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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the fiscal year ended December 31, 1999
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
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Common Stock, par value $2.50 per share New York, Pacific
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days: Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. /X/
Based upon the March 17, 2000 New York Stock Exchange closing price of
$7.8125 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $2.6 billion.
On that date, there were 366,798,511 shares of Common Stock outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain portions of Registrant's annual report to stockholders for the
fiscal year ended December 31, 1999 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
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TABLE OF CONTENTS
PAGE
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PART I.............................................................................. 1
ITEM 1. BUSINESS.................................................... 1
General Information................................................................. 1
Current Operations................................................................ 1
Recent Developments............................................................... 1
Separation of Gaming Business..................................................... 2
Industry Segments................................................................. 3
Hotel Operations.................................................................... 3
Hotel Properties.................................................................. 3
Hotel Brands...................................................................... 5
Expansion Program................................................................. 6
Strategic Alliances and Joint Ventures............................................ 8
Development Financing............................................................. 8
Territorial Restrictions.......................................................... 9
Potential Acquisitions............................................................ 9
Property Transactions............................................................. 9
Statistical Information........................................................... 10
Additional Information.............................................................. 13
Vacation Ownership................................................................ 13
Casino Windsor.................................................................... 13
Flamingo Casino-Kansas City....................................................... 13
Design and Furnishing Services.................................................... 13
Reservation System................................................................ 13
E-Business........................................................................ 14
Trademarks........................................................................ 14
Marketing......................................................................... 14
Business Risks.................................................................... 14
Competition....................................................................... 15
Forward-Looking Statements........................................................ 15
Environmental Matters............................................................. 15
Year 2000......................................................................... 16
Regulation and Licensing.......................................................... 16
Employees......................................................................... 17
ITEM 2. PROPERTIES.................................................. 17
ITEM 3. LEGAL PROCEEDINGS........................................... 17
Bally Merger Litigation............................................................. 17
Promus Acquisition Litigation....................................................... 17
Rights Agreement Litigation......................................................... 18
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS......... 18
Executive Officers of the Company................................................... 19
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PAGE
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PART II............................................................................. 20
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS......................................... 20
Rights Agreement.................................................................... 20
ITEM 6. SELECTED FINANCIAL DATA..................................... 21
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION 21
AND RESULTS OF OPERATIONS...................................
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK........................................................ 21
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA................. 21
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING 21
AND FINANCIAL DISCLOSURE....................................
PART III............................................................................ 22
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......... 22
ITEM 11. EXECUTIVE COMPENSATION...................................... 22
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.................................................. 22
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............. 22
PART IV............................................................................. 23
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8-K......................................................... 23
(a) Index to Financial Statements................................................. 23
(b) Reports on Form 8-K........................................................... 23
(c) Exhibits...................................................................... 23
Signatures.......................................................................... 24
Index to Exhibits................................................................... 25
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PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation ("Hilton" or the "Company") is primarily engaged,
together with its subsidiaries, in the ownership, management and franchising of
hotels. As of December 31, 1999, the Company owned an interest in and operated
141 hotels, managed 185 hotels owned by others, leased 74 hotels and franchised
1,352 hotels owned and operated by third parties. All of these hotels were
located in the United States, with the exception of 11 hotels in which the
Company owns an interest and/or manages and 30 hotels franchised by the Company.
The Company is also engaged in various other activities incidental or related to
the operation of hotels. See "Additional Information."
On November 30, 1999, the Company acquired Promus Hotel Corporation. See
"Recent Developments--Promus Acquisition." On December 31, 1998, the Company
completed the spin-off of its gaming operations. See "Separation of Gaming
Business."
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.
For additional information, see the Company's Annual Report to Stockholders
for the fiscal year ended December 31, 1999 (the "Stockholder Report"). The
Stockholder Report is included as Exhibit 13 to this Form 10-K and, to the
extent specific references are made to the Stockholder Report, these provisions
are incorporated in this Form 10-K by reference.
RECENT DEVELOPMENTS
PROMUS ACQUISITION
On November 30, 1999, the Company consummated its acquisition of Promus
Hotel Corporation ("Promus") through the merger of Promus into a wholly owned
subsidiary of the Company (the "Promus Acquisition"). Pursuant to the Agreement
and Plan of Merger, dated as of September 3, 1999, as amended, among the
Company, its merger subsidiary and Promus, each share of Promus common stock was
converted into the right to receive either $38.50 in cash or 3.2158 shares of
the Company's Common Stock. Fifty-five percent of the Promus shares were
exchanged for approximately $1.7 billion of cash consideration, while the
remaining forty-five percent were converted into approximately 113 million
shares of the Company's Common Stock. See "Acquisitions and
Divestitures--Acquisition of Promus Hotel Corporation" in the Notes to the
Company's Consolidated Financial Statements on page 37 in the Stockholder
Report.
As a result of the Promus Acquisition, the Company added over
1,450 properties representing over 200,000 rooms to its hotel system, along with
a complementary portfolio of hotel brand names including Doubletree, Embassy
Suites, Hampton Inn, Homewood Suites and Red Lion. The Company believes that the
Promus Acquisition has created a more diversified and balanced income stream by
increasing the percentage of revenues the Company derives from management and
franchise fees which require little or no capital investment by the Company. The
Company believes that the Promus Acquisition will result in significant
synergies, economies of scale and revenue enhancements by providing greater
opportunity for expansion with multiple brands and market segments; spreading
overhead over a wider base of properties; and including the Promus brands in
Hilton's HHonors frequent guest program, its Hilton Reservations Worldwide
central reservation system and its sales and marketing organizations.
HOTEL ACQUISITIONS
In addition to the Promus Acquisition, during 1999, the Company increased
its ownership of full-service hotels by acquiring 100% ownership interests in
the following properties:
- In February 1999, the Company acquired the 495-room Radisson Plaza Hotel
at Mark Center in Alexandria, Virginia (renamed the Hilton Alexandria Mark
Center).
- In April 1999, the Company acquired the 563-room Pointe Hilton Squaw Peak
Resort in Phoenix, Arizona and the 385-room Hilton Boston Back Bay in
Boston, Massachusetts. Prior to these acquisitions, the Pointe Hilton
Squaw Peak Resort had been managed by the Company and the Hilton Boston
Back Bay had been operated as a Hilton franchise hotel.
- In November 1999, the Company acquired the 814-room Hilton Minneapolis &
Towers, which had been managed by the Company.
HOTEL CONSTRUCTION
Since January 1, 1999, the Company has completed construction of the
following hotels, each of which is wholly owned and managed by the Company:
- In September 1999, the Company completed construction of the 600-room
Hilton Boston Logan Airport, located at the center of Boston's Logan
International Airport.
- In February 2000, the Company completed construction of the 162-room
Hilton Garden Inn LAX/ El Segundo, located near the Los Angeles
International Airport, which the Company also plans to use for employee
training and for testing model room designs for its hotel brands.
FRANCHISE HOTELS
During 1999, the Company continued to improve its franchise business
primarily through the expansion of the Hilton Garden Inn product. The Company
opened 45 Hilton Garden Inn properties in 1999, bringing the total number of
such properties to 63 at December 31, 1999. The Promus Acquisition has increased
Hilton's franchise business significantly, adding more than 1,100 franchise
properties to the Company's portfolio.
ADDITIONAL INFORMATION
For a more detailed description of the Company's recent developments, see
"Hotel Operations" and "Additional Information--Vacation Ownership." For a
description of the Company's planned expansion activities, see "Hotel
Operations--Expansion Program." For additional information, see "Management's
Discussion and Analysis of Financial Condition and Results of Operations" on
pages 23 through 30 in the Stockholder Report.
SEPARATION OF GAMING BUSINESS
On December 31, 1998, the Company completed the spin-off of its gaming
operations, thereby creating a new publicly-held gaming company called Park
Place Entertainment Corporation ("Park Place"). The spin-off was accomplished
through a tax free distribution to the Company's stockholders, on a one-for-one
basis, of the shares of Park Place common stock (the "Park Place Distribution").
As a result of the Park Place Distribution, effective December 31, 1998, the
Company disposed of all of its gaming operations, and all assets and liabilities
related to the gaming operations, except as follows:
- The Company retained its 50% ownership interest in the consortium that
manages Casino Windsor for the Ontario provincial government. See
"Additional Information--Casino Windsor."
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- On February 1, 1999, the Company opened the 619-room Conrad International
Cairo which features an approximately 6,000 square foot amenity casino.
The Company owns a 10% equity interest in, and manages, the Conrad
International Cairo.
- The Company owns and operates the Flamingo Casino-Kansas City in Kansas
City, Missouri. The Company has entered into an agreement to sell this
riverboat casino to a third party. Upon completion of such sale, the
proceeds of the sale will be allocated between the Company and Park Place
pursuant to an agreement entered into in connection with the Park Place
Distribution. See "Additional Information--Flamingo Casino-Kansas City."
- In the Park Place Distribution, the Company retained its right to use the
"Hilton" name in the United States and granted Park Place a non-exclusive
license to use such name in the operation of its business for specified
periods in exchange for license fees to be paid to the Company commencing
in 2001. For additional information relating to the use of the Hilton
name, see "Hotel Operations--Territorial Restrictions."
INDUSTRY SEGMENTS
Hilton's revenue and income are derived primarily from hotel operations,
which include the operation of Hilton's owned, leased, partially owned and
managed hotels, and franchise fees.
As of December 31, 1999, the Company managed (and in some cases, partially
owned) hotel properties in Belgium, Egypt, England, Hong Kong, Ireland, Puerto
Rico, Singapore, Spain and Turkey. The Company also franchised hotel properties
in Canada, Chile, Colombia, Costa Rica, Mexico and Puerto Rico. To date, the
amounts of revenues, operating profits and identifiable assets attributable to
geographic areas outside the United States have not been material.
HOTEL OPERATIONS
HOTEL PROPERTIES
OWNED HOTELS
As of December 31, 1999, the Company owned and managed 85 hotels,
representing 36,367 rooms. The owned hotels consist of properties in which the
Company owned a majority or controlling interest and include some of the
Company's largest and most profitable hotels, including:
- the 1,380-room Waldorf=Astoria;
- the 2,041-room Hilton New York & Towers;
- the 2,545-room Hilton Hawaiian Village;
- the 1,895-room Hilton San Francisco & Towers;
- the 1,543-room Hilton Chicago & Towers;
- the 1,639-room Palmer House Hilton;
- the 1,123-room Hilton Washington & Towers; and
- the 1,600-room Hilton New Orleans Riverside.
Included in the number of owned hotels are 12 hotels for which Hilton leases
the land upon which the hotels are located. The expiration dates of the leases
range up to 2044, with certain leases containing renewal options for 30 to 40
years. Under these leases, the Company owns the buildings and leasehold
improvements and all furniture and equipment, is responsible for repairs,
maintenance, operating expenses and lease rentals, and retains complete
managerial discretion over operations. Generally, the Company pays a percentage
rental based on the gross revenue of the facility. Upon the expiration of such
leases, the
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buildings and other leasehold improvements presently owned by the Company revert
to the landlords. For additional information, see "Leases" in the Notes to the
Company's Consolidated Financial Statements on page 44 in the Stockholder
Report.
LEASED HOTELS
As of December 31, 1999, the Company leased 74 hotels, representing 12,681
rooms. Under these leases, the Company leases the hotel from its owner, manages
the hotel and is generally responsible for all aspects of the hotel's operations
and recognizes all revenues and substantially all expenses associated with the
hotel's operations. Although, in general, furniture, fixtures and equipment
replacement is the landlord's responsibility, certain leases obligate the
Company to maintain and replace these items. Lease terms typically require the
payment by the Company of a fixed monthly base rent regardless of the
performance of the hotel and a variable rent based on a percentage of revenues.
Included in the number of hotels leased by the Company as of December 31,
1999, were 52 hotels representing 7,821 rooms that the Company leased pursuant
to substantially similar lease agreements with subsidiaries of RFS Hotel
Investors, Inc. ("RFS"). The RFS leases generally have expiration dates ranging
up to 2012, are subject to early termination upon the occurrence of certain
contingencies, and require the payment of base rent and percentage rent. The
Company and RFS have entered into an agreement which gives RFS an option to
terminate all 52 of these leases. See "Strategic Alliances and Joint
Ventures--RFS Hotel Investors" below and "Leases" in the Notes to the Company's
Consolidated Financial Statements on page 44 in the Stockholder Report.
JOINT VENTURES
As of December 31, 1999, the Company had a minority ownership interest in
and managed 56 hotels, representing 16,171 rooms. These hotels are owned by
joint ventures of which the Company owns a minority or non-controlling interest.
The Company has a right of first refusal to purchase additional equity interests
in certain of these joint ventures. Each of the partially owned hotels is
managed by the Company for the entity owning the hotel. For additional
information, See "Strategic Alliances and Joint Ventures" below.
MANAGED HOTELS
As of December 31, 1999, the Company managed 185 hotels, representing 51,979
rooms, which are wholly owned by others. Under its standard management
arrangement, the Company operates a hotel for the benefit of its owner, which
either owns or leases the hotel and the associated personal property. The
Company's management fee is generally based on a percentage of each hotel's
gross revenue plus, in the majority of properties, an incentive fee based on
operating performance. The expiration dates of the Company's management
agreements range up to 2024 and generally contain renewal options ranging from
five to 20 years, subject to certain termination rights.
Under the management agreements, all operating and other expenses are paid
by the owner, and the Company is generally reimbursed for its out-of-pocket
expenses. In turn, the Company's managerial discretion is subject to approval by
the owner in certain major areas, including adoption of capital budgets.
FRANCHISE HOTELS
As of December 31, 1999, the Company franchised 1,352 hotels, representing
183,081 rooms, which are owned and operated by third parties. In general,
franchisees pay the Company an initial fee based on the number of rooms in a
franchise hotel and a continuing fee based on a percentage of the hotel's room
revenue. Although the Company does not directly participate in the management or
operation of franchise hotels, it conducts periodic inspections to ensure that
the Company's standards are maintained and renders
4
advice with respect to hotel operations. The Company generally approves the
plans for, and the location of, franchise hotels and assists in their design.
HOTEL BRANDS
The Company operates hotels through the following brands, which target a
wide variety of markets and geographic areas.
HILTON
Hilton hotels are upscale, full-service hotels targeted toward group
meetings, business travelers and leisure travelers. These hotels typically
include swimming pools, gift shops and retail facilities, meeting and banquet
facilities, restaurants and lounges, room service, parking facilities and other
services. The Hilton brand also includes Hilton Suites hotels which target the
upscale extended stay market utilizing an all-suites design. As of December 31,
1999, there were 220 Hilton hotels, representing 82,388 rooms, located in 40
states, the District of Columbia, Canada and Mexico. As of December 31, 1999,
there were 10 Hilton hotels either under construction or in the process of
converting from third party brands, all of which will be franchise hotels.
HILTON GARDEN INN
Hilton Garden Inn hotels target the upper mid-market hotel segment utilizing
a modular design constructed around a courtyard containing an indoor or outdoor
swimming pool. As of December 31, 1999, there were 63 Hilton Garden Inn hotels,
representing 8,836 rooms, located in 23 states, Canada and Mexico, of which 60
were franchise hotels. As of December 31, 1999, 31 Hilton Garden Inn hotels were
under construction, 30 of which will be franchise hotels.
DOUBLETREE
Doubletree hotels are positioned as the complementary full-service brand to
the Hilton brand in the mid-market to upscale hotel segment. The Doubletree
brand also includes the Doubletree Guest Suites and the moderately priced
Doubletree Club hotels. As of December 31, 1999, there were 164 Doubletree
hotels, representing 44,414 rooms, located in 38 states, the District of
Columbia, the U.S. Virgin Islands and Mexico. As of December 31, 1999, 20
Doubletree hotels were either under construction or in the process of converting
from third party brands, of which 15 will be franchise hotels.
EMBASSY SUITES
Embassy Suites are upscale all-suite hotels that target business and leisure
travelers. These hotels feature two-room guest suites with a separate living
room and dining/work area and a complimentary cooked-to-order breakfast. Most
Embassy Suites hotels are built around a landscaped atrium. As of December 31,
1999, there were 149 Embassy Suites, representing 35,873 rooms, located in 39
states, the District of Columbia, Canada and Latin America. As of December 31,
1999, 35 Embassy Suites hotels were under construction, all of which will be
franchise hotels.
HOMEWOOD SUITES BY HILTON
Homewood Suites by Hilton target the upscale, extended stay market, as well
as the traditional business and leisure traveler. These properties feature
residential-style accommodations including business centers, swimming pools,
convenience stores and limited meeting facilities. In January 2000, the Company
re-launched the Homewood Suites brand as "Homewood Suites by Hilton," and also
announced a new prototype design with a more efficient, home-like interior and a
product that can be built at a lower cost than previous design plans. As of
December 31, 1999, there were 86 Homewood Suites, representing 9,455
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rooms, located in 29 states. As of December 31, 1999, 14 Homewood Suites were
under construction, nine of which will be franchise hotels.
HAMPTON INN
Hampton Inn hotels are moderately priced hotels with limited food and
beverage facilities that target the mid-market business and leisure traveler.
The Hampton Inn brand also includes Hampton Inn & Suites hotels which offer both
traditional hotel room accommodations and apartment-style suites within one
property. As of December 31, 1999, there were 984 Hampton Inn hotels,
representing 102,403 rooms, located in 48 states, Canada, Chile, Costa Rica,
Mexico and Puerto Rico. As of December 31, 1999, 84 Hampton Inn hotels were
under construction, all of which will be franchise hotels.
OTHER BRANDS
In addition to the hotel brands described above, as of December 31, 1999,
there were 86 hotels, representing 16,910 rooms, operated under other brand
names. These hotels are operated under the Company's brand names described below
or under third party brands pursuant to contractual arrangements.
- RED LION. Red Lion hotels are full-service hotels located primarily in the
Pacific Northwest that serve as a complementary brand to Doubletree hotels
in the mid-market hotel segment. As of December 31, 1999, there were
29 Red Lion hotels in the Company's system, representing 4,506 rooms,
located in nine states. As of December 31, 1999, there were three hotels
operated under third party brands scheduled to convert to the Red Lion
brand in spring 2000.
- CONRAD INTERNATIONAL. Conrad International hotels are the Company's
upscale full-service hotels located outside the United States. As of
December 31, 1999, the Company managed, and in some cases partially owned,
ten Conrad International hotels, representing 3,904 rooms, located in
Belgium, Egypt, England, Hong Kong, Ireland, Singapore, Spain and Turkey.
Future development of Conrad International hotels is subject to agreements
between the Company and Hilton Group plc. See "Territorial Restrictions"
below.
- HARRISON CONFERENCE CENTERS. The Company owns and operates Harrison
Conference Centers which are conference centers and hotels targeting
upscale corporate convention groups, executive education and training
groups, sales meetings and other group meetings. As of December 31, 1999,
the Company operated 11 Harrison Conference Centers, representing 2,014
rooms and approximately 287,000 square feet of meeting space.
EXPANSION PROGRAM
CONSTRUCTION AND RENOVATION
The Company seeks to maintain its competitive advantage by consistently
improving its hotel system through renovation programs and the construction of
new properties or additions to existing hotels. The Company has recently
completed, has commenced or is commencing construction projects or renovation
programs at a number of properties, including the following:
HILTON
- Hilton New York & Towers--substantially completed an extensive renovation
including new restaurants, a state-of-the-art business/conference center,
a world-class fitness facility, a Towers Lounge overlooking Manhattan and
37 additional guest rooms.
- Hilton Hawaiian Village--commenced construction of the new 453-room Kalia
Tower, which will feature a world-class health club and wellness spa,
retail shops and an interactive Hawaiian cultural center.
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- Hilton Seattle Airport--commenced construction of a 222-room addition to
the property, which will include a new conference center and the
renovation of existing rooms.
- Hilton Portland--expect to begin construction of a 319-room Executive
Tower addition to the property in spring 2000.
HOMEWOOD SUITES BY HILTON
- Homewood Suites by Hilton, St. Louis--completed construction of a new
145-suite hotel in March 2000.
- Homewood Suites by Hilton, Orlando--expect to complete construction of a
new 144-suite hotel in summer 2000.
- Homewood Suites by Hilton, Washington, D.C.--expect to complete
construction of a new 175-suite hotel in fall 2000.
- Homewood Suites by Hilton, Albuquerque--expect to complete construction of
a new 151-suite hotel in December 2000.
- Homewood Suites by Hilton, Colorado Springs--expect to complete
construction of a new 127-suite hotel in January 2001.
For additional information regarding the Company's expansion program, see
"Additional Information--Vacation Ownership."
FRANCHISE AND MANAGED HOTELS
During 1999, the Company continued to improve its franchise business
primarily through the expansion of the Hilton Garden Inn product. The Company
opened 45 Hilton Garden Inn properties in 1999, bringing the total number of
such properties to 63 at December 31, 1999. The Company anticipates that
approximately 200 Hilton Garden Inn hotels will be either open or under
construction by December 31, 2000. The Promus Acquisition has increased Hilton's
franchise business significantly, adding more than 1,100 franchise properties to
the Company's portfolio. The Company believes this will result in greater
diversification of revenue and cash flow.
The Company also acquired a strong development pipeline with the Promus
Acquisition, with 300 properties either in the design or construction phase as
of December 31, 1999. The majority of this new development will be franchise
properties in the Hampton Inn and Hampton Inn & Suites brands. The Company's
total development pipeline for 2000 and 2001, including Hilton Garden Inn
franchise expansion, totals more than 430 hotels and 63,000 rooms either under
construction or in design.
Hilton intends to grow its brands primarily through franchising and the
addition of management contracts. The success of the Company's ability to grow
the number of franchise and managed hotels is affected by, among other things,
national and regional economic conditions, capital markets, credit availability,
relationships with franchisees and owners as well as competition from other
hotel franchisors and managers.
INTERNATIONAL HOTELS
The Company has entered into management contracts to operate new
international hotels under the Conrad International name in Bangkok, Thailand
and Jakarta, Indonesia. The Company expects to have a 10% equity interest in the
Conrad International Jakarta.
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Future development of international hotels by the Company under the "Hilton"
and "Conrad" names will be subject to agreements entered into between the
Company and Hilton Group plc, formerly known as Ladbroke Group PLC ("Hilton
Group"). Pursuant to such agreements, Hilton Group has rights to future
international development using the Conrad brand name and the Company and Hilton
Group will have the opportunity to participate in certain of each other's future
hotel development focusing primarily upon management contracts and franchises.
See "Strategic Alliances and Joint Ventures--Hilton Group" and "Territorial
Restrictions."
STRATEGIC ALLIANCES AND JOINT VENTURES
HILTON GROUP
In 1997, the Company entered into agreements with Hilton Group, whose wholly
owned subsidiary, Hilton International Co. ("HI"), owns the rights to the Hilton
name outside the United States. The agreements provide for the reunification of
the Hilton brand worldwide through a strategic alliance between the companies,
including cooperation on sales and marketing, loyalty programs and other
operational matters. Pursuant to these agreements, the Company and HI have
integrated their reservation systems under Hilton Reservations Worldwide, LLC,
launched the Hilton HHonors Worldwide loyalty program, integrated worldwide
sales offices, developed joint marketing initiatives and adopted a new Hilton
brand identity used by both companies. Stephen F. Bollenbach, the Company's
President and Chief Executive Officer, is a non-executive director of Hilton
Group and Peter M. George, Chief Executive of Hilton Group, is a non-executive
director of the Company.
RFS HOTEL INVESTORS
As of December 31, 1999, the Company leased 52 hotel properties from RFS. On
January 26, 2000, the Company entered into an agreement with RFS which gives RFS
an option to terminate all of these leases for a termination payment of
approximately $60 million. Under this agreement, the Company has the option to
require RFS to repurchase convertible preferred stock of RFS owned by the
Company for approximately $13 million. If RFS exercises its termination option,
the Company anticipates that the lease termination and stock repurchase will
occur simultaneously in the first quarter of 2001. See "Hotel Properties--Leased
Hotels" above.
FELCOR
As of December 31, 1999, FelCor Lodging Trust Inc. ("FelCor") owned or had
an interest in 75 Company brand hotels and the Company owned approximately 1.5
million shares of FelCor common stock, representing approximately two percent of
FelCor's outstanding shares. In addition, the Company has guaranteed repayment
of a third party loan to FelCor of up to $25 million.
CANDLEWOOD
As of December 31, 1999, the Company owned approximately 2.6 million shares
of Candlewood Hotel Company ("Candlewood") common stock. The Company also has a
note receivable from Candlewood with a balance of approximately $15 million at
December 31, 1999.
The Company has committed to provide credit support for a loan facility
utilized by Candlewood to provide construction and permanent financing to
Candlewood and its franchisees. The Company's aggregate maximum exposure for
such credit support is capped at $30 million. As of December 31, 1999, the
Company has guaranteed $11 million in such financing.
DEVELOPMENT FINANCING
In order to assist prospective owners in obtaining financing for hotel
projects, the Company has initiated programs to provide alternative capital
sources to owners. Promus Acceptance Corp.
8
("ProMAC"), a third party lending entity, provides first mortgage construction
financing to franchisees for select Homewood Suites by Hilton, Hampton Inn and
Embassy Suites hotels. The Company has provided a guarantee of up to $36 million
on loans outstanding under the ProMAC program. The Company has also agreed to
guarantee up to 25 percent of construction financing relating to select Hilton
Garden Inn development projects. Under a pre-existing program, the Company
provided secondary financing to franchisees under a mezzanine financing program.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" on pages 23 through 30 in the Stockholder Report.
TERRITORIAL RESTRICTIONS
Certain franchise and management agreements entered into by Hilton and
Promus contain provisions that may have the effect of limiting or restricting
Hilton's or Promus' right to own, manage or franchise additional hotels, or in
some cases brands, in a specified geographic area. Such provisions vary
significantly in their applicability and scope and may be subject to differing
interpretations. As a result of the Promus Acquisition, the Company owns,
manages or franchises hotels in circumstances that may give rise to claims that
such hotels conflict with or violate such provisions. To the extent that such
conflicts arise, the Company seeks to resolve them by negotiation with the
relevant parties. In the event that such resolution cannot be achieved,
litigation may result in damages or other remedies against the Company. Such
remedies could include termination of the right to own, manage or franchise the
relevant property. Although no assurance can be given that the Company will be
able to renegotiate successfully or otherwise resolve the effects of all
conflicts in each instance, these conflicts are not expected to have a material
adverse effect on the Company's financial position or results of operations. See
"Item 3. Legal Proceedings--Promus Acquisition Litigation."
Hilton has entered into agreements which restrict its right to operate
hotels in various areas under the "Hilton" or "Conrad" names. Pursuant to an
agreement entered into in 1964 at the time Hilton distributed to its
stockholders all of the issued and outstanding capital stock of HI, Hilton was
prohibited from operating facilities outside the United States identified as
"Hilton" hotels and HI was prohibited from operating facilities within the
United States identified as "Hilton" hotels. The Company conducts certain of its
international hotel operations under the Conrad International name. See "Hotel
Brands--Other Brands--Conrad International."
The Company and Hilton Group, the parent company of HI, have entered into
agreements to form a strategic alliance which reunites the Hilton name. See
"Strategic Alliances and Joint Ventures--Hilton Group." Pursuant to these
agreements, the Company has granted a license to HI to use the Conrad name for
future development outside the United States for a period of 20 years. HI has
granted a license to the Company to develop franchise properties under the
Hilton and Hilton Garden Inn names in Canada, Mexico and the Island of
St. John, U.S. Virgin Islands for a period of 20 years. Subject to the foregoing
restrictions as to the use of the "Hilton" and "Conrad" names, Hilton and HI can
compete in all, and do compete in certain, markets.
POTENTIAL ACQUISITIONS
The Company continuously evaluates acquisition opportunities and may, from
time to time, negotiate to engage in a business combination transaction or other
acquisition. However, there is no assurance that the Company will engage in any
such transactions.
PROPERTY TRANSACTIONS
The Company 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 the Company's long range
plans. In light of the Promus Acquisition, the Company will continue to review
its hotel portfolio for potential repositioning or re-branding opportunities,
and may seek to sell certain owned assets.
9
STATISTICAL INFORMATION
The following table sets forth certain information for the Company's hotel
properties with respect to the number of hotels and rooms as of December 31,
1998 and 1999:
1998(1) 1999(1) CHANGE
NUMBER OF NUMBER OF NUMBER OF
BRAND HOTELS ROOMS HOTELS ROOMS HOTELS ROOMS
- ----- -------- -------- -------- -------- -------- --------
HILTON
Owned............................................... 31 23,144 36 26,000 5 2,856
Joint Venture....................................... 2 1,453 2 1,453 -- --
Managed............................................. 17 12,220 15 10,844 (2) (1,376)
Franchised.......................................... 172 44,411 167 44,091 (5) (320)
----- ------- ----- ------- --- ------
Total............................................. 222 81,228 220 82,388 (2) 1,160
HILTON GARDEN INN
Owned............................................... 1 197 1 197 -- --
Joint Venture....................................... 1 152 2 280 1 128
Franchised.......................................... 16 2,151 60 8,359 44 6,208
----- ------- ----- ------- --- ------
Total............................................. 18 2,500 63 8,836 45 6,336
DOUBLETREE
Owned............................................... 18 5,560 14 4,757 (4) (803)
Leased.............................................. 9 3,050 9 3,050 -- --
Joint Venture....................................... 34 8,374 30 7,907 (4) (467)
Managed............................................. 64 17,900 63 17,341 (1) (559)
Franchised.......................................... 51 11,927 48 11,359 (3) (568)
----- ------- ----- ------- --- ------
Total............................................. 176 46,811 164 44,414 (12) (2,397)
EMBASSY SUITES
Owned............................................... 6 1,299 6 1,299 -- --
Joint Venture....................................... 19 4,944 19 5,098 -- 154
Managed............................................. 58 14,425 60 15,049 2 624
Franchised.......................................... 62 13,905 64 14,427 2 522
----- ------- ----- ------- --- ------
Total............................................. 145 34,573 149 35,873 4 1,300
HOMEWOOD SUITES BY HILTON
Owned............................................... 19 2,232 13 1,655 (6) (577)
Leased.............................................. 1 83 1 83 -- --
Managed............................................. 4 471 15 1,689 11 1,218
Franchised.......................................... 50 5,081 57 6,028 7 947
----- ------- ----- ------- --- ------
Total............................................. 74 7,867 86 9,455 12 1,588
HAMPTON INN
Owned............................................... 11 1,504 1 133 (10) (1,371)
Leased.............................................. 18 2,250 18 2,250 -- --
Managed............................................. 10 1,337 10 1,337 -- --
Franchised.......................................... 835 86,581 955 98,683 120 12,102
----- ------- ----- ------- --- ------
Total............................................. 874 91,672 984 102,403 110 10,731
OTHER(2)
Owned............................................... 10 1,620 14 2,326 4 706
Leased.............................................. 41 6,433 46 7,298 5 865
Joint Venture....................................... 2 816 3 1,433 1 617
Managed............................................. 24 5,537 22 5,719 (2) 182
Franchised.......................................... -- -- 1 134 1 134
----- ------- ----- ------- --- ------
Total............................................. 77 14,406 86 16,910 9 2,504
TOTAL
Owned............................................... 96 35,556 85 36,367 (11) 811
Leased.............................................. 69 11,816 74 12,681 5 865
Joint Venture....................................... 58 15,739 56 16,171 (2) 432
Managed............................................. 177 51,890 185 51,979 8 89
Franchised.......................................... 1,186 164,056 1,352 183,081 166 19,025
----- ------- ----- ------- --- ------
TOTAL HOTELS.......................................... 1,586 279,057 1,752 300,279 166 21,222
===== ======= ===== ======= === ======
10
- ---------
(1) Statistics are presented on a pro forma basis for both periods, as if the
Promus Acquisition had been completed as of January 1, 1998.
(2) Includes properties operated under the Company's Red Lion, Conrad
International and Harrison Conference Center brands, and properties operated
under third party brands pursuant to contractual arrangements.
For purposes of the table above, "owned" hotels are properties in which the
Company has a majority or controlling ownership interest and "joint venture"
hotels are properties in which the Company has a minority or non-controlling
ownership interest. For additional information, see "Hotel Properties" above.
The following table sets forth certain information for the Company's hotel
properties with respect to occupancy rates, average room rates and revenues per
available room for the fiscal years ended December 31, 1998 and 1999:
%/PT
1998(1) 1999(1) CHANGE
------------ ------------ --------
HILTON
Occupancy................................... 71.2% 70.7% (0.5)pts
Average rate................................ $ 127.19 $ 130.60 2.7%
RevPAR(2)................................... $ 90.54 $ 92.34 2.0%
HILTON GARDEN INN
Occupancy................................... 64.0% 65.9% 1.9pts
Average rate................................ $ 91.00 $ 92.05 1.2%
RevPAR(2)................................... $ 58.20 $ 60.63 4.2%
DOUBLETREE(3)
Occupancy................................... 70.8% 70.1% (0.7)pts
Average rate................................ $ 106.34 $ 108.01 1.6%
RevPAR(2)................................... $ 75.31 $ 75.70 0.5%
EMBASSY SUITES
Occupancy................................... 72.5% 73.1% 0.6pts
Average rate................................ $ 120.77 $ 121.49 0.6%
RevPAR(2)................................... $ 87.57 $ 88.84 1.5%
HOMEWOOD SUITES BY HILTON
Occupancy................................... 73.9% 73.7% (0.2)pts
Average rate................................ $ 96.01 $ 95.01 (1.0)%
RevPAR(2)................................... $ 70.93 $ 69.98 (1.3)%
HAMPTON INN
Occupancy................................... 70.0% 68.1% (1.9)pts
Average rate................................ $ 68.57 $ 71.29 4.0%
RevPAR(2)................................... $ 47.98 $ 48.57 1.2%
OTHER(4)
Occupancy................................... 68.1% 67.0% (1.1)pts
Average rate................................ $ 98.38 $ 99.50 1.1%
RevPAR(2)................................... $ 67.02 $ 66.70 (0.5)%
- ---------
(1) Statistics are presented on a pro forma basis for both periods, as if the
Promus Acquisition had been completed as of January 1, 1998. Statistics are
for comparable hotels, and include only those hotels in the Company's system
as of December 31, 1999 which were owned, leased, managed or franchised by
the Company since January 1, 1998.
11
(2) RevPAR is equal to rooms revenue divided by the number of available rooms.
(3) Doubletree franchise hotels are not included in this table.
(4) Includes properties operated under the Company's Red Lion, Conrad
International and Harrison Conference Center brands, and properties operated
under third party brands pursuant to contractual arrangements.
For additional information regarding the Company's hotel brands, see "Hotel
Brands" above.
The following table sets forth certain statistical information for the
Company's properties by geographic region as of and for the year ended
December 31, 1999:
PROPERTIES ROOMS OCCUPANCY ROOM RATE REVPAR
---------- -------- --------- --------- --------
Owned, Leased and Managed Hotels:
Pacific/Mountain........................ 143 42,352 70.6% $120.94 $ 85.34
North Central........................... 60 15,952 71.6 123.01 88.11
South Central........................... 63 15,841 69.5 112.68 78.33
New England/Middle Atlantic............. 42 14,800 75.9 185.31 140.68
South Atlantic.......................... 81 24,257 72.3 143.46 103.65
International........................... 11 3,996 68.2 130.33 88.83
----- ------- ---- ------- -------
Total..................................... 400 117,198 71.3% $131.33 $ 93.67
===== ======= ==== ======= =======
Franchise Hotels:........................... 1,352 183,081 68.3% $ 84.91 $ 58.01
===== ======= ==== ======= =======
In the table above, statistics are for comparable hotels, and include only
those hotels in the Company's system as of December 31, 1999 which were owned,
leased, managed or franchised by the Company since January 1, 1998. For
additional information regarding the Company's properties, number of available
rooms and occupancy ratios, see the Supplementary Financial Information and Five
Year Summary on pages 48 and 49 in the Stockholder Report.
12
ADDITIONAL INFORMATION
VACATION OWNERSHIP
Hilton Grand Vacations Company and its related entities ("HGVC"), which are
wholly owned by the Company, currently operate 19 vacation ownership resorts in
Florida, two in Nevada and one in Hawaii. In addition, HGVC operates the
HGVClub, a points based reservation and exchange system. HGVC has recently
opened or is currently developing the following projects:
- In December 1999, HGVC opened a new 232-unit vacation ownership resort
located adjacent to the Las Vegas Hilton.
- In December 1999, HGVC opened the final phase of a new 52-unit vacation
ownership resort in the South Beach area of Miami Beach, Florida,
developed through the renovation of two historic art deco buildings.
- HGVC has completed 260 units of a 420-unit vacation ownership resort
located adjacent to Sea World in Orlando, Florida.
- HGVC is developing a 275-unit vacation ownership resort at the Hilton
Hawaiian Village in Honolulu, Hawaii, developed through the conversion of
the Lagoon Tower to timeshare units. HGVC expects to open this facility in
the first quarter of 2001.
As a result of the Promus Acquisition, the Company also manages three
vacation ownership resorts and franchises seven vacation ownership resorts in
the United States under the Embassy Vacation Resort and Hampton Vacation Resort
names.
HGVC is actively seeking new management, development and acquisition
opportunities in other destination resort locations.
CASINO WINDSOR
The Company owns a 50% equity interest in Windsor Casino Limited ("WCL"),
which operates the 400-room Casino Windsor in Windsor, Ontario, Canada for the
Ontario provincial government under a management contract. This hotel casino
features a 75,000 square foot casino and entertainment and meeting facilities.
See "Additional Information--Regulation and Licensing--Ontario Gaming Laws."
FLAMINGO CASINO-KANSAS CITY
The Company owns and operates the Flamingo Casino-Kansas City, a dockside
casino complex in Kansas City, Missouri. Prior to and in connection with the
Park Place Distribution, Park Place applied to the Missouri Gaming Commission
for approval to own and operate the Flamingo Casino-Kansas City, which approval
was not received prior to the Park Place Distribution. As a result, the Company
retained this property and agreed to cooperate with Park Place to take
appropriate action to put Park Place in the same economic position it would have
been in if the transfer had occurred on December 31, 1998. The Company and Park
Place entered into a disposition agreement providing for the sale or other
disposition of the Flamingo Casino-Kansas City. On February 8, 2000, the Company
entered into an agreement to sell this property to a third party. Upon
completion of such sale, the proceeds of the sale will be allocated between the
Company and Park Place pursuant to the disposition agreement. See "Additional
Information--Regulation and Licensing--Missouri Gaming Laws."
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly owned subsidiary, Hilton Equipment Corporation,
provides design and furnishing services to the Company's hotels and to hotels
owned and operated by others. These services include the purchase and
distribution of furniture, furnishings, equipment, food, beverage and operating
supplies. The revenues of this operation depend primarily on the number of new
hotels operated or franchised by the Company and on refurbishing and remodeling
of the Company's existing hotels.
RESERVATION SYSTEM
Hilton Reservations Worldwide, LLC ("HRW") operates a worldwide reservation
system for hotels owned, operated or franchised by the Company, HI, their
affiliates and others. The Company and HI each
13
own a 50% interest in HRW. HRW uses an updated computerized reservation system
called Hilstar, which is managed by REZsolutions Inc. The Company is integrating
the reservation system used by Promus into the Hilstar system. See "Hotel
Operations--Strategic Alliances and Joint Ventures--Hilton Group."
E-BUSINESS
The Company operates the award winning Hilton.com internet web site which
provides cost effective customer service in addition to the Hilstar reservation
system used by HRW. The Company also provides high-speed internet access and
business services in hotel guest rooms and other areas at certain of its hotels.
TRADEMARKS
The following trademarks used herein are owned by the Company and are
registered as service marks in the United States and in certain foreign
countries: Conrad International-Registered Trademark-, Doubletree-Registered
Trademark-, Doubletree Club-Registered Trademark-, Doubletree Guest
Suites-Registered Trademark-, Embassy Suites-Registered Trademark-, Embassy
Vacation Resort-Registered Trademark-, Hampton Inn-Registered Trademark-,
Hampton Inn & Suites-Registered Trademark-, Hampton Vacation Resort-Registered
Trademark-, Harrison Conference Centers-Registered Trademark-,
HGVClub-Registered Trademark-, HHonors-Registered Trademark-, Hilton-Registered
Trademark-, Hilton Garden Inn-Registered Trademark-, Hilton Grand Vacations
Company-Registered Trademark-, Hilton Suites-TM-, Homewood Suites-Registered
Trademark-by Hilton, and Red Lion Hotels and Inns-Registered Trademark-. The
Company considers all of these marks, and the associated name recognition, to be
valuable to its business. See "Summary of Significant Accounting Policies--
Brands" in the Notes to the Company's Consolidated Financial Statements on
page 36 in the Stockholder Report.
MARKETING
The Company's hotel properties offer multiple product lines to a broad range
of customers in many geographic markets. The Company's properties include
full-service and limited-service hotels in urban, airport, resort and suburban
locations, as well as vacation ownership resorts and conference centers. The
Company participates in certain joint marketing programs with business partners
in the airline, car rental and cruise line industries.
The Company's metropolitan and airport properties primarily serve the
convention and meeting market and the business traveler market (businesspersons
traveling as individuals or in small groups). The Company's resort properties
primarily serve the tour and leisure market (tourists traveling either as
individuals or in groups) and the convention and meeting market. The Company's
suburban properties primarily serve the leisure and business traveler markets.
As indicated under "Business Risks" below, these sources of business are
sensitive to general economic and other conditions.
The Company believes that the Promus Acquisition enables it to strengthen
the performance of its hotel brands and maximize revenue per available room by:
- introducing the Hilton HHonors Worldwide frequent guest program to the
Doubletree, Hampton Inn, Embassy Suites and Homewood Suites by Hilton
brands in April 2000;
- utilizing the Company's worldwide sales organization to market all of the
Company's hotel brands;
- cross-selling complementary brands and, where appropriate, converting
hotels to another Company brand to maximize revenues; and
- spreading brand support and system costs over a greater number of
properties.
The Company believes that its alliance with Hilton Group (which currently
owns the rights to the Hilton name outside the U.S.) has improved the
performance of the Company's operations as its properties have benefited from
the worldwide integration of the Hilton brand, reservation systems, marketing
programs and sales organizations. See "Hotel Operations--Strategic Alliances and
Joint Ventures--Hilton Group."
BUSINESS RISKS
The Company's future operating results could be adversely impacted by
industry overcapacity and weak demand, which could restrict the Company's
ability to raise room rates to keep pace with the rate of inflation. The
Company's business could also be adversely affected by increases in
transportation and fuel
14
costs or sustained recessionary periods in the U.S. (affecting domestic travel)
and internationally (affecting inbound travel from abroad). In 1999, the
Company's hotels in Hawaii were adversely impacted by the softness in Hawaiian
tourism resulting from the Asian economic situation.
General economic conditions, competition, work stoppages and other factors
affecting particular properties impact the Company's occupancy ratios. Occupancy
ratios at the Company's hotels could also be negatively impacted by a decrease
in travel resulting from adverse economic conditions outside the U.S. and by
excess industry capacity.
COMPETITION
The Company seeks to maintain the quality of its lodging business while
expanding both domestically and internationally. The Company intends to improve
and expand its core business by leveraging its strong brand names, maximizing
operating efficiencies, expanding and enhancing properties and acquiring or
developing properties as appropriate.
The Company's position as a multi-branded owner, operator, manager and
franchisor of hotels makes it one of the largest hotel companies in the United
States. Competition in the industry is based primarily on the level of service,
quality of accomodations, convenience of locations and room rates. 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 the Company operates or franchises its facilities. The
Company's hotels also compete generally with facilities offering similar
services and located in cities and other locations where the Company's hotels
are not present. If hotel capacity is expanded by others in a city where a
Company branded hotel is located, competition will increase.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this report, including without limitation,
those set forth under the captions "General Information--Recent Developments,"
"Hotel Operations--Hotel Brands," "--Expansion Program," "--Strategic Alliances
and Joint Ventures," "--Territorial Restrictions," "--Potential Acquisitions"
and "--Property Transactions," and "Additional Information--Vacation Ownership,"
"--Trademarks," "--Marketing," "--Competition," "--Environmental Matters" and
"--Regulation and Licensing," and "Legal Proceedings," and statements relating
to the Company's plans, strategies, objectives, expectations, intentions and
adequacy of resources, are made pursuant to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995.
Words such as "believes," "anticipates," "expects," "intends," "plans" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements reflect the Company's current views with respect to
future events and financial performance, and are subject to certain risks and
uncertainties, including those set forth under the captions "Additional
Information--Business Risks" and "--Competition," the effect of economic
conditions, and customer demand, which could cause actual results to differ
materially from historical results or those anticipated. Although the Company
believes the expectations reflected in such forward-looking statements are based
upon reasonable assumptions, it can give no assurance that its expectations will
be attained.
ENVIRONMENTAL MATTERS
The Company, like others in its industry, is subject to various Federal,
state, local and, in some cases, foreign laws, ordinances and regulations that:
(i) govern activities or operations that may have adverse environmental
effects, such as discharges to air and water, as well as handling and disposal
practices for solid and hazardous or toxic wastes, or
(ii) may impose liability for the costs of cleaning up, and certain damages
resulting from, sites of past spills, disposals or other releases of hazardous
or toxic substances or wastes (together, "Environmental Laws").
15
The Company endeavors to maintain compliance with Environmental Laws but,
from time to time, the Company's operations may have resulted or may result in
noncompliance or liability for cleanup pursuant to Environmental Laws. In that
regard, the Company has been notified of contamination resulting from past
disposals of wastes at two sites to which hazardous or non-hazardous wastes may
have been sent from Company facilities in the past. Based on information
reviewed by and available to the Company, including:
(i) uncertainty whether a Company facility in fact shipped any wastes to one
such site;
(ii) the number of potentially responsible parties at such sites;
(iii) where available, the volume and type of waste sent to each such site;
and
(iv) efforts among potentially responsible parties to voluntarily resolve
potential legal disputes relating to one such site;
the Company believes that any liability arising from such disposals under
Environmental Laws would not have a material adverse effect on its results of
operations or financial condition.
YEAR 2000
The Company encountered no significant problems from the impact of the Year
2000 on the processing of date-sensitive information by its computerized
information systems. The Company had established a Year 2000 program to ensure
that all significant information technology systems, non-information technology
systems and suppliers were Year 2000 compliant. The cost to assess, test and
remediate potential Year 2000 problems totaled approximately $6 million.
REGULATION AND LICENSING
ONTARIO GAMING LAWS. Ontario, Canada has laws and regulations governing the
conduct of casino gaming. Ontario law requires that the operator of a casino
must be found suitable and be registered. A registration once issued remains in
force until revoked. Ontario law defines the grounds for registration, as well
as revocation or suspension of such registration. The Ontario authorities have
conducted an investigation of, and have found suitable, the Company and the
other shareholder of WCL in connection with the Ontario registration of WCL. See
"Additional Information--Casino Windsor."
MISSOURI GAMING LAWS. Missouri has enacted the Missouri Gaming Law (the
"MGL") and established the Missouri Gaming Commission (the "MGC"), which is
responsible for licensing and regulating riverboat gaming in Missouri. The MGL
grants specific powers and duties to the MGC to supervise riverboat gaming,
implement the MGL and take other action as may be reasonable or appropriate to
enforce the MGL. The MGL extensively regulates owning and operating riverboat
gaming facilities in Missouri. Generally, a licensed company and its officers,
directors, employees, related subsidiaries and significant shareholders are
subject to such extensive regulation. In October 1996, the MGC granted a
riverboat gaming license to the Company to operate the Flamingo Casino-Kansas
City.
Prior to and in connection with the Park Place Distribution, Park Place
applied to the MGC for approval to own and operate the Flamingo Casino-Kansas
City. The approval was not received prior to the Park Place Distribution. On
February 8, 2000, the Company entered into an agreement to sell this property to
a third party. This sale is subject to approval by the MGC. Upon completion of
the sale, the Company expects to cease gaming operations in Missouri and
surrender the gaming license to the MGC. See "Additional Information--Flamingo
Casino-Kansas City."
OTHER LAWS AND REGULATIONS. Each of the hotels and vacation ownership
resorts 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. Federal and state laws and
regulations also require certain registration, disclosure statements and other
practices with respect to the franchising of hotels. Management believes that
the Company has obtained all required licenses and permits and its businesses
are conducted in substantial compliance with applicable laws.
16
EMPLOYEES
At December 31, 1999, Hilton employed approximately 78,000 persons, of whom
approximately 17,000 were 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. 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 spends, and intends to continue to spend,
substantial funds to maintain its owned facilities in first-class condition in
order to remain competitive.
Hotels owned, leased, managed and franchised by Hilton are briefly described
under "Item 1" and, in particular, under the caption "Hotel Operations." In
addition, contemplated additions to or renovations of existing properties and
new hotels presently under construction that Hilton will operate are briefly
described under the caption "Hotel Operations--Expansion Program" and
"Additional Information--Vacation Ownership" under "Item 1."
ITEM 3. LEGAL PROCEEDINGS
BALLY MERGER LITIGATION
A purported class action against Bally Entertainment Corporation ("Bally"),
its directors and Hilton was commenced in August 1996 under the caption PARNES
V. BALLY ENTERTAINMENT CORPORATION, ET AL. (C.A. No. 15192) in the Court of
Chancery for the State of Delaware. The plaintiff alleges breaches of fiduciary
duty in connection with the merger of Bally with and into Hilton in
December 1996 (the "Bally Merger"), including allegedly illegal payments to
Arthur M. Goldberg that purportedly denied Bally shareholders other than
Mr. Goldberg an opportunity to sell their shares to Hilton or any other bidder
at the best possible price. In the complaint, the plaintiff seeks, among other
things:
(i) an order enjoining the Bally Merger;
(ii) an award of damages in an unspecified amount;
(iii) an order requiring Mr. Goldberg to disgorge his profits; and
(iv) an award of attorneys' fees and expenses.
In orders dated May 13, 1997 and February 3, 1998, the Court dismissed this
litigation. Plaintiff appealed this dismissal and, on January 25, 1999, the
Delaware Supreme Court reversed the dismissal order and remanded the case to the
Court of Chancery. The Company intends to continue to defend this action
vigorously.
PROMUS ACQUISITION LITIGATION
On or around September 7, 1999, two actions were filed in the Court of
Chancery for the State of Delaware by alleged common stockholders of Promus on
behalf of a purported class of similarly situated Promus stockholders. The
actions are captioned STEVEN GOLDSTEIN V. PROMUS HOTEL CORPORATION, ET AL.
(C.A. No. 17410NC) and JOSEPH CARCO V. PROMUS HOTEL CORPORATION, ET AL.
(C.A. No. 17411NC). The complaints in the actions, which are substantially
similar, name as defendants Promus, the members of the Promus board of directors
and Hilton, and allege that the Promus directors breached their fiduciary duties
to Promus stockholders by agreeing to the acquisition and by allegedly failing
to obtain the highest value for Promus stockholders, and that Hilton allegedly
aided and abetted such alleged breaches of fiduciary
17
duty. The complaints seek injunctive relief and monetary damages in an
unspecified amount. Defendants intend to defend these actions vigorously.
On or about October 11, 1999, an action was filed in the United States
District Court for the Southern District of Florida entitled HOTELRAMA
ASSOCIATES, LTD. V. HILTON HOTELS CORPORATION (Case No. 99-CV02717), alleging
that the acquisition of Promus would cause Hilton to be in violation of
territorial restrictions contained in a management agreement under which Hilton
manages a hotel owned by the plaintiff in Miami, Florida. The complaint sought
to enjoin Hilton from violating the restrictive covenant by its acquisition of
Promus, as well as other remedies. On November 19, 1999, the Court denied
plaintiff's motion to enjoin Hilton from acquiring Promus, and the Promus
Acquisition was consummated on November 30, 1999. On March 16, 2000, the Company
and plaintiff reached an agreement in principle to settle all outstanding issues
between the parties, subject to documentation.
RIGHTS AGREEMENT LITIGATION
A purported class action against the Company was filed in the Court of
Chancery for the State of Delaware on or about February 22, 2000 under the
caption LEONARD LOVENTHAL ACCOUNT V. HILTON HOTELS CORPORATION (C.A.
No. 17803NC). The plaintiff alleges that the Rights Agreement, dated as of
November 29, 1999, between the Company and ChaseMellon Shareholder Services
L.L.C., relating to the Company's preferred share purchase rights plan, is
invalid and unenforceable and violates provisions of the Delaware General
Corporation Law, the Uniform Commercial Code and the Company's Restated
Certificate of Incorporation and By-Laws. In the complaint, plaintiff seeks an
order declaring the Rights Agreement to be invalid and enjoining the Company
from enforcing the Rights Agreement, and monetary damages in an unspecified
amount. The Company intends to defend this action vigorously. For a description
of the Rights Agreement, see "Part II Item 5.--Rights Agreement" below.
In management's opinion, disposition of pending litigation against the
Company, including the litigation described above, is not expected to have a
material adverse effect on the Company's financial position or results of
operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Company's special meeting of stockholders held on November 30, 1999,
the Company's stockholders approved each of the proposals voted upon. The voting
results for each of the proposals are as follows:
i) Approval of the Agreement and Plan of Merger, dated as of September 3, 1999, as amended, between the Company,
Promus and a wholly owned subsidiary of the Company, and the issuance of the Company's Common Stock in the Promus
Acquisition.
FOR: 193,495,168 AGAINST: 8,610,492 ABSTAIN: 885,679
ii) Approval of the amendment to the Company's Restated Certificate of Incorporation to increase the authorized number
of shares of Common Stock from 400 million shares to 500 million shares.
FOR: 194,718,989 AGAINST: 7,228,702 ABSTAIN: 1,043,648
iii) Approval of the amendment to the Company's By-Laws to change the authorized number of directors from 12 to a range
of 10 to 20 directors, with the exact number to be set from time to time by the Company's Board of Directors.
FOR: 221,091,587 AGAINST: 15,225,215 ABSTAIN: 1,129,926
18
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
executive officers of the Company:
NAME POSITIONS AND OFFICES WITH THE COMPANY AGE
- ---- -------------------------------------- ---
Stephen F. Bollenbach President and Chief Executive Officer since 57
February 1996
Thomas E. Gallagher Executive Vice President and General Counsel since 55
July 1997, Secretary since May 1998 and Chief
Administrative Officer since May 1999
Matthew J. Hart Executive Vice President and Chief Financial 47
Officer since April 1996, and Treasurer from
January 1999 until January 2000
Dieter H. Huckestein Executive Vice President and President--Hotel 56
Division
Thomas L. Keltner Executive Vice President and President--Franchise 53
Hotel Group since December 1999
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1995. 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.
All of the above named executive officers are directors of the Company,
except for Messrs. Gallagher, Hart and Keltner. Prior to joining Hilton, Mr.
Gallagher served as President and Chief Executive Officer of The Griffin Group,
Inc. since April 1992, and was a partner with the law firm of Gibson, Dunn &
Crutcher prior thereto. During 1995 and 1996, Mr. Gallagher also served as
President and Chief Executive Officer of Griffin Gaming & Entertainment, Inc.
(formerly Resorts International, Inc.). Prior to joining Hilton, Mr. Hart served
as Senior Vice President and Treasurer of The Walt Disney Company since October
1995, and as Executive Vice President and Chief Financial Officer of Host
Marriott Corporation prior thereto. Prior to joining Hilton, Mr. Keltner served
as President, Brand Performance and Development Group of Promus since February
1999, as Executive Vice President and Chief Development Officer of Promus from
July 1997 until February 1999, and as Senior Vice President, Development of
Promus prior thereto.
Additional 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 11, 2000, and this information is incorporated in this Form 10-K. See "Cover
Page--Documents Incorporated by Reference."
19
PART II
ITEM 5. MARKET FOR 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." In 1998, the Company made
quarterly dividend payments of $.08 per share. Following the Park Place
Distribution, in 1999 and the first quarter of 2000 the Company made quarterly
dividend payments of $.02 per share. The sales prices for the Company's Common
Stock in 1999 and 2000 reflect the Common Stock trading on a stand-alone basis
after the Park Place Distribution on December 31, 1998. As of December 31, 1999,
the Company had approximately 23,300 stockholders of record. The high and low
reported sales prices per share of the Company's Common Stock are set forth in
the following table for the periods indicated:
HIGH LOW
-------- --------
1998
1st Quarter................................................. $35.50 $27.50
2nd Quarter................................................. 34.00 28.13
3rd Quarter................................................. 29.38 16.56
4th Quarter................................................. 22.81 12.50
1999
1st Quarter................................................. 16.69 13.81
2nd Quarter................................................. 17.13 13.38
3rd Quarter................................................. 15.00 9.75
4th Quarter................................................. 11.50 8.38
2000
1st Quarter (through March 28, 2000)........................ 9.94 6.38
RIGHTS AGREEMENT
On November 29, 1999, the Company adopted a new preferred share purchase
rights plan (the "Rights Plan") and declared a dividend distribution of one
preferred share purchase right (a "Right") on each outstanding share of the
Company's Common Stock. The new Rights Plan replaced the Company's prior rights
plan which had been originally adopted in 1988 and readopted in 1998 prior to
its expiration. The Company and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent, entered into a Rights Agreement, dated as of November 29, 1999
(the "Rights Agreement"). The Rights are transferred only with the Common Stock,
unless and until they become exercisable. The Rights will expire on
November 29, 2009, subject to the Company's right to extend, unless earlier
redeemed or exchanged by the Company or terminated.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as defined below):
(i) acquires beneficial ownership of 20% or more of the Company's Common
Stock (such person or group, an "Acquiring Person") or
(ii) 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.
When exercisable, each Right entitles a shareholder to purchase from the Company
one one-hundredth of a share of Series A Junior Participating Preferred Stock at
an exercise price of $80, subject to adjustment (the "Purchase Price").
After a person becomes an Acquiring Person, each holder of a Right (other
than Rights owned by the Acquiring Person) will have the right to receive, upon
exercise of such Right, a number of shares of Common Stock having a market value
equal to two times the then current Purchase Price of the Right. After a person
becomes an Acquiring Person, if the Company engages in certain mergers or
transfers of assets, each holder of a Right (other than Rights owned by the
Acquiring Person) will have the right to
20
receive upon exercise, at the Right's exercise price, a number of the acquiring
company's common shares having a market value of twice the Right's Purchase
Price.
Once a person becomes an Acquiring Person, but prior to their acquisition of
50% or more of the outstanding Common Stock, the Company's Board of Directors
may cause the Company to exchange the Rights (other than Rights owned by an
Acquiring Person), in whole or in part, for shares of Common Stock at an
exchange ratio based on the value of the Common Stock at that time, subject to
adjustment.
Prior to a person or group becoming an Acquiring Person, the Rights are
redeemable for $.001 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 Rights Agreement has been filed as Exhibit 4.18 to this Form 10-K, and
the foregoing summary is qualified in its entirety by reference to
Exhibit 4.18. For a description of litigation relating to the Rights Agreement,
see "Part I Item 3. Legal Proceedings--Rights Agreement Litigation."
ITEM 6. SELECTED FINANCIAL DATA
The ratio of earnings to fixed charges for the five years ended
December 31, 1999 is as follows: 1999 - 2.3 to 1; 1998 - 3.2 to 1; 1997 -
4.0 to 1; 1996 - 4.2 to 1; and 1995 - 2.8 to 1.
The ratio of earnings to combined fixed charges and preferred stock
dividends for the five years ended December 31, 1999 is as follows: 1999 - 2.3
to 1; 1998 - 2.9 to 1; 1997 - 3.3 to 1; 1996 - 4.1 to 1; and 1995 - 2.8 to 1.
The computation of the aforesaid ratios is set forth in Exhibit 12 to this
Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
See pages 23 through 30 in the Stockholder Report, which information is
incorporated in this Form 10-K by reference.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the Stockholder Report on the pages indicated,
which information is incorporated in this Form 10-K by reference.
PAGE
--------
Consolidated Statements of Income for
the three years ended December 31, 1999................... 31
Consolidated Balance Sheets as of December 31, 1999 and
1998...................................................... 32
Consolidated Statements of Cash Flow for
the three years ended December 31, 1999................... 33
Consolidated Statements of Stockholders' Equity for
the three years ended December 31, 1999................... 34
Notes to Consolidated Financial Statements.................. 35
Report of Independent Public Accountants.................... 46
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
21
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 of the Company" in Part
I. Other information respecting certain executive officers, as well as the
required information for directors, will be contained in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation," "Compensation Committee Report on Executive Compensation--Chief
Executive Officer Compensation" and "--Chairman of the Board Compensation,"
"Retirement Plans" and "Change of Control Agreements" in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Security
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Company's Proxy Statement, and reference is expressly made to
the Proxy Statement for the specific information incorporated in this
Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Compensation
Committee Interlocks and Insider Participation" in the Company's Proxy
Statement, and reference is expressly made to the Proxy Statement for the
specific information incorporated in this Form 10-K.
22
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 of this Form 10-K.
2. Financial Statement Schedules:
All schedules are inapplicable or the required information is included
elsewhere herein.
(b) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated December 1, 1999,
under the caption "Item 2. Acquisition or Disposition of Assets," to report the
consummation of the Promus Acquisition, and under the caption "Item 5. Other
Events," to report that the stockholders of the Company and Promus voted in
favor of all proposals at the special meetings of stockholders held on November
30, 1999, and that the Company adopted a new Rights Plan, dated as of
November 29, 1999.
(c) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits to this Form 10-K.
23
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, as of March 28, 2000.
HILTON HOTELS CORPORATION
(Registrant)
By: MATTHEW J. HART
-----------------------------------------
Matthew J. Hart
Executive Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated as of March 28, 2000.
STEPHEN F. BOLLENBACH ROBERT M. LA FORGIA
- ---------------------------------------------- ----------------------------------------------
Stephen F. Bollenbach Robert M. La Forgia
President, Chief Executive Officer Senior Vice President and Controller
and Director (Chief Accounting Officer)
A. STEVEN CROWN BENJAMIN V. LAMBERT
- ---------------------------------------------- ----------------------------------------------
A. Steven Crown Benjamin V. Lambert
Director Director
PETER M. GEORGE JOHN H. MYERS
- ---------------------------------------------- ----------------------------------------------
Peter M. George John H. Myers
Director Director
ARTHUR M. GOLDBERG JOHN L. NOTTER
- ---------------------------------------------- ----------------------------------------------
Arthur M. Goldberg John L. Notter
Director Director
MATTHEW J. HART JUDY L. SHELTON
- ---------------------------------------------- ----------------------------------------------
Matthew J. Hart Judy L. Shelton
Executive Vice President and Director
Chief Financial Officer
BARRON HILTON DONNA F. TUTTLE
- ---------------------------------------------- ----------------------------------------------
Barron Hilton Donna F. Tuttle
Chairman of the Board Director
DIETER H. HUCKESTEIN PETER V. UEBERROTH
- ---------------------------------------------- ----------------------------------------------
Dieter H. Huckestein Peter V. Ueberroth
Director Director
ROBERT L. JOHNSON SAM D. YOUNG, JR.
- ---------------------------------------------- ----------------------------------------------
Robert L. Johnson Sam D. Young, Jr.
Director Director
24
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
2.1 Agreement and Plan of Merger, dated as of June 30, 1998,
among Registrant, Park Place Entertainment Corporation
("Park Place"), Gaming Acquisition Corporation, GCI Lakes,
Inc. and Grand Casinos, Inc. (incorporated herein by
reference from Exhibit 2.1 to Registrant's Quarterly Report
on Form 10-Q for the period ended June 30, 1998)
2.2 Agreement and Plan of Merger, dated as of September 3, 1999,
as amended, among Registrant, Promus Hotel Corporation and
Chicago Hilton, Inc. (incorporated herein by reference from
Appendix A to Registrant's Registration Statement on Form
S-4 (File No. 333-89437))
3.1 Restated Certificate of Incorporation of Registrant, as
amended (incorporated herein by reference from Exhibit 4.1
to Registrant's Registration Statement on Form S-3 (File
No. 333-18523))
3.2 Amendment to Restated Certificate of Incorporation of
Registrant, relating to Exhibit 3.1 hereto (incorporated
herein by reference from Exhibit 3.1 to Registrant's
Quarterly Report on Form 10-Q for the period ended June 30,
1997)
3.3 Amendment to Restated Certificate of Incorporation of
Registrant, relating to Exhibits 3.1 and 3.2 hereto
(incorporated herein by reference from Appendix F to
Registrant's Registration Statement on Form S-4 (File No.
333-89437))
3.4 By-Laws of Registrant, as amended (incorporated herein by
reference from Exhibit 4.2 to Registrant's Registration
Statement on Form S-3 (File No. 333-18523))
3.5 Amendment to By-Laws of Registrant, relating to Exhibit 3.4
hereto (incorporated herein by reference from Exhibit 3.4 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998)
3.6 Amendment to By-Laws of Registrant, relating to Exhibits 3.4
and 3.5 hereto (incorporated herein by reference from
Appendix G to Registrant's Registration Statement on Form
S-4 (File No. 333-89437))
4.1 Indenture, dated as of July 1, 1988, between Registrant and
Morgan Guaranty Trust Company of New York, as Trustee,
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))
4.2 First Supplemental Indenture, dated as of June 30, 1992,
between Registrant and Morgan Guaranty Trust Company of New
York, as Trustee, regarding Registrant's Senior Debt
Securities, relating to Exhibit 4.1 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)
4.3 Indenture, dated as of May 14, 1996, between Registrant and
The Bank of New York, as Trustee, regarding Registrant's 5%
Convertible Subordinated Notes due 2006 (incorporated herein
by reference from Exhibit 4.6 to Registrant's Registration
Statement on Form S-4 (File No. 333-10415))
25
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
4.4.1 Indenture, dated as of April 15, 1997, between Registrant
and BNY Western Trust Company, as Trustee, regarding
Registrant's Debt Securities (incorporated herein by
reference from Exhibit 4.3 to Registrant's Current Report on
Form 8-K, dated April 15, 1997)
4.4.2 First Supplemental Indenture, dated as of December 31, 1998,
among Registrant, Park Place and BNY Western Trust Company,
as Trustee, regarding Registrant's Debt Securities, relating
to Exhibit 4.4.1 hereto (incorporated herein by reference
from Exhibit 4.1 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)
4.4.3 Officers' Certificate containing terms of 7.95% Senior Notes
due 2007 (incorporated herein by reference from Exhibit 99
to Registrant's Current Report on Form 8-K, dated April 15,
1997)
4.4.4 Officers' Certificate containing terms of 7.375% Senior
Notes due 2002 (incorporated herein by reference from
Exhibit 99.01 to Registrant's Current Report on Form 8-K,
dated June 4, 1997)
4.4.5 Officers' Certificate containing terms of 7% Senior Notes
due 2004 (incorporated herein by reference from Exhibit
99.01 to Registrant's Current Report on Form 8-K,
dated July 17, 1997)
4.4.6 Officers' Certificate containing terms of 7.20% Senior Notes
due 2009 and 7.5% Senior Notes due 2017 (incorporated herein
by reference from Exhibit 4.1 to Registrant's Current Report
on Form 8-K, dated December 17, 1997)
4.5 Five Year Credit Agreement, dated as of November 30, 1999,
among Registrant, Bank of America, N.A., as Administrative
Agent, and the financial institutions signatory thereto.....
4.6 Short Term Credit Agreement, dated as of November 30, 1999,
among Registrant, Bank of America, N.A., as Administrative
Agent, and the financial institutions signatory thereto.....
4.7 Credit Agreement, dated as of October 18, 1996, among
Registrant, Morgan Guaranty Trust Company of New York, as
Documentation Agent, The Bank of New York, as Administrative
Agent, and the financial institutions signatory thereto
(incorporated herein by reference from Exhibit 4.5 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996)
4.8 Amendment No. 1 to Credit Agreement, dated as of December 3,
1998, among Registrant, Morgan Guaranty Trust Company of New
York, as Documentation Agent, The Bank of New York, as
Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibit 4.7 hereto
(incorporated herein by reference from Exhibit 4.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1998)
26
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
4.9 Amendment No. 2 to Credit Agreement, dated as of November
30, 1999, among Registrant, Morgan Guaranty Trust Company of
New York, as Documentation Agent, The Bank of New York, as
Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibits 4.7 and 4.8
hereto......................................................
4.10 Credit Agreement, dated as of June 1, 1998, among Hilton
Hawaiian Village LLC, Registrant, NationsBank, N.A., as
Syndication Agent, First Union National Bank, as
Documentation Agent, The Bank of New York, as Administrative
Agent, and the financial institutions signatory thereto.....
4.11 Amendment No. 1 to Credit Agreement, dated as of December
10, 1998, among Hilton Hawaiian Village LLC, Registrant,
NationsBank, N.A., as Syndication Agent, First Union
National Bank, as Documentation Agent, The Bank of New York,
as Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibit 4.10 hereto..........
4.12 Amendment No. 2 to Credit Agreement, dated as of November
30, 1999, among Hilton Hawaiian Village LLC, Registrant,
Bank of America, N.A., as Syndication Agent, First Union
National Bank, as Documentation Agent, The Bank of New York,
as Administrative Agent, and the financial institutions
signatory thereto, relating to Exhibits 4.10 and 4.11
hereto......................................................
4.13 Reimbursement Agreement, 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)
4.14 First Amendment to Reimbursement Agreement, dated as of
December 17, 1996, among Registrant, Deutsche Bank AG and
the financial institutions signatory thereto, relating to
Exhibit 4.13 hereto (incorporated herein by reference from
Exhibit 4.9 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1998)
4.15 Second Amendment to Reimbursement Agreement, dated as of May
1, 1998, among Registrant, Deutsche Bank AG and the
financial institutions signatory thereto, relating to
Exhibits 4.13 and 4.14 hereto (incorporated herein by
reference from Exhibit 4.10 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1998)
4.16 Third Amendment to Reimbursement Agreement, dated as of June
30, 1999, among Registrant, Deutsche Bank AG and the
financial institutions signatory thereto, relating to
Exhibits 4.13, 4.14 and 4.15 hereto.........................
4.17 Fourth Amendment to Reimbursement Agreement, dated as of
November 30, 1999, among Registrant, Deutsche Bank AG and
the financial institutions signatory thereto, relating to
Exhibits 4.13, 4.14, 4.15 and 4.16 hereto...................
4.18 Rights Agreement, dated as of November 29, 1999, between
Registrant and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent (incorporated herein by reference from Exhibit
1 to Registrant's Registration Statement on Form 8-A, dated
December 1, 1999)
27
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.1 1984 Stock Option and Stock Appreciation Rights Plan of
Registrant, together with the Stock Option Agreement
relating thereto, both as amended (incorporated herein by
reference from Exhibit 10.5 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1989)*
10.2 Amendment, dated October 18, 1990, to the 1984 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibit 10.1 hereto (incorporated herein by reference
from Exhibit 10.3 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1990)*
10.3 Amendment, dated November 14, 1996, to the 1984 Stock Option
and Stock Appreciation Rights Plan 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, 1996)*
10.4 Third Amendment, dated as of December 31, 1998, to the 1984
Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.1, 10.2 and 10.3 hereto
(incorporated herein by reference from Exhibit 99.8 to
Registrant's Current Report on Form 8-K, dated January 8,
1999)*
10.5 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)*
10.6 Amendment, dated January 20, 1994, to the 1990 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibit 10.5 hereto (incorporated herein by reference
from Exhibit 10.5 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1993)*
10.7 Amendment, dated January 19, 1995, to the 1990 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibits 10.5 and 10.6 hereto (incorporated herein by
reference from Exhibit 10.5 to Registrant's Annual Report on
Form 10-K for the year ended December 31, 1994)*
10.8 Amendment, dated November 14, 1996, to the 1990 Stock Option
and Stock Appreciation Rights Plan of Registrant, relating
to Exhibits 10.5, 10.6 and 10.7 hereto (incorporated herein
by reference from Exhibit 10.7 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996)*
10.9 Fourth Amendment, dated as of December 31, 1998, to the 1990
Stock Option and Stock Appreciation Rights Plan of
Registrant, relating to Exhibits 10.5, 10.6, 10.7 and 10.8
hereto (incorporated herein by reference from Exhibit 99.9
to Registrant's Current Report on Form 8-K, dated January 8,
1999)*
10.10 Amended and Restated 1996 Stock Incentive Plan of Registrant
(incorporated herein by reference from Annex F to
Registrant's Joint Proxy Statement/Prospectus, dated October
23, 1998)*
10.11 1996 Chief Executive Stock Incentive Plan of Registrant
(incorporated herein by reference from Exhibit 10.7 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1995)*
28
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.12 First Amendment, dated as of December 31, 1998, to the Chief
Executive Stock Incentive Plan of Registrant, relating to
Exhibit 10.11 hereto (incorporated herein by reference from
Exhibit 99.10 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)*
10.13 1997 Independent Director Stock Option Plan of Registrant
(incorporated herein by reference from Exhibit 10.10 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1997)*
10.14 First Amendment, dated as of December 31, 1998, to the 1997
Independent Director Stock Option Plan of Registrant,
relating to Exhibit 10.13 hereto (incorporated herein by
reference from Exhibit 99.11 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)*
10.15 Second Amendment, dated as of November 11, 1999, to the 1997
Independent Director Stock Option Plan of Registrant,
relating to Exhibits 10.13 and 10.14 hereto*................
10.16 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)*
10.17 Amendment, dated as of January 1, 1994, to the Incentive
Compensation Plan of Registrant, relating to Exhibit 10.16
hereto (incorporated herein by reference from Exhibit 10.7
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1993)*
10.18 Promus Hotel Corporation Key Executive Officer Annual
Incentive Plan (incorporated herein by reference from
Exhibit 10.30 to the Promus Hotel Corporation Annual Report
on Form 10-K for the year ended December 31, 1998)*
10.19 Retirement Plan of Registrant, as amended and restated
(incorporated herein by reference from Exhibit 10.8 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1994)*
10.20 First Amendment, dated as of November 15, 1995, to the
Retirement Plan of Registrant, relating to Exhibit 10.19
hereto (incorporated herein by reference from Exhibit 10.11
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1995)*
10.21 Second Amendment, effective December 31, 1996, to the
Retirement Plan of Registrant, relating to Exhibits 10.19
and 10.20 hereto (incorporated herein by reference from
Exhibit 10.15 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1996)*
10.22 Third Amendment, effective December 31, 1996, to the
Retirement Plan of Registrant, relating to Exhibits 10.19,
10.20 and 10.21 hereto (incorporated herein by reference
from Exhibit 10.16 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1996)*
10.23 Amendment, effective January 1, 1997, to the Retirement Plan
of Registrant, relating to Exhibits 10.19, 10.20, 10.21 and
10.22 hereto (incorporated herein by reference from
Exhibit 10.17 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)*
29
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.24 Amendment 1999-1 to the Retirement Plan of Registrant,
relating to Exhibits 10.19, 10.20, 10.21, 10.22 and 10.23
hereto (incorporated herein by reference from Exhibit 99.01
to Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1999)*
10.25 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)*
10.26 Amendment, effective April 1, 1994, to the Supplemental
Executive Retirement Plan of Registrant, relating to
Exhibit 10.25 hereto (incorporated herein by reference from
Exhibit 10.10 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1994)*
10.27 Amendment, effective December 31, 1996, to the Supplemental
Executive Retirement Plan of Registrant, relating to
Exhibits 10.25 and 10.26 hereto (incorporated herein by
reference from Exhibit 10.19 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1996)*
10.28 Doubletree Hotels Corporation Supplemental Executive
Retirement Plan, dated as of February 15, 1997, as amended
by letter dated December 9, 1997 (incorporated herein by
reference from Exhibit 10.29 to the Promus Hotel Corporation
Annual Report on Form 10-K for the year ended December 31,
1998)*
10.29 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)*
10.30 First Amendment, dated July 31, 1997, to the Directors'
Retirement Benefit Plan of Registrant, relating to Exhibit
10.29 hereto (incorporated herein by reference from
Exhibit 10.22 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1997)*
10.31 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)*
10.32 Amendment, dated as of January 1, 1994, to the Retirement
Benefit Replacement Plan of Registrant, relating to
Exhibit 10.31 hereto (incorporated herein by reference from
Exhibit 10.12 to Registrant's Annual Report on Form 10-K for
the year ended December 31, 1993)*
10.33 Amendment, effective April 1, 1994, to the Retirement
Benefit Replacement Plan of Registrant, relating to
Exhibits 10.31 and 10.32 hereto (incorporated herein by
reference from Exhibit 10.14 to Registrant's Annual Report
on Form 10-K for the year ended December 31, 1994)*
10.34 Amendment, effective December 31, 1996, to the Retirement
Benefit Replacement Plan of Registrant, relating to
Exhibits 10.31, 10.32 and 10.33 hereto (incorporated herein
by reference from Exhibit 10.24 to Registrant's Annual
Report on Form 10-K for the year ended December 31, 1996)*
10.35 Thrift Savings Plan of Registrant, as amended and restated
(incorporated herein by reference from Exhibit 10.25 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996)*
30
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.36 Amendment, effective January 1, 1996, to the Thrift Savings
Plan of Registrant, relating to Exhibit 10.35 hereto
(incorporated herein by reference from Exhibit 10.26 to
Registrant's Annual Report on Form 10-K for the year ended
December 31, 1996)*
10.37 Amendment, effective January 1, 1997, to the Thrift Savings
Plan of Registrant, relating to Exhibits 10.35 and 10.36
hereto (incorporated herein by reference from Exhibit 10.29
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997)*
10.38 Amendment 1999-1 to the Thrift Savings Plan of Registrant,
relating to Exhibits 10.35, 10.36 and 10.37 hereto
(incorporated herein by reference from Exhibit 99.02 to
Registrant's Quarterly Report on Form 10-Q for the period
ended June 30, 1999)*
10.39 Executive Deferred Compensation Plan of Registrant, as
amended and restated effective January 1, 2000*.............
10.40 Employee Stock Purchase Plan of Registrant (incorporated
herein by reference from Exhibit 10.29 to Registrant's
Annual Report on Form 10-K for the year ended December 31,
1996)*
10.41 Amendment, effective January 1, 1997, to the Employee Stock
Purchase Plan of Registrant, relating to Exhibit 10.40
hereto (incorporated herein by reference from Exhibit 10.34
to Registrant's Annual Report on Form 10-K for the year
ended December 31, 1997)*
10.42 Second Amendment, dated as of December 31, 1998, to the
Employee Stock Purchase Plan of Registrant, relating to
Exhibits 10.40 and 10.41 hereto (incorporated herein by
reference from Exhibit 99.12 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)*
10.43 Form of Change of Control Agreement between Registrant and
each of Thomas E. Gallagher, Matthew J. Hart, Barron
Hilton, Dieter H. Huckestein and Thomas L. Keltner*.........
10.44 Employment Agreement, dated as of March 9, 2000, between
Registrant and Stephen F. Bollenbach*.......................
10.45 Distribution Agreement, dated as of December 31, 1998,
between Registrant and Park Place (incorporated herein by
reference from Exhibit 99.1 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)
10.46 Debt Assumption Agreement, dated as of December 31, 1998,
between Registrant and Park Place (incorporated herein by
reference from Exhibit 99.2 to Registrant's Current Report
on Form 8-K, dated January 8, 1999)
10.47 Assignment and License Agreement, dated as of December 31,
1998, between Registrant, Conrad International Royalty
Corporation and Park Place (incorporated herein by reference
from Exhibit 99.3 to Registrant's Current Report on Form
8-K, dated January 8, 1999)
10.48 Hilton Hotels Corporation Corporate Services Agreement,
dated as of December 31, 1998, between Registrant and Park
Place (incorporated herein by reference from Exhibit 99.4 to
Registrant's Current Report on Form 8-K, dated January 8,
1999)
31
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- --------------------- -----------
10.49 Park Place Entertainment Corporation Corporate Services
Agreement, dated as of December 31, 1998, between Registrant
and Park Place (incorporated herein by reference from
Exhibit 99.5 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)
10.50 Employee Benefits and Other Employment Matters Allocation
Agreement, dated as of December 31, 1998, between Registrant
and Park Place (incorporated herein by reference from
Exhibit 99.6 to Registrant's Current Report on Form 8-K,
dated January 8, 1999)
10.51 Tax Allocation and Indemnity Agreement, dated as of December
31, 1998, between Registrant and Park Place (incorporated
herein by reference from Exhibit 99.7 to Registrant's
Current Report on Form 8-K, dated January 8, 1999)
10.52 Guarantee Agreement, dated as of February 6, 1996, among
Promus Hotel Corporation, Promus Hotels, Inc., Canadian
Imperial Bank of Commerce, as Agent for the lenders, FelCor
Suites Limited Partnership, FelCor/CSS Holdings, L.P. and
FelCor Suite Hotels, Inc. (incorporated herein by reference
from Exhibit 10.3 to the Promus Hotel Corporation Quarterly
Report on Form 10-Q for quarter ended March 31, 1996)
10.53 Guaranty Agreement, dated as of November 13, 1998, among
Doubletree Corporation, GMAC Commercial Mortgage Corporation
and Promus Hotel Corporation (incorporated herein by
reference from Exhibit 10.5 to the Promus Hotel Corporation
Annual Report on Form 10-K for the year ended December 31,
1998)
10.54 Termination Agreement, dated as of January 26, 2000, among
Registrant, Doubletree Corporation, RFS Hotel Investors,
Inc. and related entities signatory thereto.................
11 Computation of Earnings Per Share...........................
12 Computation of Ratios of Earnings to Fixed Charges..........
13 Incorporated portions of Registrant's Annual Report to
Stockholders for the fiscal year ended December 31, 1999....
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 Section 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.
32