1
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
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 1-13719
PROMUS HOTEL CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE I.R.S. NO. 62-1716020
(State of Incorporation) (I.R.S. Employer Identification No.)
755 CROSSOVER LANE
MEMPHIS, TENNESSEE 38117-4900
(Address of principal executive offices)
Registrant's telephone number, including area code: (901) 374-5000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
Common Stock* New York Stock Exchange
Chicago Stock Exchange
Pacific Stock Exchange
Philadelphia Stock Exchange
* Common Stock also has special stock purchase rights listed on each of the same
exchanges
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. [ ]
At March 5, 1999, there were 84,006,509 outstanding shares of common stock.
At such date, the aggregate market value of the shares of common stock held by
non-affiliates of the registrant, based upon the closing price of $35.00 for the
common stock as reported on the New York Stock Exchange Composite Tape, was
$2,940,227,815.
DOCUMENTS INCORPORATED BY REFERENCE
PART OF FORM 10-K
DOCUMENTS INCORPORATED INTO WHICH INCORPORATED
---------------------- -----------------------
1. Certain parts of the 1998 Annual Report to Part I -- Item 1
Shareholders............................................ Part II -- Items 5, 7 and 8
Part IV -- Item 14(a)(1).
2. Certain parts of the Proxy Statement dated March 29, Part III
1999....................................................
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
2
FORM 10-K
CROSS-REFERENCE INDEX
PAGE
----
PART I
Item 1. Business.................................................... 1
Item 2. Properties.................................................. 7
Item 3. Legal Proceedings........................................... 15
Item 4. Submission of Matters to a Vote of Security Holders......... 15
PART II
Item 5. Market for the Company's Common Stock and Related
Shareholder Matters....................................... 16
Item 6. Selected Financial Data..................................... 17
Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations................................. 17
Item 7A. Quantitative and Qualitative Disclosures About Market
Risk...................................................... 18
Item 8. Financial Statements and Supplementary Data................. 18
Item 9. Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure.................................. 18
PART III
Item 10. Directors and Executive Officers............................ 19
Item 11. Executive Compensation...................................... 19
Item 12. Security Ownership of Certain Beneficial Owners and
Management................................................ 19
Item 13. Certain Relationships and Related Transactions.............. 19
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K....................................................... 20
SIGNATURES.............................................................. 21
3
PART I
ITEM 1. BUSINESS
On December 19, 1997, Doubletree Corporation ("Doubletree") and Promus
Hotel Corporation ("PHC") effected a business combination (the "Merger") in
accordance with the Agreement and Plan of Merger (the "Merger Agreement") by and
among Doubletree, PHC and Parent Holding Corp., a corporation formed and jointly
owned by Doubletree and PHC to facilitate the Merger. Concurrent with the
Merger, Parent Holding Corp. was renamed Promus Hotel Corporation ("Promus" or
the "Company"). As a result of the Merger , (i) Doubletree and PHC became
wholly-owned subsidiaries of Promus; (ii) each outstanding share of common stock
of Doubletree was converted into one share of common stock of Promus; and (iii)
each outstanding share of PHC common stock was converted into .925 of a share of
common stock of Promus.
The principal assets of Promus are the shares of PHC (now named Promus
Operating Company, Inc.) and Doubletree. Doubletree and PHC directly or
indirectly through their subsidiaries, hold substantially all of the assets of
the Company's businesses. The principal corporate offices of Promus are located
at 755 Crossover Lane, Memphis, Tennessee 38117-4900, telephone (901) 374-5000.
Operating data for the three most recent fiscal years, together with
interest expense, dividend income, interest and other income (including
information as to assets), is set forth herein. For information on operating
results and a discussion of those results, see "Performance Statistics",
"Management's Discussion and Analysis of Financial Condition and Results of
Operations", and the consolidated financial statements included in the Company's
1998 Annual Report to Shareholders (the "Annual Report"), which information is
incorporated herein by reference.
GENERAL
Through its wholly owned subsidiaries, the Company franchises and manages
hotels with the following brands: Doubletree, Doubletree Guest Suites, Club
Hotel by Doubletree, Embassy Suites, Hampton Inn, Hampton Inn & Suites, and
Homewood Suites. Promus may also own all or a portion of these hotels or lease
these hotels from others. In addition, Promus leases and manages some hotels
that are not Promus-branded. As of December 31, 1998, Promus franchised 998
hotels and operated 339 hotels, of which 177 hotels were managed, 62 hotels were
wholly owned, 23 were partially owned through joint ventures, and 77 were leased
from third parties. These 1,337 hotels contain approximately 192,000 rooms and
are located in all 50 states, the District of Columbia, Puerto Rico, the U.S.
Virgin Islands and six foreign countries. The Company also operates and
franchises vacation interval ownership systems under the Embassy Vacation Resort
and Hampton Vacation Resort names.
The Company's primary focus is to develop, grow and support its franchise
and management business for all brands. The Company's main sources of revenues
are from the operations of owned and leased hotels, franchise royalty fees, and
management fees.
Doubletree hotels are upscale, full service hotels targeted toward business
travelers, group meetings, and leisure travelers. There were 115 Doubletree
hotels in operation as of December 31, 1998.
Doubletree Guest Suites hotels, of which there were 41 in operation as of
December 31, 1998, are full service, all-suite hotels geared toward business
travelers, group meetings, and leisure travelers who have a need or desire for
greater space than typically is provided at most traditional upscale hotels.
Club Hotel by Doubletree hotels are moderately priced hotels with food and
beverage facilities primarily targeted at individual business travelers. There
were 20 Club Hotel by Doubletree hotels in operation as of December 31, 1998.
Embassy Suites hotels, of which there were 145 in operation as of December
31, 1998, appeal to the business and leisure traveler who has a need or desire
for greater space and more focused services than are available in traditional
upscale hotels.
4
Hampton Inn hotels are moderately priced hotels designed to attract the
business and leisure traveler desiring quality accommodations at affordable
prices. There were 826 Hampton Inn hotels in operation as of December 31, 1998.
Hampton Inn & Suites hotels offer both traditional hotel room
accommodations and apartment-style suites within one property. There were 48
Hampton Inn & Suites hotels in operation as of December 31, 1998.
Homewood Suites hotels, of which there were 74 in operation on December 31,
1998, appeal to the upscale extended stay market and target the traveler who
stays five or more consecutive nights, as well as the traditional business and
leisure traveler.
The Company also operates 68 hotels that are non-Promus branded.
Promus vacation resort properties, of which there were eight as of December
31, 1998, feature a high quality interval ownership system available to the
public.
All of the Company's hotel brands are managed by a single senior management
team. Although the Company's growth strategy emphasizes obtaining new franchise
or management contracts, the Company also constructs, owns and operates its own
hotels. Owned hotels are sold from time to time to realize the value of the
underlying assets and to increase the Company's return on investment. Following
such sales, the hotels typically are either operated by the Company under
management contracts or by their purchasers under franchise licenses from the
Company.
Each of the Company's hotel brands currently use an integrated computerized
system that includes centralized reservations and marketing systems, along with
local property management and revenue management systems. The Company is in the
process of implementing System 21(TM), its proprietary, fully integrated
windows-based system, to all its hotel brands. System 21(TM) is a sophisticated
business system which provides seamless, integrated property management, revenue
maximization, marketing, decision support and reservations systems linked to the
Promus network, a communications network which will connect all Promus hotels to
the Company's reservation offices and more than 300,000 travel agents worldwide.
All of the Company's brands' reservation modules will receive reservation
requests entered on terminals located at all of their respective hotels,
interval ownership properties and reservation centers, major domestic and
international airlines via their global distribution systems, and direct from
consumers via computer access to each brand's Internet website and various third
party travel services websites. The systems immediately confirm reservations or
indicate accommodations available at alternate Promus properties. Reservations
are transmitted automatically to the property for which the reservation is made.
The Company's data centers that house all of the satellite and reservation,
marketing and revenue management computers are located in Memphis, Tennessee.
The Company operates three central reservations offices, located in Memphis,
Tennessee, Tampa, Florida, and Vancouver, Washington. See "Management's
Discussion and Analysis of Financial Condition and Results of
Operations -- Capital Spending -- Investment in Franchise System" and "Year
2000" on pages 29, 31 and 32 of the Annual Report, which information is
incorporated herein by reference.
A major element of the Company's business strategy and culture is an
unconditional 100% guarantee of service satisfaction. This guarantee, which is
currently utilized by the Embassy Suites, Hampton Inn, Hampton Inn & Suites and
Homewood Suites brands, began being implemented during 1998 in the Doubletree,
Doubletree Guest Suites and Club Hotel by Doubletree brands. This implementation
will continue throughout 1999. If guests are not satisfied with their stay, they
are not expected to pay. All of the Company's hotel brands offer suites/rooms
exclusively for non-smoking guests.
HOTEL OPERATIONS
FRANCHISING
The Company's revenues from franchising operations for Doubletree,
Doubletree Guest Suites, Club Hotel by Doubletree, Embassy Suites, Hampton Inn,
Hampton Inn & Suites, and Homewood Suites hotels consist of initial franchise
application fees and continuing royalties. The franchise agreements provide for
up to
2
5
a four percent royalty based upon gross rooms revenues and also provide for a
separate marketing and reservation contribution.
The Company earns fees under franchise agreements for the vacation resort
brands based on a percentage of net interval sales and gross rental pool
revenues, including additional fees for revenues booked through central
reservations.
In screening applicants for franchises, the Company evaluates the
character, operations ability, experience and financial responsibility of each
applicant or its principals; the Company's prior business dealings, if any, with
the applicant; suitability of the proposed hotel location and other factors. The
franchise agreement establishes requirements for service and quality of
accommodations. The Company provides certain training for the franchisee's
management and makes regular inspections of all hotels.
Franchise agreements for new hotels generally have a 20-year term. The
Company may terminate a franchise agreement if the franchisee fails to cure a
breach of the franchise agreement in a timely manner. In certain instances, a
franchise agreement may be terminated by the franchisee, but such termination
generally requires a payment to the Company.
MANAGEMENT CONTRACTS
The Company's revenues from management contracts consist primarily of
management fees which are based on a percentage of gross revenues, operating
profits, cash flow, or a combination thereof. The contract terms governing
management fees vary depending on the size and location of the hotel and other
factors relative to such hotel property.
Under the Company's management contracts, the Company, as the manager,
operates or supervises all aspects of a hotel's operations. The owner of the
hotel property is generally responsible for all costs, expenses and liabilities
incurred in connection with operating the hotel, including the expenses and
salaries of all hotel employees. The Company either requires each such owner to
enter into a separate license agreement and pay the royalty, marketing and
reservation contributions as provided in the license agreement or includes such
payments in the management contract. In addition, the hotel owner is often
required to set aside a certain percentage of hotel revenues for capital
replacement. The Company's form of management contract typically has a term of
10 years, although many contracts acquired or written in the past have
substantially longer terms, and most give the Company specified renewal rights.
The management contract may be terminated by either party due to an uncured
default by the other party. Management contracts may contain termination
provisions upon a sale of the hotel, but in such cases generally require a
payment to the Company.
The Company also acts as the manager for five of its vacation resort
properties pursuant to management contracts with generally similar terms and
responsibilities as its hotel management contracts. Fees for the management of
vacation resort properties consist of a percentage of rental pool revenue and
homeowner assessments.
See "Franchise and Management Fees" in the Consolidated Statement of
Operations on page 35 of the Annual Report, which information is incorporated
herein by reference, for revenues from licensing and management contract
operations.
OWNED HOTELS
As of December 31, 1998, the Company owned 62 hotels, representing 11,401
rooms, all of which it manages. The Company is responsible for all aspects of
these hotels, including all of the costs associated with their operation. The
Company also receives substantially all of the revenues generated by its owned
hotels.
Promus' primary focus is to grow its franchise and management businesses,
while limiting its ownership of real estate. It is the Company's goal not to be
a long-term owner of real estate. The Company owns a mix of Promus-brand hotels
that can enhance its role as manager and franchisor for its brands, but
periodically sells hotels as opportunities arise to realize a hotel's
appreciated value.
3
6
LEASES
As of December 31, 1998, the Company leased 77 hotels with 13,495 rooms.
Under the Company's leases, the Company leases the hotel from its owner and is
responsible for all aspects of the hotel's operations, including guest services,
staffing at the hotel, sales and marketing, accounting functions, purchasing and
budgeting. As the lessee of a hotel, the Company recognizes all revenues and
substantially all expenses associated with the hotel's operations. Typically,
other than real estate taxes, casualty insurance costs, maintenance of
underground utilities, structural element costs, and other capital improvement
costs, each of which are the landlord's obligation, the Company is required to
pay all of the costs associated with operating the hotel, including rent,
personal property taxes, utilities, employee liability costs, liability
insurance costs and the like. Although, in general, furniture, fixtures and
equipment replacement is the landlord's responsibility, certain leases obligate
the Company to maintain and replace these items. The Company is entitled to
retain all revenues derived from the operation of a leased hotel, subject to the
payment of its obligations under the lease, including rent. Lease terms
typically require the payment of a fixed monthly base rent regardless of the
performance of the hotel leased and a variable rent based on a percentage of
revenues. There can be no assurance that any particular lease will be profitable
for the Company after the payment of its obligations under the lease.
In addition, most of the Company's leases typically provide that the
Company indemnify its landlord against certain liabilities resulting from the
leasing, operation or use of the hotel. Examples of these liabilities may
include (i) injury to persons or property at the hotel, (ii) environmental
liability caused by the Company and (iii) liability resulting from the sale of,
or consumption of, alcoholic beverages at the hotel.
Included in the total of hotels leased by the Company at December 31, 1998,
were 51 hotels containing 7,566 rooms that the Company leased pursuant to
substantially similar lease agreements (the "Percentage Leases") with
subsidiaries of RFS Hotel Investors, Inc., a real estate investment trust
("RHI"). Four of the hotels leased pursuant to Percentage Leases are managed by
third parties. The Percentage Leases generally have an initial term of not less
than 15 years from the date of inception (with expiration dates ranging from
2003 to 2015), are subject to early termination upon the occurrence of certain
contingencies, and require the monthly payment of base rent and the quarterly
payment of percentage rent. During 1998, the base rent component of the
Percentage Leases was approximately 41.0% of total Percentage Leases expense.
Top percentage rents ranged from 50.0% to 76.5% of incremental room revenue. For
the year ended December 31, 1998, room revenue for each of the hotels subject to
the Percentage Leases exceeded the amount required to trigger the top tier of
percentage rent. If an RHI leasing entity enters into an agreement to sell a
hotel, it may terminate a Percentage Lease and either pay the Company the fair
market value of Promus' leasehold interest or offer to lease to the Company a
substitute hotel on terms that would create an equivalent value. The Percentage
Leases provide that RHI may terminate the Percentage Leases upon certain events
of default.
As of December 31, 1998, the Company leased 17 hotels that are included in
the total of 77 leased hotels, represent 3,991 rooms, and are subject to a
long-term lease agreement with RLH Partnership, L.P. ("RLH") entered into in
1995 (the "Partnership Lease"). The initial term of the Partnership Lease
expires in 2010, subject to earlier termination by RLH upon the occurrence of
one or more events of default. The Company has the option to extend the
Partnership Lease on a hotel-by-hotel basis for five additional five-year
periods on the same terms. In September 1998, the Company exercised its option
by executing an extension of the Partnership Lease using two of the five-year
extensions. The term of the Partnership Lease now expires in 2020. Rental
payments under the Partnership Lease consist of base rent payable monthly and
additional rent payable annually, if applicable. The base rent for all of the
hotels is $15.0 million per year. The additional rent for the hotels is equal to
7.5% of the amount, if any, by which the aggregate operating revenues for all of
the hotels for the given year exceeds the aggregate operating revenues for all
such hotels for the twelve-month period ended September 30, 1996. This long-term
arrangement allows the Company to retain all of the benefit from any increase in
operating income from these properties during the term of the Partnership Lease,
subject to the payment of additional rent.
4
7
As of December 31, 1998, the Company leased nine hotels pursuant to leases
other than the Percentage Leases and the Partnership Lease. Such leases contain
varying terms, but are generally "triple net" leases, the terms of which are in
substantial conformity to the general descriptions above.
JOINT VENTURES
The Company participates in various non-controlling joint ventures with
ownership ranging from less than 1% to 50%. In addition, the Company has a
controlling interest in joint ventures which own six hotels with 1,935 rooms.
In addition to its ownership interest in the joint ventures, the Company is
responsible for the day-to-day operations of the hotels owned by the joint
ventures and receives management fees for operating the hotels. Under each joint
venture agreement or separate management contract with respect to a hotel, the
Company's compensation is comprised of either an annual base management fee, an
annual incentive management fee (based on a percentage of cash flow or operating
profit) or both. The Company has made significant advances to certain joint
ventures. Repayment of these advances receives priority distribution from the
cash flow distributable to the joint venture's partners.
RISK FACTORS
COMPETITION
The Company encounters strong competition as a manager, franchisor, and
hotel owner with other companies in the lodging industry. As of December 31,
1998, there were more than 184 hotel brands (hotel chains with more than one
hotel). Although most of these companies are privately owned firms, several
large national chains own and operate their own hotels and also franchise their
brands. There is no single competitor which is dominant in the industry.
Affiliation with a national or regional brand is a major trend in the U.S.
lodging industry. In 1998 70% of U.S. hotel rooms were brand-affiliated,
compared to 62% in 1989. Most of the branded properties are franchises, under
which the operator pays the franchisor a fee for the use of its systems, brand
identification and reservation system.
The Company believes that its brands are attractive to hotel owners seeking
franchise affiliation or a management company, because its hotels typically
generate higher revenue per available room than the average of its direct
competitors in most market areas. The Company attributes this performance
premium to its success in achieving and maintaining strong customer preference.
The Company's brands are also designed to be attractive to leisure guests and
generate weekend demand. Repeat guest business is enhanced by the Company's
unconditional guest satisfaction guarantee, which is a significant component of
the Company's operating strategy.
The lodging industry in general, including the Company's brands, may be
adversely affected by national and regional economic conditions and government
regulations. The demand for accommodations at a particular hotel may be
adversely affected by many factors, including changes in travel patterns, local
and regional economic conditions, and the degree of competition with other
hotels in the area.
RISKS ASSOCIATED WITH OWNING AND LEASING REAL ESTATE
The Company is subject to varying degrees of risk generally related to
owning and leasing real estate. In addition to general risks related to the
lodging industry, these risks include liability for long-term lease obligations,
changes in national, regional and local economic conditions, inflation and its
effect on operating costs, local real estate market conditions, changes in
interest rates and in the availability, cost and terms of financing, the
potential for uninsured casualty and other losses, present and future labor,
health and safety, and environmental laws and regulatory requirements, and
adverse changes in zoning laws and other regulations, most of which risks are
beyond the control of the Company. Moreover, real estate investments are
relatively illiquid, which means that the ability of the Company to vary its
portfolio of hotels in response to changes in economic and other conditions may
be limited.
5
8
FLUCTUATIONS IN OPERATING RESULTS
The lodging industry may be adversely affected by changes in economic
conditions, changes in local market conditions, oversupply of hotel space, a
reduction in demand for hotel space in specific areas, changes in travel
patterns, extreme weather conditions, changes in governmental regulations that
influence or determine wages, prices or construction costs, changes in interest
rates, the availability of financing for operating or capital needs, and changes
in real estate tax rates and other operating expenses. Room supply and demand
historically have been sensitive to shifts in the country's gross domestic
product, which has resulted in cyclical changes in average daily room and
occupancy rates. Due in part to the strong correlation between the lodging
industry's performance and economic conditions, the lodging industry is subject
to cyclical changes in revenues. Furthermore, the lodging industry is seasonal
in nature, with revenues and profitability typically higher in summer periods
than in winter periods.
GOVERNMENTAL REGULATION
A number of states regulate the franchising of hotels and restaurants and
the granting of liquor licenses by requiring registration, disclosure
statements, and compliance with specific standards of conduct. Various federal
and state laws and regulations mandate certain disclosures and other practices
with respect to the sale of franchises and the franchisor/franchisee
relationship. In addition, there is considerable state regulation of the
vacation interval industry. The Company's operations have not been materially
affected by such laws and regulations.
EMPLOYEE RELATIONS
Promus, through its subsidiaries, has approximately 40,000 employees.
Promus' subsidiaries have collective bargaining agreements at five of the
Company's managed locations. The Company considers its relations with employees
to be very good.
EXECUTIVE OFFICERS
The table below sets forth information with respect to the business
experience of the Company's executive officers during at least the past five
years.
NAME AND AGE BUSINESS EXPERIENCE
------------ -------------------
Norman P. Blake, Jr.(57)............... Chairman of the Board, President and Chief Executive
Officer of Promus since December 1998. Vice Chairman of
the Board of The St. Paul Companies, Inc., from April to
December 1998. Chairman of the Board, President and Chief
Executive Officer of USF&G Corporation from 1990 to April
1998.
Dan L. Hale(54)........................ Executive Vice President and Chief Financial Officer of
Promus since December 1998. Executive Vice President and
Chief Financial Officer of USF&G Corporation (1993-1998).
James T. Harvey(40).................... Executive Vice President and Chief Information Officer of
Promus since February 1999. Senior Vice President,
Information Technology of Promus (1998-February 1999).
Vice President and Chief Information Officer of Promus
(1995-1997). Corporate Director, Hotel and Corporate
Information Systems of Promus Companies Inc. (1994-1995).
Director, Information Systems of Promus Companies Inc.
(1993-1994).
J. Kendall Huber(44)................... Executive Vice President, General Counsel and Secretary of
Promus since February 1999. Vice President and Deputy
General Counsel of Legg Mason, Inc. (November 1998-January
1999). Vice President and Deputy General Counsel of USF&G
Corporation (1995-1998). Vice President and Group General
Counsel of USF&G (1990-1995).
6
9
NAME AND AGE BUSINESS EXPERIENCE
------------ -------------------
Thomas L. Keltner(52).................. President, Brand Performance and Development Group of
Promus since February 1999. Executive Vice President and
Chief Development Officer of Promus (1997-February 1999).
Senior Vice President, Development of PHC (1995-1997).
Senior Vice President, Development of the Hotel Division
of Promus Companies Inc. (1993-1995).
Stevan D. Porter (44).................. Executive Vice President, Operations since February 1999.
Senior Vice President, Full Service Operations of Promus
(1998-February 1999). Vice President,
Operations -- Embassy Suites (1996-1997). Vice President,
Marketing -- Embassy Suites (1994-1996). Senior Director
Field Marketing-Embassy Suites (1992-1993).
M. Ann Rhoades(54)..................... Executive Vice President, Team Services of Promus since
December 1997. Executive Vice President, Human Resources
of Doubletree Corporation (1996-1997). Senior Vice
President, Human Resources of Doubletree Corporation
(1995-1996). Vice President, People Department of
Southwest Airlines (1989-1995).
Thomas W. Storey(42)................... Executive Vice President, Corporate Strategic Planning and
Venture Operations of Promus since February 1999.
Executive Vice President, Sales, Marketing and
Reservations of Promus (1997-February 1999). Executive
Vice President, Sales and Marketing of Doubletree
Corporation (1994-1997).
FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Annual Report on Form 10-K, including the
exhibits hereto, may constitute forward-looking statements within the meaning of
the federal securities laws. Forward-looking statements are those that express
management's view of future performance and trends, and usually are preceded
with "expects", "anticipates", "believes", "hopes", "estimates", "plans" or
similar phrasing, and include statements regarding Year 2000 readiness and
potential exposure, the Company's ability to increase rates, margin improvements
and projected expenditures, capital spending and availability of capital
resources. Such statements are based on management's beliefs, assumptions and
expectations, which in turn are based on information currently available to
management. The Company's actual performance and results could differ materially
from those expressed in or contemplated by the forward-looking statements due to
a number of factors, most of which are beyond Promus' ability to predict or
control. Such factors include, but are not limited to, operations of existing
hotel properties, including the effects of competition and customer demand;
changes in the size of Promus' hotel system, including anticipated scope and
opening dates of new developments, planned future capital spending, terminations
of franchise or management agreements, or dispositions of properties;
relationships with third parties, including franchisees, lessors, hotel owners,
lenders and others; litigation or other judicial actions; changes in the
national economy or regional economies which, among other things, affect
business and leisure travel and expenditures and capital availability for hotel
development; and adverse changes in interest rates for Promus and its
franchisees and business partners which, among other things, affect new hotel
development, real estate values, and credit availability. See "-- Risk Factors"
for a further discussion of certain events, conditions and circumstances that
could affect the Company and its business. Promus disclaims any obligation to
update any forward-looking information.
ITEM 2. PROPERTIES
HOTEL AND VACATION RESORT BRANDS
DOUBLETREE HOTELS
Doubletree hotels are upscale, full-service hotels targeted at business
travelers, group meetings, and leisure travelers. Doubletree hotels are located
in 34 states, the District of Columbia, U.S. Virgin Islands and
7
10
Mexico and have an average of 293 rooms. As of December 31, 1998, four
Doubletree hotels were under construction, three of which will be franchisee
operated. These hotels typically include a swimming pool, gift shop, meeting and
banquet facilities, at least one restaurant and cocktail lounge, room service,
parking facilities and other services.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, average daily rate per occupied room
("ADR"), and revenue per available room ("RevPAR") for Doubletree hotels, which
also includes Doubletree Guest Suites and Club Hotel by Doubletree hotels.
DOUBLETREE GUEST SUITES
Doubletree Guest Suites all-suite hotels are targeted at business
travelers, group meetings, and lesiure travelers who have a need or desire for
greater space than typically is provided at most traditional upscale hotels.
Each guest suite has a separate living room and dining/work area, with a color
television, refrigerator and wet bar. Guest Suites hotels have an average of 216
rooms and are located in 20 states and the District of Columbia. As of December
31, 1998, there was one Doubletree Guest Suites hotel under construction.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for all Doubletree
hotels.
CLUB HOTEL BY DOUBLETREE
Club Hotel by Doubletree hotels are moderately priced hotels primarily
targeted at individual business travelers. Club Hotels have an average of 210
rooms and are located in 14 states. Club Hotels typically include a conference
area, a library or reading area, desk with telephone, a business center and food
service facilities.
The Company anticipates growth of the Club Hotel by Doubletree brand
through the acquisition of management contracts of unaffiliated underperforming
hotels and ground-up construction. As of December 31, 1998, 20 Club Hotels were
in operation and three were under construction or conversion.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for all Doubletree
hotels.
EMBASSY SUITES
Embassy Suites hotels are located in 36 states, the District of Columbia,
Canada and Latin America and have an average of 238 suites per hotel. As of
December 31, 1998, 13 Embassy Suites hotels were under construction, 11 of which
will be franchisee operated. Each guest suite has a separate living room and
dining/work area, with a console television, sofa-sleeper, refrigerator and wet
bar, as well as a traditional bedroom (with a king size bed or two double beds).
Most Embassy Suites hotels are built around a landscaped atrium. All hotels
offer a free, cooked-to-order breakfast and, where local law allows,
complimentary evening cocktails.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Embassy Suites
hotels.
HAMPTON INN
Hampton Inn hotels are currently located in 48 states, as well as Canada,
Thailand, Puerto Rico, Mexico and Costa Rica. An average Hampton Inn hotel has
104 rooms. On December 31, 1998, 103 Hampton Inn hotels were under construction,
all of which will be franchisee operated. The Hampton Inn hotel's standardized
concept provides for a guest room featuring a color television, free in-room
movies, free local telephone calls and complimentary continental breakfast.
Unlike full-service hotels, Hampton Inn hotels do not feature restaurants,
lounges or large public spaces.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Hampton Inn hotels.
8
11
HAMPTON INN & SUITES
Hampton Inn & Suites have an average of 116 rooms and suites and are
currently located in 19 states and Canada. As of December 31, 1998, 24 Hampton
Inn & Suites hotels were under construction, 23 of which will be franchisee
operated. These hotels combine standard Hampton Inn guest rooms with a
significant block of two-room suites in a single property. Development of this
product is targeted for commercial and suburban markets, as well as destination
and resort markets. Each property contains a centrally located, expanded lobby
and complimentary services area and includes an exercise room, convenience shop,
meeting/hospitality room and guest laundry. An expanded complimentary
continental breakfast buffet is offered.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Hampton Inn & Suites
hotels.
HOMEWOOD SUITES
Homewood Suites hotels, which have an average of 106 suites, are currently
located in 28 states. On December 31, 1998, 14 Homewood Suites hotels were under
construction, nine of which will be franchisee operated. Homewood Suites hotels
feature residential-style accommodations, which include a living room area (some
with fireplaces), separate bedroom (with a king size bed or two double beds),
separate bathroom, and a fully-equipped kitchen. The hotel is centered around a
central community building called the Lodge which affords guests a high level of
social interaction. Amenities include a complimentary breakfast and an evening
social hour, a convenience store, grocery shopping, business center, outdoor
pool, exercise center and limited meeting facilities.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for Homewood Suite
hotels.
NON-PROMUS BRAND HOTELS
In addition to the Promus brand hotels, the Company operates 68 hotels (41
of which are leased) which are not Promus branded. These hotels have an average
of 164 rooms.
See "-- Performance Statistics" for information regarding number of rooms,
number of hotels, occupancy percentage, ADR and RevPAR for non-Promus branded
hotels.
PROMUS VACATION RESORT PROPERTIES
The Promus Vacation Resort is a premium interval ownership concept that
provides consumers the opportunity to purchase use of a one, two or three
bedroom condominium-style unit for one or more weeks annually in a prime leisure
location, for an initial investment plus an annual maintenance fee. Each Promus
Vacation Resort property offers a quality, fully furnished product (consisting
of an inside living area, full kitchen, bathroom(s), bedroom(s), and outside
patio/entertainment area) coupled with added value facilities such as a swimming
pool, an exercise room, a hot tub, tennis courts, a volleyball court, and kids
club. Beach, boating, or snow/water skiing facilities may be available depending
on location. For a separate annual fee (the initial year fee is paid as part of
the purchase price), plus a per exchange service fee, each owner has the
opportunity to exchange his interest for the use of similar facilities at
another Embassy Vacation Resort property or a third-party participating resort
property.
Promus has entered into franchise agreements with Sunterra Corporation for
Embassy Vacation Resorts at Orlando, Florida; Lake Tahoe, California; Poipu
Point, Hawaii; and Maui, Hawaii; and with Vistana Development Ltd. for Embassy
Vacation Resorts in Scottsdale, Arizona, and Myrtle Beach, South Carolina, and
for a Hampton Vacation Resort in Kissimmee, Florida.
See "-- Performance Statistics" for information regarding numbers of units,
resorts, available timeshare intervals, and intervals sold for Promus Vacation
Resorts.
9
12
PERFORMANCE STATISTICS
The table below sets forth information regarding the numbers of hotels and
rooms within the Promus hotel system as of December 31, 1996-1998, and the
respective compound annual growth rates for such hotels and rooms during the
three years ended December 31, 1998.
COMPOUND COMPOUND
NUMBER OF HOTELS ANNUAL NUMBER OF ROOMS ANNUAL
--------------------- GROWTH --------------------------- GROWTH
BRAND 1996 1997 1998 RATE 1996 1997 1998 RATE
----- ----- ----- ----- -------- ------- ------- ------- --------
Doubletree Hotels(a)
Company owned..................... 1 16 16 300% 239 4,749 4,746 346%
Leased............................ 7 18 18 60% 1,748 4,805 4,812 66%
Joint venture(b).................. -- 3 4 N/A -- 812 1,002 N/A
Management contract............... 65 83 87 16% 18,240 23,466 24,324 15%
Franchised........................ 37 49 51 17% 8,469 10,980 11,927 19%
----- ----- ----- ------- ------- -------
110 169 176 26% 28,696 44,812 46,811 28%
===== ===== ===== ======= ======= =======
Embassy Suites
Company owned..................... 9 6 6 (18)% 2,025 1,299 1,299 (20)%
Joint venture(b).................. 22 19 19 (7)% 5,578 4,946 4,944 (6)%
Management contract............... 47 53 58 11% 11,461 13,020 14,425 12%
Franchised........................ 58 63 62 3% 13,583 14,826 13,905 1%
----- ----- ----- ------- ------- -------
136 141 145 3% 32,647 34,091 34,573 3%
===== ===== ===== ======= ======= =======
Hampton Inn
Company owned..................... 12 11 11 (4)% 1,654 1,506 1,504 (5)%
Leased............................ 17 19 18 3% 2,202 2,359 2,250 1%
Joint venture(b).................. 19 -- -- (100)% 2,376 -- -- (100)%
Management contract............... 5 7 7 18% 678 929 929 17%
Franchised........................ 567 689 790 18% 60,628 72,793 81,398 16%
----- ----- ----- ------- ------- -------
620 726 826 15% 67,538 77,587 86,081 13%
===== ===== ===== ======= ======= =======
Hampton Inn & Suites
Management contract............... 1 2 3 73% 127 287 408 79%
Franchised........................ 15 29 45 73% 1,719 3,167 5,183 74%
----- ----- ----- ------- ------- -------
16 31 48 73% 1,846 3,454 5,591 74%
===== ===== ===== ======= ======= =======
Homewood Suites
Company owned..................... 7 11 19 65% 800 1,202 2,232 67%
Leased............................ 1 -- -- (100)% 98 -- -- (100)%
Management contract............... 4 4 5 12% 471 471 554 8%
Franchised........................ 25 36 50 41% 2,530 3,590 5,081 42%
----- ----- ----- ------- ------- -------
37 51 74 41% 3,899 5,263 7,867 42%
===== ===== ===== ======= ======= =======
Non-Promus Brand Hotels
Company owned..................... 22 9 10 (33)% 5,548 1,320 1,620 N/A
Leased............................ 57 49 41 (15)% 9,855 7,244 6,433 (19)%
Joint venture(b).................. 3 -- -- (100)% 812 -- -- (100)%
Management contract............... 31 23 17 (26)% 8,824 5,031 3,067 (41)%
----- ----- ----- ------- ------- -------
113 81 68 (21)% 25,039 13,595 11,120 (33)%
===== ===== ===== ======= ======= =======
Total System
Company owned..................... 51 53 62 10% 10,266 10,076 11,401 5%
Leased............................ 82 86 77 (3)% 13,903 14,408 13,495 (1)%
Joint venture(b).................. 44 22 23 (28)% 8,766 5,758 5,946 (18)%
Management contract............... 153 172 177 8% 39,801 43,204 43,707 5%
Franchised........................ 702 866 998 19% 86,929 105,356 117,494 16%
----- ----- ----- ------- ------- -------
1,032 1,199 1,337 14% 159,665 178,802 192,043 10%
===== ===== ===== ======= ======= =======
- - ---------------
(a) Includes Doubletree, Doubletree Guest Suites, and Club Hotel by Doubletree
brands.
(b) For statistical purposes only, the Company classifies unconsolidated joint
ventures in which it holds less than a 20% interest as management contracts
and consolidated joint ventures as Company owned.
10
13
The table below sets forth information regarding the Promus Vacation Resort
properties as of December 31, 1996 -- 1998, and the compound annual growth rates
for such properties during the three years ended December 31, 1998.
MANAGED FRANCHISED TOTAL COMPOUND
------------------------ ------------------------ ------------------------ ANNUAL
1996 1997 1998 1996 1997 1998 1996 1997 1998 GROWTH
------ ------ ------ ------ ------ ------ ------ ------ ------ --------
Promus Vacation Resorts(a)
Resort properties................. 2 3 5 1 3 3 3 6 8 63.3%
Timeshare units................... 164 228 500 207 818 874 371 1,046 1,374 92.4%
Timeshare intervals available..... 8,364 11,628 24,500 10,557 41,718 44,574 18,921 53,346 70,074 92.4%
Timeshare intervals sold(b)....... 3,098 6,227 14,271 1,426 4,077 10,154 4,524 10,304 24,425 132.4%
- - ---------------
(a) Excludes 40 non-branded resort units managed by Promus in 1997.
(b) Includes pre-sales for resorts under construction but not yet open.
The table below sets forth occupancy, ADR and RevPAR information for the
hotels in the Promus system for each of the three years ended December 31, 1998.
YEARS ENDED DECEMBER 31(A)
---------------------------------
BRAND 1996 1997 1998
----- ------- ------- -------
Doubletree Hotels(b)
Occupancy............................................... 72.2% 72.7% 71.5%
ADR..................................................... $ 97.33 $107.12 $115.13
RevPAR.................................................. $ 70.28 $ 77.93 $ 82.35
Red Lion Hotels converted to
Doubletree Hotels(c)
Occupancy............................................... N/A 70.4% 70.1%
ADR..................................................... N/A $ 89.07 $ 91.09
RevPAR.................................................. N/A $ 62.73 $ 63.88
Embassy Suites
Occupancy............................................... 73.6% 74.8% 73.6%
ADR..................................................... $107.22 $114.34 $120.53
RevPAR.................................................. $ 78.95 $ 85.56 $ 88.76
Hampton Inn
Occupancy............................................... 72.3% 72.3% 71.1%
ADR..................................................... $ 61.64 $ 64.33 $ 67.28
RevPAR.................................................. $ 44.58 $ 46.50 $ 47.86
Hampton Inn & Suites
Occupancy............................................... 68.5% 72.1% 75.1%
ADR..................................................... $ 69.07 $ 72.01 $ 75.10
RevPAR.................................................. $ 47.28 $ 51.92 $ 56.41
Homewood Suites
Occupancy............................................... 63.7% 79.2% 77.5%
ADR..................................................... $106.63 $ 91.19 $ 95.89
RevPAR.................................................. $ 67.93 $ 72.19 $ 74.29
Non-Promus Brand Hotels(d)
Occupancy............................................... 73.0% 72.2% 70.8%
ADR..................................................... $ 81.17 $ 85.83 $ 90.36
RevPAR.................................................. $ 59.23 $ 62.00 $ 63.96
- - ---------------
(a) Revenue statistics are for comparable hotels, and include information only
for those hotels in the system as of December 31, 1998 and managed or
franchised by PHC or managed by Doubletree since January 1, 1996. Doubletree
franchised hotels are not included in the statistical information.
11
14
(b) Includes results for Doubletree, Doubletree Guest Suites, and Club Hotel by
Doubletree brands.
(c) Revenue statistics for the Red Lion hotels converted to the Doubletree brand
are included only for the period from the initial date of conversion (Phase
I -- 4 hotels on April 1, 1997; Phase II -- 36 hotels on July 1, 1997)
through December 31, 1998.
(d) Includes results for the 15 Red Lion hotels that have not been converted to
the Doubletree brand as well as the results for comparable hotels managed
under other franchisors' brands or as independent hotels.
HOTELS BY GEOGRAPHIC REGION
The following tables present certain hotel information with respect to the
hotels in the Promus system in all of North America and in each of eight
geographic regions as of and for the year ended December 31, 1998: New England
(Maine, New Hampshire, Vermont, Massachusetts, Rhode Island and Connecticut);
Middle Atlantic (New York, New Jersey, Pennsylvania, Delaware, Maryland,
District of Columbia, Virginia and West Virginia); Mountain (Montana, Idaho,
Wyoming, Colorado, Utah and Nevada); Pacific (Washington, Oregon, California,
Alaska and Hawaii); Midwest (Ohio, Indiana, Illinois, Michigan and Wisconsin);
Plains (Minnesota, Iowa, Missouri, North Dakota, South Dakota, Nebraska and
Kansas); Southeast (North Carolina, South Carolina, Georgia, Florida, Kentucky,
Tennessee, Alabama, Mississippi, Arkansas and Louisiana); and Southwest
(Oklahoma, Texas, New Mexico and Arizona). The tables exclude the vacation
interval resorts managed and/or franchised by the Company.
NORTH AMERICA
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 115 33,732 70.2% $ 97.17 $68.23
Doubletree Guest Suites...................... 41 8,870 73.9 132.08 97.65
Club Hotel by Doubletree..................... 20 4,209 65.5 76.56 50.16
Embassy Suites............................... 145 34,573 73.8 119.35 88.08
Hampton Inn.................................. 826 86,081 70.8 66.86 47.34
Hampton Inn & Suites......................... 48 5,591 75.0 82.39 61.76
Homewood Suites.............................. 74 7,867 76.1 96.87 73.70
Non-Promus Brand Hotels...................... 68 11,120 70.4 92.88 65.39
----- -------
Total in North America.................. 1,337 192,043
===== =======
NEW ENGLAND(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 4 864 62.4% $156.69 $ 97.72
Doubletree Guest Suites...................... 2 583 78.4 161.27 126.44
Club Hotel by Doubletree..................... 1 268 -- -- --
Embassy Suites............................... 2 348 86.2 111.00 95.67
Hampton Inn.................................. 15 1,910 71.1 72.67 51.65
Hampton Inn & Suites......................... -- -- -- -- --
Homewood Suites.............................. 2 245 80.2 92.97 74.60
Non-Promus Brand Hotels...................... 10 1,347 78.3 208.32 163.21
----- -------
Total for Region........................ 36 5,565
===== =======
12
15
MIDDLE ATLANTIC(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 12 4,164 70.4% $105.98 $ 74.59
Doubletree Guest Suites...................... 7 1,616 81.7 171.34 140.07
Club Hotel by Doubletree..................... 4 757 -- -- --
Embassy Suites............................... 17 4,051 76.1 132.25 100.69
Hampton Inn.................................. 129 14,338 72.6 72.13 52.36
Hampton Inn & Suites......................... 6 670 75.6 78.59 59.45
Homewood Suites.............................. 10 1,008 73.7 111.45 82.19
Non-Promus Brand Hotels...................... 4 968 75.0 96.85 72.60
--- ------
Total for Region........................ 189 27,572
=== ======
MOUNTAIN(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 9 2,611 75.5% $ 82.30 $62.17
Doubletree Guest Suites...................... -- -- -- -- --
Club Hotel by Doubletree..................... 2 348 66.0 68.18 44.97
Embassy Suites............................... 7 1,510 72.2 114.73 82.87
Hampton Inn.................................. 32 3,326 66.1 68.35 45.16
Hampton Inn & Suites......................... 2 210 -- -- --
Homewood Suites.............................. 2 210 79.8 116.85 93.24
Non-Promus Brand Hotels...................... 3 274 61.3 52.04 31.92
-- -----
Total for Region........................ 57 8,489
== =====
PACIFIC(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 46 13,151 68.4% $ 93.85 $ 64.22
Doubletree Guest Suites...................... 3 670 77.4 129.47 100.26
Club Hotel by Doubletree..................... 1 160 -- -- --
Embassy Suites............................... 32 8,216 74.3 124.96 92.81
Hampton Inn.................................. 26 3,081 71.0 69.31 49.22
Hampton Inn & Suites......................... 2 350 -- -- --
Homewood Suites.............................. 5 634 79.2 129.00 102.22
Non-Promus Brand Hotels...................... 18 3,156 71.1 93.06 66.15
--- ------
Total for Region........................ 133 29,418
=== ======
13
16
MIDWEST(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 5 1,310 --% $ -- $ --
Doubletree Guest Suites...................... 9 1,942 72.0 123.00 88.61
Club Hotel by Doubletree..................... 2 442 73.1 86.34 63.08
Embassy Suites............................... 12 3,029 72.3 127.67 92.26
Hampton Inn.................................. 128 12,812 70.6 67.74 47.84
Hampton Inn & Suites......................... 10 1,132 72.4 76.41 55.30
Homewood Suites.............................. 10 944 78.1 87.83 68.57
Non-Promus Brand Hotels...................... 9 1,161 73.7 82.15 60.51
--- ------
Total for Region........................ 185 22,772
=== ======
PLAINS(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 7 2,173 70.8% $ 90.19 $63.88
Doubletree Guest Suites...................... 3 637 -- -- --
Club Hotel by Doubletree..................... 1 197 -- -- --
Embassy Suites............................... 10 2,377 69.2 112.86 78.05
Hampton Inn.................................. 54 5,841 68.0 65.48 44.55
Hampton Inn & Suites......................... 1 85 -- -- --
Homewood Suites.............................. 4 463 60.2 83.76 50.46
Non-Promus Brand Hotels...................... 3 493 69.8 89.50 62.49
-- ------
Total for Region........................ 83 12,266
== ======
SOUTHEAST(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 14 3,849 70.9% $101.93 $72.29
Doubletree Guest Suites...................... 12 2,047 68.5 110.13 75.42
Club Hotel by Doubletree..................... 9 2,037 61.1 73.22 44.71
Embassy Suites............................... 33 8,271 74.6 118.76 88.55
Hampton Inn.................................. 353 35,067 71.2 65.66 46.78
Hampton Inn & Suites......................... 20 2,282 73.8 86.97 64.21
Homewood Suites.............................. 23 2,445 77.3 92.09 71.19
Non-Promus Brand Hotels...................... 13 2,105 72.6 77.88 56.57
--- ------
Total for Region........................ 477 58,103
=== ======
14
17
SOUTHWEST(c)
AS OF YEAR ENDED DECEMBER 31, 1998(a)
DECEMBER 31, 1998 --------------------------------
--------------------- AVERAGE
NUMBER OF NUMBER OF OCCUPANCY DAILY
BRAND HOTELS ROOMS PERCENTAGE RATE REVPAR(b)
----- --------- --------- ---------- ------- ---------
Doubletree................................... 15 4,815 70.3% $103.82 $73.02
Doubletree Guest Suites...................... 5 1,375 72.5 109.60 79.47
Club Hotel by Doubletree..................... -- -- -- -- --
Embassy Suites............................... 27 5,799 71.1 107.79 76.65
Hampton Inn.................................. 80 8,398 67.6 64.11 43.34
Hampton Inn & Suites......................... 6 758 76.5 68.41 52.35
Homewood Suites.............................. 18 1,918 75.7 100.06 75.78
Non-Promus Brand Hotels...................... 8 1,616 64.8 82.12 53.20
--- ------
Total for Region........................ 159 24,679
=== ======
- - ---------------
(a) Revenue statistics are for comparable hotels, which include only those
hotels in the system for the entire period from January 1, 1997 through
December 31, 1998. Doubletree, Doubletree Guest Suites and Club Hotel by
Doubletree's revenues statistics exclude franchised hotels. Embassy Suites,
Hampton Inn, Hampton Inn & Suites and Homewood Suites' revenue statistics
exclude hotels that had room additions.
(b) RevPAR is the product of the occupancy percentage times the average daily
rate.
(c) The geographical regional data presented above excludes 18 hotels with an
aggregate of 3,179 rooms located outside the United States.
AUDUBON WOODS BUSINESS CAMPUS
The Company's corporate headquarters, located in Memphis, Tennessee,
consist of four office buildings acquired in 1995 containing approximately
360,000 square feet of office space on 31 acres of land. The Company currently
occupies 75% of the office space. The remaining space is leased.
TRADEMARKS
The following trademarks used herein are owned by the Company:
Doubletree(R), Doubletree Guest Suites(R), Club Hotel by Doubletree(R), Embassy
Suites(R), Embassy Vacation Resort(R), Hampton Inn(R), Hampton Inn & Suites(R),
Hampton Vacation Resort(SM), Homewood Suites(R), Promus(R), Red Lion Hotels and
Inns(R), and System 21(TM). The names "Club Hotel by Doubletree," "Doubletree,"
"Doubletree Guest Suites," "Embassy Suites," "Embassy Vacation Resort," "Hampton
Inn," "Hampton Inn & Suites," and "Homewood Suites" are registered as service
marks in the United States and in certain foreign countries. The Company
considers all of these marks, and the associated name recognition, to be
valuable to its business.
ITEM 3. LEGAL PROCEEDINGS
Actions for negligence or other tort claims occur routinely in the ordinary
course of the Company's business, but none of these proceedings involves a claim
for damages (in excess of applicable excess umbrella insurance coverages)
involving more than 10% of current assets of the Company. The Company does not
anticipate that any amounts which it may be required to pay as a result of an
adverse determination of such legal proceedings, individually or in the
aggregate, or any other relief granted by reason thereof, will have a material
adverse effect on the Company's financial condition or results of operation.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders during the fiscal
quarter ended December 31, 1998.
15
18
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange and
traded under the ticker symbol "PRH". The stock is also listed on the Chicago
Stock Exchange, Pacific Stock Exchange, and Philadelphia Stock Exchange. There
were approximately 10,400 holders of record of common stock as of March 5, 1999.
The following table sets forth the high and low sale prices per share of
common stock for 1998 and 1997 as reported on the New York Stock Exchange
Composite Tape:
PROMUS
---------------
1998 HIGH LOW
- - ---- ------ ------
Fourth Quarter.............................................. $36.63 $20.56
Third Quarter............................................... 43.63 26.50
Second Quarter.............................................. 48.31 37.13
First Quarter............................................... 49.63 40.75
DOUBLETREE PHC PROMUS
--------------- --------------- ---------------
1997 HIGH LOW HIGH LOW HIGH LOW
- - ---- ------ ------ ------ ------ ------ ------
Fourth Quarter (December 19-31,
1997)................................ -- -- -- -- $43.13 $36.50
Fourth Quarter (through December 18,
1997)................................ $49.38 $37.75 $45.38 $35.75 -- --
Third Quarter.......................... 50.75 41.38 46.88 38.00 -- --
Second Quarter......................... 49.00 30.25 39.25 30.50 -- --
First Quarter.......................... 45.25 35.00 36.38 28.25 -- --
In April 1998, the Company's Board of Directors authorized the Company to
repurchase up to $200 million of its common stock for cash. The authorization
allows the Company to conduct the repurchase program in the open market or in
negotiated or block transactions at prevailing market prices until December 31,
1999. Through December 31, 1998, the Company had repurchased 3,620,000 shares of
common stock at a total cost of approximately $117.6 million. The average price
per share, including transaction costs, was $32.48.
The Company has not paid, and does not presently intend to pay, cash
dividends on the common stock. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Liquidity and Capital
Resources" in the Annual Report on pages 29-31, which information is
incorporated herein by reference. The payment of dividends in the future will be
at the discretion of the Board of Directors of the Company and will be dependent
on the Company's results of operations, financial condition, cash requirements,
future prospects and other factors deemed relevant by the Board of Directors.
16
19
ITEM 6. SELECTED FINANCIAL DATA
COMPOUND
PRO FORMA ANNUAL
1994 1995 1996(A) 1996(B) 1997(A) 1998(C) GROWTH RATE
----- ----- ------- --------- ------- ------- -----------
(IN MILLIONS, EXCEPT PER SHARE DATA)
Operating Results
Revenues............................ $ 327 $ 422 $ 560 $ 891 $1,038 $1,107 35.7%
EBITDA(e)........................... 129 149 214 311 312 419 34.2%
Operating income.................... 110 124 165 230 184 303 29.0%
Net income.......................... 50 64 91 106 95 154 32.8%
Diluted earnings per share.......... $0.73 $0.92 $ 1.23 $1.21 $ 1.09 $ 1.78 (d)
Financial Position
Total assets........................ $ 548 $ 683 $2,363 N/A $2,379 $2,474 45.7%
Notes payable (long-term)........... 189 229 789 N/A 672 769 42.1%
Total equity........................ 235 282 1,050 N/A 1,096 1,159 49.1%
- - ---------------
(a) 1997 includes $115.0 million of business combination expenses, a $10.9
million breakup fee received in connection with the terminated Renaissance
Hotel Group transaction, $43.3 million of gains on the sale of real estate
and securities, and other net gains of $0.9 million. In 1996, the Company
recognized gains of $4.4 million on the sale of real estate and securities.
Excluding the effect of these transactions, 1997 and 1996 net income would
have been $143.8 million and $103.4 million, respectively. Diluted earnings
per share for 1997 and 1996, excluding the effect of these transactions,
would have been $1.64 and $1.18 per share, respectively.
(b) 1996 pro forma results of operations reflect the acquisition of Red Lion as
if it had occurred on January 1, 1996.
(c) 1998 includes $28.1 million of business combination expenses, $10.1 million
of severance and employment-related expenses associated with the
resignations of the CEO and President of the Company, $10.2 million of gains
on the sale of securities, $1.3 million of gain on the sale of excess land,
and other miscellaneous real estate gains of $0.2 million.
(d) For periods prior to PHC's June 30, 1995 spin-off by its former parent,
weighted average shares outstanding are assumed to be equal to the actual
shares outstanding at the spin-off. For the period January 1, 1994 through
June 30, 1994 (Doubletree's initial public offering), shares outstanding
were assumed to be equal to the shares issued on June 30, 1994. Excluding
unusual items (identified in footnotes (a) and (c)) in 1998, 1997 and 1996,
diluted earnings per share would have been $2.08, $1.64 and $1.18,
respectively, resulting in a 32.8% three year compound growth rate.
(e) EBITDA, consisting of income before extraordinary items plus interest
expense, income tax expense, depreciation and amortization and cash
distributions from nonconsolidated affiliates less earnings from
nonconsolidated affiliates, is a supplemental financial measurement used by
management, as well as by industry analysts, to evaluate Promus' operations.
However, EBITDA should not be construed as an alternative to operating
income (as an indicator of operating performance) or to cash flows from
operating activities (as a measure of liquidity) as determined in accordance
with generally accepted accounting principles.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The information required by Item 7 is included under the heading
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the Annual Report on pages 20-33, which information is
incorporated herein by reference.
17
20
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk, primarily changes in interest rates.
The Company has entered into derivative transactions to hedge its exposure to
interest rate changes. The Company does not hold or issue derivative financial
instruments for trading purposes and does not enter into derivative transactions
that would be considered speculative positions.
The table below provides information about the Company's derivative
financial instruments and other financial instruments that are sensitive to
changes in interest rates, including interest rate swaps and debt obligations.
For debt obligations, the table presents principal cash flows and related
weighted average interest rates by expected maturity dates. For interest rate
swaps, the table presents notional amounts and weighted average rates by
contractual maturity dates.
MATURITY DATE
------------------------------------------------------------ FAIR
1999 2000 2001 2002 2003 THEREAFTER TOTAL VALUE(1)
------ ----- ----- ----- ----- ---------- ------ --------
(DOLLARS IN MILLIONS)
LIABILITIES
Long-term debt
Fixed rate................ $ 1.6 $ 1.9 $ 2.1 $37.9 $ 1.3 $56.6 $101.4 $ 97.8
Average interest
rate................. 7.5% 7.5% 7.5% 5.8% 7.1% 7.1% 6.6%
Variable rate............. $669.3 $ -- $ -- $ -- $ -- $ -- $669.3 $669.3
Average interest
rate(2).............. 6.2% -- -- -- -- -- 6.2%
INTEREST RATE SWAPS
Variable to Fixed......... $337.5 $ -- $ -- $39.1 $ -- $ -- $376.6 $ (3.6)
Average pay rate....... 6.2% -- -- 6.4% -- -- 6.2%
Average receive rate... 5.3% -- -- 5.3% -- -- 5.3%
- - ---------------
(1) The fair value of the fixed rate debt is based on the borrowing rates
currently available for debt instruments with similar terms and maturities.
The carrying value of variable rate long-term debt approximates fair value
due to their short maturities and interest terms. The fair value of the swap
agreements is based on the price the Company would have to pay to terminate
them.
(2) The average interest rates were based on December 31, 1998, variable rates.
Actual rates in future periods could vary.
The long-term debt consists of an unsecured credit arrangement (the "Promus
Facility"), mortgage indebtedness, and other unsecured notes payable. For a more
detailed discussion of the Promus Facility and the Company's other indebtedness,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Liquidity and Capital Resources -- Promus Facility and Other
Indebtedness" on page 30 and "Note 8 -- Notes Payable" on pages 44 and 45 of the
Annual Report, which information is incorporated herein by reference.
The interest rate swap agreements contain a credit risk to the Company that
the counterparties may be unable to meet the terms of the agreements. The
Company minimizes this risk by evaluating the creditworthiness of its
counterparties, which are limited to major banks and financial institutions.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial information required by Item 8 is included in the Annual
Report on pages 34-54, which pages are incorporated herein by reference, and in
the section labeled "Performance Statistics" on pages 10-12 in Part I hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable.
18
21
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
See the information regarding the directors of the Company set forth in the
Company's Proxy Statement dated March 29, 1999, relating to the 1999 Annual
Meeting of Shareholders (the "Proxy Statement") in the section entitled "Item
1 -- Election of Directors" on pages 6-8 thereof, which information is
incorporated herein by reference. See "Executive Officers" on pages 6-7 in Part
I hereof for information concerning the Company's executive officers.
ITEM 11. EXECUTIVE COMPENSATION
See the information set forth in the Proxy Statement in the section
entitled "How are directors compensated?" on page 10 thereof and the information
entitled "Executive Officer Compensation" on pages 12-21 thereof, which
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
See the information set forth in the Proxy Statement in the section
entitled "Stock Ownership" on pages 3-5 thereof, which information is
incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
See the information set forth in the Proxy Statement in the section
entitled "Certain Relationships and Related-Party Transactions" on page 11
thereof, which information is incorporated herein by reference.
19
22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
The financial statements required by Item 14(a)(1) are included in the
Annual Report on pages 34-54, which information is incorporated herein by
reference.
(a)(2) Financial Statement Schedules
Financial statement schedules for the fiscal years ended December 31, 1997
and 1998, are as follows:
Schedule II -- Consolidated Valuation and Qualifying Accounts
Schedules I, III, IV and V are omitted because they are not applicable.
(a)(3) Exhibits
The exhibits listed in the Exhibit Index below are filed as part of this
Report or are incorporated herein by reference.
(b) Reports on Form 8-K
The Company filed the following Current Reports on Form 8-K during the
fiscal quarter ended December 31, 1998.
DATE OF EVENT REPORTED SUBJECT
- - ---------------------- -------
December 3, 1998....................... Press release announcing the election of Norman P. Blake,
Jr., as Chairman of the Board, President and Chief
Executive Officer
December 15, 1998...................... Press release announcing the resignation of William L.
Perocchi as Executive Vice President and Chief Financial
Officer and the election of Dan L. Hale as Executive Vice
President and Chief Financial Officer
20
23
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
PROMUS HOTEL CORPORATION
By: NORMAN P. BLAKE, JR.
------------------------------------
Norman P. Blake, Jr.
Chairman of the Board
Date: March 29, 1999
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
NORMAN P. BLAKE, JR. Chairman of the Board, March 29, 1999
- - ----------------------------------------------------- President and Chief Executive
Norman P. Blake, Jr. Officer (principal executive
officer)
PRISCILLA FLORENCE Director March 29, 1999
- - -----------------------------------------------------
Priscilla Florence
DALE F. FREY Director March 29, 1999
- - -----------------------------------------------------
Dale F. Frey
ROBERT E. GREGORY Director March 29, 1999
- - -----------------------------------------------------
Robert E. Gregory
CHRISTOPHER W. HART Director March 29, 1999
- - -----------------------------------------------------
Christopher W. Hart
MICHAEL W. MICHELSON Director March 29, 1999
- - -----------------------------------------------------
Michael W. Michelson
JOHN H. MYERS Director March 29, 1999
- - -----------------------------------------------------
John H. Myers
C. WARREN NEEL Director March 29, 1999
- - -----------------------------------------------------
C. Warren Neel
MICHAEL I. ROTH Director March 29, 1999
- - -----------------------------------------------------
Michael I. Roth
JAY STEIN Director March 29, 1999
- - -----------------------------------------------------
Jay Stein
RONALD TERRY Director March 29, 1999
- - -----------------------------------------------------
Ronald Terry
21
24
SIGNATURE TITLE DATE
--------- ----- ----
PETER V. UEBERROTH Director March 29, 1999
- - -----------------------------------------------------
Peter V. Ueberroth
DAN L. HALE Executive Vice President and March 29, 1999
- - ----------------------------------------------------- Chief Financial Officer
Dan L. Hale (principal financial officer)
RICHARD L. TRUEBLOOD Senior Vice President, March 29, 1999
- - ----------------------------------------------------- Controller and Chief
Richard L. Trueblood Accounting Officer (principal
accounting officer)
22
25
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Promus Hotel Corporation:
We have audited in accordance with generally accepted auditing standards,
the financial statements included in the Promus Hotel Corporation 1998 annual
report to shareholders incorporated by reference in this Form 10-K, and have
issued our report thereon dated February 12, 1999. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole. The schedule
listed under Item 14(a)(2) is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audit of
the basic financial statements, and in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Memphis, Tennessee
February 12, 1999.
23
26
SCHEDULE II
PROMUS HOTEL CORPORATION
CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- - -------------------------------------------- ---------- ------------------- ---------- ---------
ADDITIONS
-------------------
CHARGED
BALANCE AT TO COSTS CHARGED BALANCE
BEGINNING AND TO OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
- - ----------- ---------- -------- -------- ---------- ---------
(IN THOUSANDS)
Fiscal Year Ended December 31, 1998
Allowance for doubtful accounts
Current................................ $ 1,600 $ 1,793 $ 0 $ 102(a) $ 3,291
======= ======== ======= ======= =======
Long-term.............................. $ 837 $ 121 $ 0 $ 0 $ 958
======= ======== ======= ======= =======
Business combination accruals
Merger costs........................... $65,789 $ 0 $ 0 $56,164(b) $ 9,625
Severance costs........................ $ 0 $ 28,065 $ 0 $ 0 $28,065
------- -------- ------- ------- -------
Total............................. $65,789 $ 28,065 $ 0 $56,164 $37,690
======= ======== ======= ======= =======
Fiscal Year Ended December 31, 1997
Allowance for doubtful accounts
Current................................ $ 1,558 $ 409 $ 0 $ 367(a) $ 1,600
======= ======== ======= ======= =======
Long-term.............................. $ 357 $ 480 $ 0 $ 0 $ 837
======= ======== ======= ======= =======
Business combination accruals
Merger costs........................... $ 0 $115,000 $ 0 $49,211(b) $65,789
======= ======== ======= ======= =======
- - ---------------
(a) Includes uncollectible accounts written off, net of amounts recovered, and
balances transferred to other accounts.
(b) Represents cash paid for accruals. None of the 1998 accrual was paid before
year-end 1998.
24
27
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
3.1 -- Restated Certificate of Incorporation of Promus Hotel
Corporation [incorporated by reference from Registration
Statement on Form S-4 (File No. 333-40253) filed on November
11, 1997].
3.2 -- Amended and Restated Bylaws of Promus Hotel Corporation
dated as of December 3, 1998.*
4.1 -- Rights Agreement dated as of December 17, 1997, between
Promus Hotel Corporation and First Union National Bank
[incorporated by reference from Form 8-A (File No. 1-13719)
filed on December 17, 1997], as amended by First Amendment
to Rights Agreement dated as of October 23, 1998, between
the parties*.
4.2 -- Registration Rights Agreement dated as of December 19, 1997,
among Promus Hotel Corporation and certain shareholders
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.1 -- Agreement and Plan of Merger dated as of September 1, 1997,
among Doubletree Corporation, Promus Hotel Corporation, and
Parent Holding Corp. [incorporated by reference from Current
Report on Form 8-K for event dated September 1, 1997 (File
No. 1-11463)], as amended by Amendment Agreement dated as of
October 1, 1997, between Doubletree Acquisition Corp. and
Promus Acquisition Corp. [incorporated by reference from
Registration Statement on Form S-4 (File No. 333-40253)
filed on November 11, 1997], and resolutions adopted by
Board of Directors of Promus Hotel Corporation on July
30-31, 1998, and effective as of December 3, 1998*.
10.2 -- Guarantee Agreement dated as of February 5, 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 by reference from
Quarterly Report on Form 10-Q for fiscal quarter ended March
31, 1996 (File No. 1-11463].
10.3 -- Lease dated as of August 1, 1995, between RLH Partnership,
L.P., and Red Lion Hotels, Inc. [incorporated by reference
from Current Report on Form 8-K for event dated November 15,
1996 (File No. 0-24392)], as amended by First Amendment to
Lease dated as of November 8, 1996, between the parties*,
Second Amendment to Lease dated as of September 15, 1998,
between the parties*, and Third Amendment to Lease dated as
of February 26, 1999, between the parties*.
10.4 -- Guaranty of Lease Obligations dated as of September 15,
1998, among Promus Hotels, Inc., Red Lion Hotels, Inc., and
RLH Partnership, L.P.*
10.5 -- Guaranty Agreement dated as of November 13, 1998, between
Doubletree Corporation and GMAC Commercial Mortgage
Corporation, and joined by Promus Hotel Corporation.*
10.6 -- Tranche A Credit Agreement dated as of December 19, 1997,
among Doubletree Corporation and Promus Hotels, Inc., as
borrowers; Promus Hotel Corporation and Promus Operating
Company, Inc., as guarantors; the Lenders; Bankers Trust
Company, The Bank of Nova Scotia, and Canadian Imperial Bank
of Commerce, as co-syndication agents; and NationsBank,
N.A., as agent [incorporated by reference from Annual Report
on Form 10-K for fiscal year ended December 31, 1997 (File
No. 1-13719)].
10.7 -- Tranche B Credit Agreement dated as of December 19, 1997,
among Doubletree Corporation and Promus Hotels, Inc., as
borrowers; Promus Hotel Corporation and Promus Operating
Company, Inc., as guarantors; the Lenders; Bankers Trust
Company, The Bank of Nova Scotia, and Canadian Imperial Bank
of Commerce, as co-syndication agents; and NationsBank,
N.A., as agent [incorporated by reference from Annual Report
on Form 10-K for fiscal year ended December 31, 1997 (File
No. 1-13719)]; as amended by First Amendment to Tranche B
Credit Agreement dated as of December 18, 1998, among the
parties*.
10.8+ -- Employment Agreement dated as of December 3, 1998, between
Promus Hotel Corporation and Norman P. Blake, Jr.*
25
28
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
10.9+ -- Employment Agreement dated as of December 19, 1997, between
Promus Hotel Corporation and Raymond E. Schultz
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.10+ -- Employment Agreement dated as of December 19, 1997, between
Promus Hotel Corporation and Richard M. Kelleher
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.11+ -- Employment Agreement dated as of December 19, 1997, between
Promus Hotel Corporation and William L. Perocchi
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.12+ -- Employment Agreement dated as of December 19, 1997, between
Promus Hotel Corporation and Thomas L. Keltner [incorporated
by reference from Registration Statement on Form S-4 (File
No. 333-40253) filed on November 11, 1997].
10.13+ -- Severance Agreement dated as of January 13, 1999, between
Promus Hotel Corporation and Norman P. Blake, Jr.*
10.14+ -- Merger Severance Agreement dated as of September 1, 1997,
between Promus Hotel Corporation and Raymond E. Schultz
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.15+ -- Severance Agreement dated as of December 17, 1997, between
Doubletree Corporation and Richard M. Kelleher [incorporated
by reference from Registration Statement on Form S-4 (File
No. 333-40253) filed on November 11, 1997].
10.16+ -- Severance Agreement dated as of December 17, 1997, between
Doubletree Corporation and William L. Perocchi [incorporated
by reference from Registration Statement on Form S-4 (File
No. 333-40253) filed on November 11, 1997].
10.17+ -- Merger Severance Agreement dated as of September 1, 1997,
between Promus Hotel Corporation and Thomas L. Keltner
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.18+ -- Severance Agreement dated as of September 15, 1997, between
Doubletree Corporation and Thomas W. Storey.*
10.19+ -- Severance Agreement dated as of September 15, 1997, between
Doubletree Corporation and Margaret Ann Rhoades.*
10.20+ -- Merger Severance Agreement dated as of September 1, 1997,
between Promus Hotel Corporation and James T. Harvey.*
10.21+ -- Merger Severance Agreement dated as of September 1, 1997,
between Promus Hotel Corporation and Stevan D. Porter.*
10.22+ -- Short-Term Retention Agreement dated as of March 15, 1999,
between Promus Hotel Corporation and Thomas L. Keltner.*
10.23+ -- Long-Term Retention Agreement dated as of March 15, 1999,
between Promus Hotel Corporation and Thomas L. Keltner.*
10.24+ -- Short-Term Retention Agreement dated as of March 5, 1999,
between Promus Hotel Corporation and Thomas W. Storey.*
10.25+ -- Long-Term Retention Agreement dated as of March 5, 1999,
between Promus Hotel Corporation and Thomas W. Storey.*
10.26+ -- Consulting Agreement dated as of January 1, 1999, between
Promus Hotel Corporation and Peter V. Ueberroth.*
10.27+ -- Promus Hotel Corporation Executive Deferred Compensation
Plan amended and restated on February 26, 1997.*
26
29
EXHIBIT
NUMBER DESCRIPTION
- - ------- -----------
10.28+ -- 1997 Equity Participation Plan of Promus Hotel Corporation
[incorporated by reference from Registration Statement on
Form S-4 (File No. 333-40253) filed on November 11, 1997].
10.29+ -- Doubletree Hotels Corporation Supplemental Executive
Retirement Plan dated as of February 15, 1997, as amended by
letter from Richard J. Ferris to Richard M. Kelleher and
William L. Perocchi dated December 9, 1997.*
10.30+ -- Promus Hotel Corporation Key Executive Officer Annual
Incentive Plan [incorporated by reference from Proxy
Statement dated April 25, 1995 (File No. 1-10410)].
10.31+ -- Form of Indemnification Agreement between Promus Hotel
Corporation and its directors and officers [incorporated by
reference from Registration Statement on Form S-4 (File No.
333-40253) filed on November 11, 1997].
11 -- Computation of Per Share Earnings*
13 -- 1998 Annual Report to Shareholders*
21 -- Subsidiaries of Promus Hotel Corporation*
23 -- Consent of Arthur Andersen LLP*
27 -- Financial Data Schedule -- Year ended December 31, 1998*
- - ---------------
* The indicated exhibit is filed herewith.
+ Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this form pursuant to Item 14(a)(3) of Form 10-K.
27