CLASS TOTAL AMOUNT
NAME OF ISSUER OF SECURITIES OF GUARANTEED
GUARANTEED BY PERSON FOR SECURITIES AND NATURE OF
WHOM STATEMENT IS FILED GUARANTEED OUTSTANDING GUARANTEE
- ------------------------------------------------ ------------ ------------ -------------
Hilton Reservation Equipment Company Principal
A 50%-Owned Company........................... Term Loan $11.0 and Interest
International Rivercenter, a partnership in
commendam Mortgage Principal
A 46.8%-Owned Company......................... Loan 6.7 and Interest
- ------------
Note: Other information has been omitted since the answer in each case is
"None."
28
30
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE VIII -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OTHER PERIOD
---------- ---------- ---------- ---------- ----- ----------
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts
Hotel and other............ $ 7.2 1.8 4.5 1.9 -- 11.6
Casino..................... 14.4 10.9 -- 17.7 -- 7.6
Reserve for loss on other
investments................ -- 12.5 -- -- -- 12.5
YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts
Hotel and other............ $ 6.0 1.7 1.5 2.1 .1 (A) 7.2
Casino..................... 12.2 8.0 -- 6.3 .5 (A) 14.4
Reserve for loss on other
investments................ 14.3 -- -- 14.3 -- --
YEAR ENDED DECEMBER 31, 1991
Allowance for doubtful
accounts
Hotel and other............ $ 7.0 2.0 .3 3.3 -- 6.0
Casino..................... 15.2 26.3 -- 29.3 -- 12.2
Reserve for loss on other
investments................ 10.0 4.3 -- -- -- 14.3
- ---------------
(A) Represents allowance for doubtful accounts of the Reno Hilton on the date of
acquisition by the Company.
29
31
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION
FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(IN MILLIONS)
CHARGED TO COSTS AND
EXPENSES
----------------------------
ITEM 1993 1992 1991
------ ----- -----
Advertising Costs................................................. $ 26.0 17.5 16.6
Gaming Taxes...................................................... 38.4 33.0 28.6
Repairs and Maintenance........................................... 57.9 52.7 48.0
Amounts for amortization of intangible assets, pre-opening costs and royalties
are not presented as such amounts, individually, are not material.
30
32
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 1993 AND 1992
(IN MILLIONS)
1993 1992
------- ------
Accounts payable and accrued expenses at December 31, consisted of:
Accounts and notes payable.............................................. $ 47.4 58.0
Accrued salaries and wages.............................................. 26.5 25.1
Guest advance deposits.................................................. -- 14.6
Insurance............................................................... 34.9 33.3
Interest................................................................ 18.9 19.6
Other accrued expenses.................................................. 100.8 85.9
------- ------
$ 228.5 236.5
------- ------
------- ------
31
33
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 18, 1994.
HILTON HOTELS CORPORATION
(Registrant)
By MAURICE J. SCANLON
-----------------------------------
Maurice J. Scanlon
Senior Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 18, 1994.
RAYMOND C. AVANSINO, JR. DONALD R. KNAB
- ---------------------------------------- ------------------------------------------
Raymond C. Avansino, Jr. Donald R. Knab
Director Director
A. STEVEN CROWN BENJAMIN V. LAMBERT
- ---------------------------------------- ------------------------------------------
A. Steven Crown Benjamin V. Lambert
Director Director
GREGORY R. DILLON CARL T. MOTTEK
- ---------------------------------------- ------------------------------------------
Gregory R. Dillon Carl T. Mottek
Director Director
BARRON HILTON MAURICE J. SCANLON
- ---------------------------------------- -----------------------------------------
Barron Hilton Maurice J. Scanlon
Chairman of the Board Senior Vice President-Finance
and Chief (Chief Financial and
Executive Officer Accounting Officer)
(Chief Executive Officer)
ERIC M. HILTON DONNA F. TUTTLE
- ---------------------------------------- ----------------------------------------
Eric M. Hilton Donna F. Tuttle
Director Director
ROBERT L. JOHNSON SAM D. YOUNG, JR.
- ---------------------------------------- ----------------------------------------
Robert L. Johnson Sam D. Young, Jr.
Director Director
32
34
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ------------------------------------------------------------------ -------------
3.1 Restated Certificate of Incorporation of Registrant, as amended
(incorporated herein by reference from Exhibit 3.1 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1987)
3.2 By-Laws of Registrant, as amended (incorporated herein by
reference from Exhibit 3.2 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)
4.1 Indenture, dated as of July 1, 1988, between Registrant and
Citibank, N.A., regarding Registrant's Subordinated Debt
Securities (incorporated herein by reference from Exhibit 4.1 to
Post-Effective Amendment No. 2 to Registrant's Registration
Statement on Form S-3 (File No. 2-95746))
4.2 Indenture, dated as of July 1, 1988, between Registrant and Morgan
Guaranty Trust Company of New York, regarding Registrant's Senior
Debt Securities (incorporated herein by reference from Exhibit 4.1
to Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (File No. 2-99967))
4.3 First Supplemental Indenture, dated as of June 30, 1992, between
Registrant and Morgan Guaranty Trust Company of New York,
regarding Registrant's Senior Debt Securities, relating to Exhibit
4.2 hereto (incorporated herein by reference from Exhibit 4.3 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992)
4.4 Reimbursement Agreements, dated as of November 15, 1990, among
Registrant, Swiss Bank Corporation and the financial institutions
signatory thereto (incorporated herein by reference from Exhibit
4.7 to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990)
4.5 Rights Agreement, dated as of July 14, 1988, between Registrant
and The First National Bank of Chicago (incorporated herein by
reference from Exhibit 1 to Registrant's Current Report on Form
8-K, dated July 14, 1988)
10.1 1975 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement relating
thereto, both as amended (incorporated herein by reference from
Exhibit 10.1 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989)*
10.2 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement relating
thereto, both as amended (incorporated herein by reference from
Exhibit 10.5 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1989)*
10.3 Amendment, dated October 18, 1990, to the 1975 and 1984 Stock
Option and Stock Appreciation Rights Plans of Registrant, relating
to Exhibits 10.1 and 10.2 hereto (incorporated herein by reference
from Exhibit 10.3 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1990)*
10.4 1990 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement relating
thereto, both as amended (incorporated herein by reference from
Exhibit 10.4 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1990)*
10.5 Amendment, dated January 20, 1994, to the 1990 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibit
10.4 hereto*......................................................
33
35
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ------------------------------------------------------------------ -------------
10.6 Incentive Compensation Plan of Registrant (incorporated herein by
reference from Exhibit 10.4 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1980)*
10.7 Amendment, dated as of January 1, 1994, to the Incentive
Compensation Plan of Registrant, relating to Exhibit 10.6
hereto*...........................................................
10.8 Retirement Plan of Registrant, as amended (incorporated herein by
reference from Exhibit 10.6 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)*
10.9 Supplemental Executive Retirement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.6 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991)*
10.10 Directors' Retirement Benefit Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1991)*
10.11 Retirement Benefit Replacement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.9 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1992)*
10.12 Amendment, dated as of January 1, 1994, to the Retirement Benefit
Replacement Plan of Registrant, relating to Exhibit 10.11
hereto*...........................................................
10.13 Investment Plan of Registrant, as amended (incorporated herein by
reference from Exhibit 10.10 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1992)*
10.14 Form of Executive Employment Agreement, as amended (incorporated
herein by reference from Exhibit 10.6 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1989)*
11 Computation of Earnings Per Share.................................
12 Computation of Ratios of Earnings to Fixed Charges................
13 Registrant's Annual Report to Stockholders for the year ended
December 31, 1993.................................................
21 List of Registrant's Subsidiaries.................................
23 Consent of Independent Public Accountants.........................
99 Undertakings......................................................
- ---------------
* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K,
previously filed where indicated and incorporated herein by reference.
Pursuant to Regulation sec. 229.601, Item 601(b)(4)(iii) of Regulation S-K,
upon request of the Securities and Exchange Commission, the Registrant hereby
undertakes to furnish a copy of any unfiled instrument which defines the rights
of holders of long-term debt of the Registrant and its consolidated subsidiaries
(and for any of its unconsolidated subsidiaries for which financial statements
are required to be filed) wherein the total amount of securities authorized
thereunder does not exceed 10% of the total consolidated assets of the
Registrant.
34