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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, 1994
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 February 28, 1995 New York Stock Exchange closing price of
$70.25 per share, the aggregate market value of Registrant's outstanding Common
Stock held by non-affiliates of the Registrant was approximately $2.3 billion.
On that date, there were 48,146,691 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, 1994 are incorporated by reference under Parts I
and II. Certain portions of Registrant's definitive proxy statement, to be filed
with the Securities and Exchange Commission pursuant to Regulation 14A not later
than 120 days after the close of the Registrant's fiscal year, are incorporated
by reference under Part III.
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PART I
ITEM 1. BUSINESS
GENERAL INFORMATION
CURRENT OPERATIONS
Hilton Hotels Corporation and its majority and wholly-owned subsidiaries
are collectively referred to as "Hilton" or the "Company," unless the context
indicates otherwise. The Company is primarily engaged in the ownership and
management of hotels and hotel-casinos. All of these properties are located in
the United States, with the exception of four hotels and two hotel-casinos
operated by the Company's wholly-owned subsidiary, Conrad International Hotels
Corporation and its subsidiaries ("Conrad").
On February 1, 1995, Hilton owned or leased and operated 23 hotels and
managed 40 hotels partially or wholly-owned by others. In addition, 160 hotels
were operated under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names
by others pursuant to franchises granted by a subsidiary of Hilton.
Seven of the hotels have substantial gaming operations, five of which are
wholly-owned by the Company and are located in Nevada and the other two hotels
are partially owned by the Company and are located in Australia and Turkey. The
Company also partially owns and manages one river casino in the United States
and owns a minority interest in a company which operates one casino in Canada.
The Company's gaming operations accounted for approximately 70%, 71% and 57% of
its total operating income in 1992, 1993 and 1994, respectively. For additional
information, see the Ten Year Summary on pages 56 and 57 in the Company's Annual
Report to Stockholders for the fiscal year ended December 31, 1994 (the "1994
Stockholders Report"), which report is included as Exhibit 13 hereto and, to the
extent specific references are made thereto, incorporated herein by such
references.
The Company, and other entities in which the Company has an investment, are
also engaged in various other activities incidental or related to the operation
of hotels and hotel-casinos. See "Additional Information."
Hilton was organized in the State of Delaware on May 29, 1946. Its
principal executive offices are located at 9336 Civic Center Drive, Beverly
Hills, California 90210, and its telephone number is (310) 278-4321.
RECENT DEVELOPMENTS
Since January 1, 1994, the Company took advantage of various opportunities
to expand its business, the most significant of which included the opening of a
river casino in New Orleans, Louisiana; the opening by Conrad and its partners
of a casino in Windsor, Ontario, Canada; the management of the Millenium Hilton
in New York, New York; the purchase of an additional equity interest in the New
Orleans Hilton Riverside; the opening of a new vacation ownership resort in Las
Vegas, Nevada; and the completion of three new "Sky Villa" luxury suites at the
Las Vegas Hilton. The Company has also engaged the investment banking firm of
Smith Barney Inc. to study strategic alternatives to enhance shareholder value.
In February 1994, the Company commenced operation of a river casino located
adjacent to the New Orleans Hilton Riverside. The initial 1,500 passenger vessel
had a 20,000 square foot casino and was wholly-owned by the Company. This
interim riverboat was leased to a joint venture, of which the Company owns a 50%
interest. In November 1994, the interim riverboat was replaced by the "Flamingo
Casino New Orleans," a permanent vessel owned by the joint venture featuring a
30,000 square foot casino and accommodating 2,400 passengers.
In May 1994, Conrad and the other two shareholders of Windsor Casino
Limited ("WCL") commenced operation of the Casino Windsor, an interim 50,000
square foot casino in Windsor, Ontario, Canada. Hilton, through Conrad, owns a
33.3% interest in WCL, which operates this project for the Ontario provincial
government. The Windsor project will open on a permanent basis in early 1997
with a hotel of at least 300 rooms, a 75,000 square foot casino, entertainment
and meeting facilities.
In June 1994, Hilton became the manager of the 561-room Millenium Hilton in
New York, New York. Also in June 1994, the Company purchased an additional 20.6%
ownership interest in the New Orleans Hilton Riverside, increasing the Company's
ownership interest in the hotel to 67.4%.
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In January 1995, the Company, through its 50% owned Hilton Grand Vacations
Company, commenced operation of a 200-unit vacation ownership resort adjacent to
the Flamingo Hilton-Las Vegas. Hilton Grand Vacations Company also anticipates
completion in summer 1995 of the first phase of a 360-unit vacation ownership
resort adjacent to Sea World in Orlando, Florida.
In early 1995, the Company completed construction of three new 12,600 to
15,400 square foot "Sky Villa" luxury suites for premium players at the Las
Vegas Hilton.
In addition, in November 1994, the Company engaged the investment banking
firm of Smith Barney Inc. to undertake a study and make recommendations to the
Company's management and Board of Directors for strategic alternatives to
enhance shareholder value. These alternatives may include the sale of the entire
Company in one or a series of transactions; spin-off of one or more of the
Company's businesses; recapitalization; business combination; share repurchase
program; or similar transaction.
The Company has also continued its ongoing program of monitoring and
improving its franchise operations. The Company added four franchises to its
system in 1994, while 13 franchise arrangements were terminated, many due to
noncompliance with the Company's standards.
For a description of the Company's planned expansion activities, see "Hotel
Operations -- Expansion Program" and "Gaming Operations -- Expansion Program"
below.
INDUSTRY SEGMENTS
Hilton's revenues and income are derived primarily from two sources: (i)
hotel operations, which include the operation of Hilton's owned or leased
hotels, management and franchise fees and operating income from unconsolidated
affiliates and (ii) gaming operations, which include the operation of Hilton's
owned hotel-casinos and management fees and operating income from partially
owned hotel-casinos and river casinos. For financial data relating to the
Company's hotel and gaming operations for the three years ended December 31,
1994, see "Segments of Business" in the Notes to the Company's Consolidated
Financial Statements on pages 53 and 54 in the 1994 Stockholders Report.
The Company re-entered the international arena in November 1985, with the
opening of a hotel-casino in Queensland, Australia and, thereafter, the opening
of additional managed (and in some cases, partially owned) hotel properties in
England, Ireland, Hong Kong, Turkey and Belgium. To date, the amounts of
revenues, operating profits and identifiable assets attributable to geographic
areas, other than the United States, have not been material.
HOTEL OPERATIONS
OWNED HOTELS
On February 1, 1995, the following hotels were owned in fee and operated by
Hilton:
NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1995
----------------- ------------ --------- -----------------
Atlanta Airport Hilton 503
Atlanta, Georgia(1) (1989) 1960 $50,000,000
Palmer House Hilton 1,639
Chicago, Illinois(2) (1925; 1945) 1988 --
Flamingo Hilton-Las Vegas 3,284
Las Vegas, Nevada (various dates 1971 --
through 1994)
Las Vegas Hilton 3,174
Las Vegas, Nevada (various dates 1971 --
through 1981)
Flamingo Hilton-Laughlin 2,000
Laughlin, Nevada (1990) 1990 --
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NUMBER OF MORTGAGE
ROOMS/SUITES YEAR INDEBTEDNESS
(YEAR OF ACQUIRED AS OF FEBRUARY 1,
NAME AND LOCATION COMPLETION) BY HILTON 1995
----------------- ------------ --------- -----------------
New Orleans Airport Hilton 312
New Orleans, Louisiana(1) (1989) 1959 $32,000,000
Waldorf-Astoria 1,380
New York, New York(3) (1931) 1977 --
Portland Hilton 455
Portland, Oregon (1963) 1963 --
Flamingo Hilton-Reno 604
Reno, Nevada(4) (1978) 1981 --
Reno Hilton 2,001
Reno, Nevada (1978) 1992 --
Hilton Garden Inn 195
Southfield, Michigan(5) (1988) 1993 --
Hilton Suites 224
Auburn Hills, Michigan (1991) 1991 --
Hilton Suites 203
Brentwood, Tennessee (1989) 1989 --
Hilton Suites 230
Orange, California (1989) 1989 --
Hilton Suites 226
Phoenix, Arizona (1990) 1990 --
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(1) The Atlanta Airport Hilton and the New Orleans Airport Hilton were closed
and demolished in 1986 and, thereafter, rebuilt and reopened in 1989.
(2) The Company owned the Palmer House Hilton from May 1946 to December 1962
and, thereafter, operated the Palmer House Hilton under a lease until
acquiring the property in February 1988.
(3) The Company operated the Waldorf-Astoria under a lease from February 1950
until acquiring the property in April 1977.
(4) An extension of the casino operation is contained in a structure located on
an adjacent block with a skywalk connecting it to the main building. This
structure is held under four long-term leases or subleases, expiring on
various dates from January 1, 2001 to August 31, 2034, including renewal
options, all of which may not necessarily be exercised.
(5) The Company managed the Hilton Garden Inn from July 1991 until acquiring the
property in July 1993.
LEASED HOTELS
Hilton leases the land upon which eight hotels have been built. Upon the
expiration of such leases, the buildings and other leasehold improvements
presently owned by Hilton revert to the landlords. See "Leases" in the Notes to
the Company's Consolidated Financial Statements on page 54 in the 1994
Stockholders Report. Hilton, in all cases, owns all furniture and equipment, is
responsible for repairs, maintenance, operating expenses and lease rentals, and
retains complete managerial discretion over operations. Generally, Hilton pays a
percentage rental based on the gross revenues of the facility, but in some
instances the rental is a fixed amount.
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On February 1, 1995, the following hotels were leased and operated by
Hilton:
NUMBER OF
ROOMS (YEAR OF
INITIAL COMPLETION;
YEAR ACQUIRED
NAME AND LOCATION BY HILTON) EXPIRATION DATE
----------------- ------------------- ---------------
Logan Airport Hilton 516 2014, with renewal options aggregating 25
Boston, Massachusetts(1) (1959; 1988) years under specified circumstances
O'Hare Hilton 858 2018
Chicago, Illinois(2) (1973; 1991)
Oakland Airport Hilton 363 2033
Oakland, California (1970; 1970)
Pittsburgh Hilton & Towers 712 2004, with renewal options aggregating 30
Pittsburgh, Pennsylvania (1959; 1959) years
San Diego Hilton Beach 354 2019
& Tennis Resort (1962; 1965)
San Diego, California
San Francisco Airport Hilton 527 1998
San Francisco, California (1959; 1959)
Seattle Airport Hilton 173 2004, with renewal options aggregating 30
Seattle, Washington (1961; 1961) years
Tarrytown Hilton 236 2003, with renewal options aggregating 40
Tarrytown, New York(3) (1961; 1993) years
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(1) The Company managed and was a joint venture partner with respect to the
Logan Airport Hilton from 1975 until July 1988, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
(2) The Company managed the O'Hare Hilton from 1974 until October 1991, when the
Company purchased the then remaining leasehold of the hotel. The O'Hare
Hilton was closed for renovation in October 1991 and reopened in July 1992.
(3) The Company managed and was a joint venture partner with respect to the
Tarrytown Hilton from 1975 until August 1993, when it acquired the
remaining equity interest in the joint venture leasing the land underlying
the hotel.
During the three years ended December 31, 1994, Hilton paid aggregate
rentals, including rentals attributable to the properties listed in the above
table, of $9,500,000, $11,300,000 and $13,300,000, respectively. For information
relating to minimum rental commitments in the future, see "Leases" in the Notes
to the Company's Consolidated Financial Statements on page 54 in the 1994
Stockholders Report.
MANAGED HOTELS
On February 1, 1995, Hilton operated 34 domestic hotels and six
international hotels under management agreements. Under its standard management
arrangement, Hilton operates a hotel for the benefit of its owner, which either
owns or leases the hotel and the associated personal property. Hilton's
management fee is generally based on a percentage of each hotel's gross revenues
plus, in the majority of properties, an incentive fee based on operating
performance.
Under the management agreements, all operating and other expenses are paid
by the owner, and Hilton is generally reimbursed for its out-of-pocket expenses.
In turn, Hilton's managerial discretion is subject to approval by the owner in
certain major areas, including adoption of capital budgets. In some cases, the
owner of a managed hotel is a joint venture in which Hilton has an equity
interest. In addition, the Company has a right of first refusal to purchase an
interest in certain managed hotels. For information relating to Hilton's
investment in entities that own managed properties, see "Investments" in the
Notes to the Company's Consolidated Financial Statements on pages 45, 46 and 47
in the 1994 Stockholders Report.
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The Company has also agreed to provide loans or additional investments to
the owners of certain managed hotels under specified circumstances. See
"Commitments and Contingent Liabilities" in the Notes to the Company's
Consolidated Financial Statements on pages 54 and 55 in the 1994 Stockholders
Report.
On February 1, 1995, the following hotels were operated by Hilton under
management agreements:
NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
------------------ ---------------------- ---------------
DOMESTIC
Anaheim Hilton & Towers 1,576 2014, with renewal options
Anaheim, California(1) (1984) aggregating 30 years, subject to
certain termination rights
Anchorage Hilton 591 2006, with renewal options
Anchorage, Alaska (various dates aggregating 20 years
through 1986)
Atlanta Hilton & Towers 1,224 2006, with a renewal option for 10
Atlanta, Georgia (1976) years
Beverly Hilton 581 2007, with renewal options
Beverly Hills, California (1955; 1967) aggregating 20 years, subject to
certain termination rights
Chicago Hilton & Towers 1,543 2005, with renewal options
Chicago, Illinois(2) (various dates aggregating 20 years
through 1986)
Brunswick Hilton 405 2013, subject to certain termination
East Brunswick, New Jersey(1) (1989) rights
Hilton Hawaiian Village 2,542 1997, with renewal options
Honolulu, Hawaii(3) (various dates aggregating 20 years
through 1988)
Long Beach Hilton 393 2012, with renewal options
Long Beach, California (1992) aggregating 20 years, subject to
certain termination rights
Los Angeles Airport Hilton & Towers 1,234 1999, with renewal options
Los Angeles, California (1983) aggregating 10 years, subject to
certain termination rights
McLean Hilton 458 2007, with renewal options
McLean, Virginia(2) (1987) aggregating 20 years
Fontainebleau Hilton Resort & Spa 1,206 1998, with a renewal option for 10
Miami, Florida (1954) years, subject to certain
termination rights
Miami Airport Hilton & Marina 500 2004, with renewal options
Miami, Florida(2) (1983) aggregating 20 years
Minneapolis Hilton & Towers 814 2012, with renewal options
Minneapolis, Minnesota (1992) aggregating 20 years, subject to
certain termination rights
Newark Airport Hilton 374 2003
Newark, New Jersey(1) (1988)
New Orleans Hilton Riverside 1,600 2007, with a renewal option for 10
& Towers (1977; 1983) years
New Orleans, Louisiana(4)
Millenium Hilton 561 2004, with a renewal option for 10
New York, New York (1992) years, subject to certain
termination rights
New York Hilton & Towers 2,041 1995
New York, New York(3) (1963)
Turtle Bay Hilton & Country Club 485 2004, with a renewal option for 10
Oahu, Hawaii (1972) years
Hilton at Walt Disney World 814 2003, with renewal options
Orlando, Florida(1) (1983) aggregating 20 years, subject to
certain termination rights
Pasadena Hilton 291 2004, with a renewal option for 10
Pasadena, California (1970) years, subject to certain
termination rights
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NUMBER OF ROOMS/SUITES
NAME AND LOCATION (YEAR OF COMPLETION) EXPIRATION DATE
----------------- ---------------------- ---------------
The Pointe Hilton on South Mountain 636 2012, with renewal options
Phoenix, Arizona (1986) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Squaw Peak 563 2012, with renewal options
Phoenix, Arizona (1977) aggregating 20 years, subject to
certain termination rights
The Pointe Hilton at Tapatio Cliffs 585 2012, with renewal options
Phoenix, Arizona (1982) aggregating 20 years, subject to
certain termination rights
Rye Town Hilton 438 1995
Rye Brook, New York(3) (1973; 1978)
Hilton Palacio del Rio 481 1998, with a renewal option for 10
San Antonio, Texas (1968) years
San Antonio Airport Hilton 387 2001, subject to certain termination
San Antonio, Texas(1) (1982) rights
San Francisco Hilton & Towers 1,895 2005, with a renewal option for 10
San Francisco, California(3) (various dates years
through 1988)
Hilton at Short Hills 300 2007, with renewal options
Short Hills, New Jersey (1988) aggregating 20 years, subject to
certain termination rights
Innisbrook Hilton Resort 857 2013, subject to certain termination
Tarpon Springs, Florida(1) (1972) rights
Hilton Waikoloa Village 1,241 2013, subject to certain termination
Waikoloa, Hawaii(2) (1988) rights
Capital Hilton 543 2005, with a renewal option for 10
Washington, D.C.(3) (1943; 1985) years
Washington Hilton & Towers 1,123 1995
Washington, D.C.(3) (1965)
Hilton Suites 212 2009, with renewal options
Oakbrook Terrace, Illinois(1)(3) (1989) aggregating 20 years
Hilton Garden Inn 152 2012, subject to certain termination
Valencia, California(2) (1991) rights
INTERNATIONAL
Conrad Brussels 269 2013, with renewal options
Brussels, Belgium (1993) aggregating 20 years
Conrad Dublin 191 2010, with renewal options
Dublin, Ireland(1)(2) (1989) aggregating 20 years
Conrad Hong Kong 513 2021
Hong Kong(2) (1990)
Conrad Istanbul 620 2011, with a renewal option for 20
Istanbul, Turkey(1)(2) (1992) years
Conrad London 159 2016, with renewal options
London, England (1990) aggregating 20 years
Hotel Conrad & Jupiters Casino 605 2001
Gold Coast, (1986)
Queensland, Australia(2)
------------------
(1) Hilton has made loans to the owners of each of the referenced properties.
(2) Hilton has equity interests of less than 50% in joint ventures which own
each of the referenced properties. See "Investments" in the Notes to the
Company's Consolidated Financial Statements on pages 45, 46 and 47 in the
1994 Stockholders Report.
(3) Hilton has equity interests of 50% in joint ventures which own each of the
referenced properties. See note 2 above.
(4) Hilton has a 67.4% equity interest in the joint venture which owns the New
Orleans Hilton Riverside. See note 2 above.
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FRANCHISE HOTELS
Pursuant to franchises granted by the Company, franchise hotels are
operated under the "Hilton," "Hilton Garden Inn" or "Hilton Suites" names. The
franchise hotels operated under the "Hilton" name are generally smaller than the
full service hotels owned, leased or managed by Hilton and average approximately
250 rooms in size. Franchise hotels bearing the "Hilton Garden Inn" name are
approximately 150 to 200 rooms in size and utilize a modular design constructed
around a courtyard containing an indoor or outdoor swimming pool. The "Hilton
Suites" properties operated pursuant to franchise agreements utilize an
all-suites design with approximately 200 to 250 suites. In each instance, Hilton
approves the plan for and the location of franchise hotels and assists in their
design.
On February 1, 1995, there were 160 franchise hotels operated by others
under the "Hilton," "Hilton Garden Inn" and "Hilton Suites" names. In general,
each franchisee pays Hilton an initial fee based on the number of rooms in a
franchise hotel and a continuing fee based on a percentage of the facility's
room revenues. Although Hilton does not directly participate in the management
or operation of franchise hotels, it conducts periodic inspections to ensure
that Hilton's standards are maintained and renders advice with respect to hotel
operations.
EXPANSION PROGRAM
Hilton has taken a reasoned approach to developing new domestic hotel
properties due to prior overbuilding in the hotel industry. At present, there
are no Company owned domestic hotels under construction. Hilton intends to
expand its operation of hotels primarily through conversion of existing hotels
into management and franchise properties in strategically significant markets.
The Company will invest in new domestic hotel projects or conversion properties
where the return on investment meets the Company's criteria.
The Company is actively exploring international hotel opportunities, with
particular emphasis on city center business hotels and resort hotels. These
international properties will generally be operated under the Conrad name
pursuant to long-term management agreements. In certain instances, the Company
may invest in or make advances to the entity that owns a hotel. The Company has
entered into management contracts to operate the following new hotels in the
Pacific Rim, the anticipated opening dates of which are indicated
parenthetically: the 700-room Conrad Jakarta in Indonesia (1998) and the
400-room Conrad Bangkok in Thailand (1999).
Negotiations relating to the management of other international hotels are
in varying stages and, in certain instances, letters of intent for management
contracts have been executed. However, no assurances can be given that
management contracts for such other hotels will be executed or that such other
hotels will be constructed and, thereafter, operated by the Company.
The operation of hotels internationally is affected by the political and
economic conditions of the countries and regions in which they are located, in
addition to factors affecting the hotel industry generally. Certain countries
have also restricted, from time to time, the repatriation of funds. The Company
considers the foregoing factors, among others, when evaluating a management
and/or investment opportunity abroad, but the Company can give no assurances
that changes in law or governmental policy will not adversely affect
international operations in the future.
TERRITORIAL RESTRICTIONS
Hilton has entered into various agreements which restrict its right to
operate hotels in various areas, including those hereinafter described which, in
management's opinion, represent the most significant restrictions to which the
Company is subject. In addition, pursuant to an agreement entered into at the
time of Hilton's distribution on December 1, 1964 to its stockholders of all the
issued and outstanding capital stock of Hilton International Co., as
subsequently amended, Hilton may not operate facilities outside the United
States identified as "Hilton" hotels and Hilton International Co. may not
operate facilities within the continental United States identified as "Hilton"
hotels. The Company's international hotel and hotel-casino operations are
conducted under the Conrad name. See "Hotel Operations," "Gaming
Operations -- International Hotel-
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Casinos" and Item 3 below. Subject to the foregoing restrictions as to the use
of the "Hilton" name, Hilton and Hilton International Co. can compete in all,
and do compete in certain, markets. The Compass computerized reservation system
utilized by Hilton and Hilton International Co. provides information as to their
respective hotels, if any, in each market. See "Additional
Information -- Computer Systems" and "Reservation System."
The Company has entered into agreements with The Prudential Insurance
Company of America ("Prudential") which provide (a) that, except for the New
York Hilton & Towers and the Waldorf-Astoria (or the ownership, operation and
management of a substitute hotel having substantially the same number of rooms)
and a hotel with not more than 1,600 rooms, the Company would not own, operate,
manage or otherwise have an interest in any hotel or similar establishment in
the Borough of Manhattan, (b) that, except for the Washington Hilton & Towers
and the Capital Hilton (or the ownership, operation and management of substitute
hotels having substantially the same number of rooms), the Company would not
own, operate, manage or otherwise have an interest in any other hotel or similar
establishment in the District of Columbia, (c) that the Company would not own,
operate, manage or otherwise have an interest in any additional hotels or
similar establishments within a radius of 20 miles of the Rye Town Hilton,
except that certain areas within said 20 mile radius have been excluded from the
territorial restriction, and (d) that, except for the Chicago Hilton & Towers,
the Palmer House Hilton, the O'Hare Hilton and specified other properties, the
Company would not manage or operate, or possess an ownership interest in, or
license or franchise, any hotel in Chicago, except the ownership and/or
management of a hotel with less than 800 rooms at the O'Hare International
Airport and a hotel with not more than 400 rooms at any other location in
Chicago.
PROPERTY TRANSACTIONS
In 1994, the Company recorded a $1,100,000 pretax gain from property
transactions as a result of the sale of land to Hilton Grand Vacations Company
for its vacation ownership project located adjacent to the Flamingo Hilton-Las
Vegas. See "Additional Information -- Vacation Ownership."
Hilton continuously evaluates its property portfolio and intends to dispose
of its interests in hotels or properties that, in its opinion, no longer yield
an adequate return on investment or conform to Hilton's long range plans. In so
doing, the Company expects to maintain a balanced mix of sources of revenues and
a favorable return on stockholders' equity.
FOREIGN CURRENCY TRANSACTIONS
In 1994, the Company recorded a $700,000 loss from foreign currency
transactions due to transaction losses and exchange adjustments arising from the
remeasurement of the Company's operations in highly inflationary economies.
International operations are subject to certain economic and political risks,
including foreign currency fluctuations. The Company monitors its foreign
operations and, where appropriate, adopts hedging strategies to minimize the
impact of changing economic and political environments. See "Financial
Instruments" in the Notes to the Company's Consolidated Financial Statements on
pages 48 and 49 in the 1994 Stockholders Report.
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GAMING OPERATIONS
NEVADA HOTEL-CASINOS
The Company owns and operates five hotel-casinos in the State of Nevada:
the 3,174-room Las Vegas Hilton, the 3,284-room Flamingo Hilton-Las Vegas, the
2,000-room Flamingo Hilton-Laughlin, the 2,001-room Reno Hilton and the 604-room
Flamingo Hilton-Reno.
The Las Vegas Hilton is located adjacent to the Las Vegas Convention Center
and focuses on up-scale individual leisure guests and convention groups. The
Flamingo Hilton-Las Vegas, the Reno Hilton and the Flamingo Hilton-Reno focus
primarily on the middle market, in particular the group tour and travel segment.
The Flamingo Hilton-Laughlin targets the budget and middle market segments. Each
of the Company's hotel-casinos has gaming, convention, dining, shopping,
entertainment and, with the exception of the Flamingo Hilton-Reno, indoor and
outdoor recreational facilities. A variety of popular entertainment is featured
in theaters and lounges at each hotel. The Company also operates a vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas. See "Additional
Information -- Vacation Ownership."
The Company continues to refurbish and expand existing facilities in Nevada
to maintain their presence as premier properties in the market. In 1994, the Las
Vegas Hilton completed construction of two new 13,200 and 12,600 square foot
"Sky Villa" luxury suites for premium players. The Las Vegas Hilton also
converted its casino lounge into a 450-seat nightclub and completed an exterior
remodeling and landscaping project. The Flamingo Hilton-Las Vegas completed
construction of 250 rooms of a new 600-room tower and new public space and
parking. The Flamingo Hilton-Laughlin added new casino signage and replaced 500
slot machines with new equipment. At the Reno Hilton, the Company completed
renovation of the race and sports book, as well as convention, entertainment and
public areas. The Flamingo Hilton-Reno completed remodeling of the buffet and
coffee shop, relocated the keno pit, built a new sports bar at the race and
sports book and renovated public areas.
The space utilized by the Company's casinos in Nevada, in terms of
approximate square footage, is as follows: Las Vegas Hilton -- 78,000 square
feet (inclusive of 29,000 square feet attributable to the race and sports book);
Flamingo Hilton-Las Vegas -- 64,000 square feet (inclusive of 20,000 square feet
attributable to O'Sheas Irish theme casino adjacent to the hotel); Flamingo
Hilton-Laughlin -- 58,000 square feet (inclusive of 3,000 square feet
attributable to the race and sports book); Reno Hilton -- 118,000 square feet
(inclusive of 12,000 square feet attributable to the race and sports book); and
Flamingo Hilton-Reno -- 46,000 square feet (inclusive of 2,500 square feet
attributable to the race and sports book).
Each of the hotel-casinos is open 24 hours a day, seven days a week, for
gaming activities. Games operated in these casinos include "21," craps,
roulette, big "6," baccarat, poker, keno and slot and other coin machines. The
Las Vegas Hilton's race and sports book is tied in by satellite or modem to the
casinos at the Flamingo Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno
Hilton and the Flamingo Hilton-Reno.
It is impracticable for Hilton's hotel-casinos to record the total amount
bet in the casinos, although the amount of chips issued for cash and credit is
determined regularly. The amount of gaming activity varies significantly from
time to time primarily due to general economic conditions, popularity of
entertainment in the hotels, and occupancy rates in the hotels and in the Las
Vegas, Laughlin and Reno markets. The amount of revenues from gaming operations
varies depending upon the amount of gaming activity as well as variations in the
odds for different games and the factor of chance. Casino activities are
conducted by experienced personnel who are supervised at all times.
As in the case of any business extensively involved in the handling of
cash, gaming operations at the Company's hotel-casinos are subject to risk of
substantial loss as a result of dishonesty. However, the Company believes that
it has reduced such risk, by means of procedures for supervision of employees
and other controls, to the fullest extent practicable without impediment to play
and within the limits of reasonable costs. Substantially all table games and
slot machines can be monitored by remote control television and substantially
all slot machines at all five Nevada properties are monitored by computers.
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The Las Vegas Hilton and, to a lesser extent, the Flamingo Hilton-Las
Vegas, the Flamingo Hilton-Reno and the Reno Hilton invite V.I.P. customers to
their casinos and may pay for or reimburse the cost of their air transportation
and provide them with complimentary rooms, food and beverage. In addition, the
Las Vegas Hilton, the Flamingo Hilton-Reno and the Reno Hilton have instituted
special flight programs, pursuant to which free air transportation on Company
owned or chartered aircraft and complimentary rooms, food and beverage are
provided to groups or selected persons. These persons either have established
casino credit limits or cash on deposit in the casinos and have previously
evidenced a willingness to put substantial amounts at risk at the casinos. The
special flight programs are sometimes referred to as junkets. The Las Vegas
Hilton, the Flamingo Hilton-Reno and the Reno Hilton hosted 9, 0 and 27 special
flight programs in 1994, compared to 22, 34 and 17 such programs in 1993,
respectively.
Revenues from the Company's casinos are accounted for in accordance with
applicable laws and rules and regulations of the State of Nevada and its
agencies. As is customary in the Nevada gaming industry, activities are
conducted on a credit as well as a cash basis, in accordance with procedures
established and supervised by management. Fluctuations in collecting casino
receivables could have a material effect on results of operations of these
properties. An allowance is provided for estimated uncollectible casino
receivables. Casino receivables aggregated $47,000,000, subject to a $14,400,000
(approximately 31%) reserve, at December 31, 1992; $47,900,000, subject to a
$7,600,000 (approximately 16%) reserve, at December 31, 1993, and $69,100,000,
subject to a $16,000,000 (approximately 23%) reserve, at December 31, 1994.
INTERNATIONAL HOTEL-CASINOS
The Company, through Conrad, manages two international hotel-casinos which
feature table games and slot machines similar to those offered at the Company's
hotel-casinos in Nevada.
The Company has a 19.9% ownership interest in the 605-room Hotel Conrad &
Jupiters Casino, which has a 70,000 square foot casino. This property has the
exclusive rights to conduct casino gaming on Queensland's Gold Coast through
1995.
The Company has a 25% ownership interest in the 620-room Conrad Istanbul,
which opened in 1992. This hotel-casino includes a 12,000 square foot casino.
CASINO WINDSOR
In May 1994, the Company and the other two shareholders of Windsor Casino
Limited ("WCL") commenced operation of the Casino Windsor, an interim 50,000
square foot casino in Windsor, Ontario, Canada. The Company, through Conrad,
owns a 33.3% interest in WCL, which operates this project for the Ontario
provincial government. The Windsor project will open on a permanent basis in
early 1997 with a hotel of at least 300 rooms, a 75,000 square foot casino,
entertainment and meeting facilities.
RIVER CASINO
In February 1994, the Company commenced operation of a river casino located
adjacent to the New Orleans Hilton Riverside. The initial 1,500 passenger vessel
had a 20,000 square foot casino featuring table games and slot machines similar
to those offered at the Company's hotel-casinos. This interim riverboat was
wholly-owned by the Company and leased to a joint venture, of which the Company
owns a 50% interest. In November 1994, the interim riverboat was replaced by the
"Flamingo Casino New Orleans," a permanent vessel owned by the joint venture
featuring a 30,000 square foot casino and accommodating 2,400 passengers.
EXPANSION PROGRAM
In January, 1995, the Company and Paramount Parks Inc. ("Paramount")
announced plans to build a 40,000 square foot attraction at the Las Vegas Hilton
to be called "Star Trek: The Experience." This attraction is scheduled to open
in late 1996 and will feature a motion-based simulation ride, interactive video
and virtual reality stations, dining and souvenir shops. The building housing
the Star Trek attraction will be owned by the Company and leased to Paramount.
The attraction will also be managed by Paramount.
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In early 1995, the Las Vegas Hilton completed construction of the third Sky
Villa, a 15,400 square foot luxury suite for premium players. In 1995, the Las
Vegas Hilton also plans to open a Hilton retail gift shop and remodel and
rebuild the 362-foot marquee sign. The Flamingo Hilton-Las Vegas plans to
complete an extensive expansion and renovation project, which will include the
remaining 350 rooms of the new tower, a new race and sports book, a casino
expansion of approximately 3,500 square feet, new entertainment, recreation and
dining facilities, exterior enhancement and new signage. At the Flamingo
Hilton-Laughlin, the Company plans to upgrade the pool, exercise area and
outdoor entertainment venue, and continue its slot machine replacement program.
At the Reno Hilton, the Company plans to continue to renovate the casino,
entertainment and registration areas, and to open a new Johnny Rockets
restaurant.
The government of Queensland, Australia has designated the owner of the
Hotel Conrad & Jupiters Casino to own and develop a new 136-room hotel-casino
project to be known as the Conrad Treasury in Brisbane, Australia. This
property, which will feature a 65,000 square foot casino, will be managed by
Conrad and will have the exclusive right to conduct casino gaming in Brisbane
for a ten year period. Conrad will have a 19.9% equity interest in this project,
which is scheduled to open in spring 1995.
In addition, the government of Uruguay has selected Conrad and its partners
to develop a new 300-room hotel-casino in Punta del Este, Uruguay. This project,
which will be the first privately operated casino in Uruguay in 30 years, will
include a 38,000 square foot casino. Conrad will manage and have an equity
interest of approximately 37% in the hotel-casino. Subject to completing
satisfactory financing, the hotel-casino is scheduled for completion in early
1997.
Conrad has entered into an agreement to develop and operate a 700-room
hotel-casino in Cairo, Egypt. This property will feature a 17,000 square foot
European-style casino. Conrad will manage and have a 10% equity interest in the
hotel-casino, which is scheduled to open in late 1997.
The Company has also been selected to develop a river casino in Kansas
City, Missouri. The Company will manage and own a 90% interest in this project,
which will include a 30,000 square foot casino on a continuously docked 130,000
square foot barge. Subject to the receipt of all required gaming licenses and
permits, this project is scheduled to open in early 1996.
The New Jersey Casino Control Commission has granted the Company's request
for a Statement of Compliance, finding that the Company satisfies all
non-facility related criteria for a casino license in Atlantic City, New Jersey.
At present, the Company does not own, nor has the Company entered into any
agreement to manage, a hotel-casino property in Atlantic City. See "Additional
Information -- Regulation and Licensing -- New Jersey Gaming Laws."
ADDITIONAL INFORMATION
VACATION OWNERSHIP
The Company owns a 50% interest in the Hilton Grand Vacations Company joint
venture ("HGVC"), which currently operates 11 vacation ownership resorts in
Florida. In January 1995, HGVC commenced operation of a 200-unit vacation
ownership resort adjacent to the Flamingo Hilton-Las Vegas. HGVC also
anticipates completion in summer 1995 of the first phase of a 360-unit vacation
ownership resort adjacent to Sea World in Orlando, Florida. HGVC is actively
seeking new development and acquisition opportunities in other resort locations.
DESIGN AND FURNISHING SERVICES
Hilton, through its wholly-owned subsidiary, Hilton Equipment Corporation,
and through its Hotels Division, provides design and furnishing services and
distributes furniture, furnishings, equipment and supplies to hotels and
hotel-casinos owned, leased or managed by Hilton and to hotels franchised by
Hilton or owned
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and operated by others. The revenues of this operation depend primarily on the
number of new hotels operated or franchised by Hilton and on refurbishing and
remodeling of existing Hilton hotels.
COMPUTER SYSTEMS
Compass Computer Services, Inc. ("Compass"), 50% of which is owned by
Hilton and the balance by Budget Rent-A-Car, Inc., operates a computerized
reservation system for, among other things, hotel reservations. This system also
provides Hilton with certain statistical data and registration packets. Compass
is being managed by Litton Computer Services.
RESERVATION SYSTEM
The Compass computerized reservation system is presently utilized by Hilton
Service Corporation,
the operator of a worldwide system of reservation offices for hotels operated by
Hilton, Hilton International Co., their affiliates and others. Hilton Service
Corporation is owned 51% by Hilton and 49% by Hilton International Co.
MARKETING
Hotel occupancy at Hilton's metropolitan and airport properties is derived
primarily from the convention and meeting market and the business traveler
market (businesspersons traveling as individuals or in small groups). Hotel
occupancy at the Company's resort properties is derived primarily from the tour
and leisure market (tourists traveling either as individuals or in groups) and
the convention and meeting market. Hotel occupancy at the Company's
hotel-casinos is derived primarily from the convention and meeting market, the
tour and leisure market and junket and V.I.P. programs. As indicated under
"Additional Information -- Business Risks" below, these sources of business are
sensitive to general economic and other conditions. In addition, the Company
participates in certain joint marketing programs with business partners in the
airline, car rental and cruise line industries.
STATISTICAL DATA
For information regarding the Company's properties, number of available
rooms, occupancy ratios and management and franchise fees, see the Ten Year
Summary on pages 56 and 57 in the 1994 Stockholders Report.
BUSINESS RISKS
In 1994, the Company was able to increase prices to keep pace with the rate
of inflation for the first year since 1989. The Company's future operating
results could be adversely impacted by industry overcapacity and weak demand.
The Company's business could also be adversely affected by increases in
transportation and fuel costs. The operating results for the Company's
hotel-casinos can be volatile depending upon the table-game play of premium
players.
Hilton's occupancy ratios are affected by general economic conditions, as
well as by competition, work stoppages and other factors affecting particular
properties. Occupancy ratios at the Company's hotels could also be adversely
impacted by a decrease in travel resulting from fluctuations in the worldwide
economy and by excess industry capacity.
COMPETITION
Hilton believes it is one of the largest operators of hotels located within
the United States. Competition from other hotels, motels and inns, including
facilities owned by local interests and facilities owned by national and
international chains, is vigorous in all areas in which Hilton operates its
facilities. Hilton hotels also compete generally with facilities offering
similar services and located in cities and other locations where Hilton hotels
are not present. The Company's precise competitive position in most areas in
which its hotels are located cannot be determined from the information and data
available to Hilton.
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To the extent that hotel capacity is expanded by others in a city where a
Hilton hotel is located, competition will increase. In this regard, recent
capacity additions have increased competition in all segments of the Las Vegas
market. Three of the Company's competitors recently opened large new theme
casinos in Las Vegas and several new casino projects are under construction.
Such new capacity additions to the Las Vegas market could adversely impact the
Company's gaming income. In addition, the business of Hilton's Nevada
hotel-casinos might be adversely affected if gaming operations of the type
conducted in Nevada were to be permitted under the laws of other states,
particularly California. The legalization of casino gaming in Atlantic City, New
Jersey has had an impact on the Company's Nevada hotel-casinos. The recent
legalization of riverboat gaming in a number of states and the operation of
casino gaming on Native American tribal lands could also impact the Company's
hotel-casinos in Nevada.
REGULATION AND LICENSING
Each of the Company's casinos is subject to extensive regulation under
laws, rules and supervisory procedures, primarily in the jurisdiction where
located or docked. Some jurisdictions, however, empower their regulators to
investigate participation by licensees in gaming outside their jurisdiction and
require access to and periodic reports respecting such gaming activities.
Violations of laws in one jurisdiction could result in disciplinary action in
other jurisdictions.
Nevada Gaming Laws. The ownership and operation of casino gaming facilities
in the State of Nevada, such as those at the Las Vegas Hilton, the Flamingo
Hilton-Las Vegas, the Flamingo Hilton-Laughlin, the Reno Hilton and the Flamingo
Hilton-Reno, are subject to the Nevada Gaming Control Act and the regulations
promulgated thereunder (the "Nevada Act") and various local regulations. The
Company's gaming operations are subject to the licensing and regulatory control
of the Nevada Gaming Commission (the "Gaming Commission"), the Nevada State
Gaming Control Board (the "Control Board"), the Clark County Liquor and Gaming
Licensing Board (the "CCB") and the City of Reno. The Gaming Commission, the
Control Board, the CCB and the City of Reno are collectively referred to as the
"Nevada Gaming Authorities."
The laws, regulations and supervisory procedures of the Nevada Gaming
Authorities are based upon declarations of public policy which are concerned
with, among other things: (i) the prevention of unsavory or unsuitable persons
from having a direct or indirect involvement with gaming at any time or in any
capacity; (ii) the establishment and maintenance of responsible accounting
practices and procedures; (iii) the maintenance of effective controls over the
financial practices of licensees, including the establishment of minimum
procedures for internal fiscal affairs and the safeguarding of assets and
revenues, providing reliable record keeping and requiring the filing of periodic
reports with the Nevada Gaming Authorities; (iv) the prevention of cheating and
fraudulent practices; and (v) the provision of a source of state and local
revenues through taxation and licensing fees. Changes in such laws, regulations
and procedures could have an adverse effect on the Company's gaming operations.
The Company's subsidiaries which operate the casinos (the "Licensees") are
required to be licensed by the Nevada Gaming Authorities. The gaming license
requires the periodic payment of fees and taxes and is not transferable. The
Company is registered by the Gaming Commission as a publicly-traded corporation
("Registered Corporation") and, as such, it is required periodically to submit
detailed financial and operating reports to the Gaming Commission and furnish
any other information which the Gaming Commission may require. No person may
become a stockholder of, or receive any percentage of profits from, the
Licensees without first obtaining licenses and approvals from the Nevada Gaming
Authorities. The Company and the Licensees have obtained from the Nevada Gaming
Authorities the various registrations, approvals, permits and licenses required
in order to engage in gaming activities in Nevada.
The Nevada Gaming Authorities may investigate any individual who has a
material relationship to, or material involvement with, the Company or the
Licensees in order to determine whether such individual is suitable or should be
licensed as a business associate of a gaming licensee. Officers, directors and
certain key employees of the Licensees must file applications with the Nevada
Gaming Authorities and may be required to be licensed or found suitable by the
Nevada Gaming Authorities. Officers, directors and key employees of
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the Company who are actively and directly involved in gaming activities of the
Licensees may be required to be licensed or found suitable by the Nevada Gaming
Authorities. The Nevada Gaming Authorities may deny an application for licensing
for any cause which they deem reasonable. A finding of suitability is comparable
to licensing, and both require submission of detailed personal and financial
information followed by a thorough investigation. The applicant for licensing or
a finding of suitability must pay for all the costs of the investigation.
Changes in licensed positions must be reported to the Nevada Gaming Authorities
and, in addition to their authority to deny an application for a finding of
suitability or licensure, the Nevada Gaming Authorities have jurisdiction to
disapprove a change in a corporate position.
If the Nevada Gaming Authorities were to find an officer, director or key
employee unsuitable for licensing or unsuitable to continue having a
relationship with the Company or the Licensees, the companies involved would
have to sever all relationships with such person. In addition, the Gaming
Commission may require the Company or the Licensees to terminate the employment
of any person who refuses to file appropriate applications. Determinations of
suitability or of questions pertaining to licensing are not subject to judicial
review in Nevada.
The Company and the Licensees are required to submit detailed financial and
operating reports to the Gaming Commission. Substantially all material loans,
leases, sales of securities and similar financing transactions by the Licensees
must be reported to, or approved by, the Gaming Commission.
If it were determined that the Nevada Act was violated by the Licensees,
the gaming licenses they hold could be limited, conditioned, suspended or
revoked, subject to compliance with certain statutory and regulatory procedures.
In addition, the Licensees, the Company and the persons involved could be
subject to substantial fines for each separate violation of the Nevada Act at
the discretion of the Gaming Commission. Further, a supervisor could be
appointed by the Gaming Commission to operate the Company's gaming properties
and, under certain circumstances, earnings generated during the supervisor's
appointment (except for the reasonable rental value of the Company's gaming
properties) could be forfeited to the State of Nevada. Limitation, conditioning
or suspension of any gaming license or the appointment of a supervisor could
(and revocation of any gaming license would) materially adversely affect the
Company's gaming operations.
Any beneficial holder of the Company's Common Stock, regardless of the
number of shares owned, may be required to file an application, be investigated,
and have such person's suitability as a beneficial holder of the Company's
Common Stock determined if the Gaming Commission has reason to believe that such
ownership would otherwise be inconsistent with the declared policies of the
State of Nevada. The applicant must pay all costs of investigation incurred by
the Nevada Gaming Authorities in conducting any such investigation.
The Nevada Act requires any person who acquires more than 5% of the
Company's Common Stock to report the acquisition to the Gaming Commission. The
Nevada Act requires that beneficial owners of more than 10% of the Company's
Common Stock apply to the Gaming Commission for a finding of suitability within
thirty days after the Chairman of the Control Board mails the written notice
requiring such filing. Under certain circumstances, an "institutional investor,"
as defined in the Nevada Act, which acquires more than 10%, but not more than
15%, of the Company's Common Stock may apply to the Gaming Commission for a
waiver of such finding of suitability if such institutional investor holds the
Common Stock for investment purposes only. An institutional investor shall not
be deemed to hold the Common Stock for investment purposes unless the Common
Stock was acquired and is held in the ordinary course of business as an
institutional investor and not for the purpose of causing, directly or
indirectly, the election of a majority of the members of the Board of Directors
of the Company, any change in the Company's corporate charter, bylaws,
management, policies or operations of the Company, or any of its gaming
affiliates, or any other action which the Gaming Commission finds to be
inconsistent with holding the Company's Common Stock for investment purposes
only. Activities which are not deemed to be inconsistent with holding voting
securities for investment purposes only include: (i) voting on all matters voted
on by stockholders; (ii) making financial and other inquiries of management of
the type normally made by securities analysts for informational purposes and not
to cause a change in its management, policies or operations; and (iii) such
other activities as the Gaming Commission may determine to be consistent with
such investment intent. If the beneficial holder of voting
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securities who must be found suitable is a corporation, partnership or trust, it
must submit detailed business and financial information including a list of
beneficial owners. The applicant is required to pay all costs of investigation.
Barron Hilton, the Company's largest stockholder, has been found suitable as a
controlling stockholder of the Company.
Any person who fails or refuses to apply for a finding of suitability or a
license within 30 days after being ordered to do so by the Gaming Commission or
by the Chairman of the Control Board may be found unsuitable. The same
restrictions apply to a record owner if the record owner, after request, fails
to identify the beneficial owner. Any stockholder found unsuitable and who
holds, directly or indirectly, any beneficial ownership of the Company's Common
Stock beyond such period of time as may be prescribed by the Gaming Commission
may be guilty of a criminal offense. The Company is subject to disciplinary
action if, after it receives notice that a person is unsuitable to be a
stockholder or to have any other relationship with the Company or the Licensees,
the Company (i) pays that person any dividend or interest upon voting securities
of the Company; (ii) allows that person to exercise, directly or indirectly, any
voting right conferred through securities held by that person; (iii) pays
remuneration in any form to that person for services rendered or otherwise; or
(iv) fails to pursue all lawful efforts to require such unsuitable person to
relinquish his voting securities for cash at fair market value. Additionally,
the CCB has taken the position that it has the authority to approve all persons
owning or controlling the stock of any corporation controlling a gaming license.
The Gaming Commission may, in its discretion, require the holder of any
debt security of a Registered Corporation to file applications, be investigated
and be found suitable to own the debt security of a Registered Corporation. If
the Gaming Commission determines that a person is unsuitable to own such
security, then pursuant to the Nevada Act, the Registered Corporation can be
sanctioned, including the loss of its approvals, if without the prior approval
of the Gaming Commission, it (i) pays to the unsuitable person any dividend,
interest or any distribution whatsoever; (ii) recognizes any voting right by
such unsuitable person in connection with such securities; (iii) pays the
unsuitable person remuneration in any form; or (iv) makes any payment to the
unsuitable person by way of principal, redemption, conversion, exchange,
liquidation or similar transaction.
The Company is required to maintain a current stock ledger in Nevada which
may be examined by the Nevada Gaming Authorities at any time. If any securities
are held in trust by an agent or by a nominee, the record holder may be required
to disclose the identity of the beneficial owner to the Nevada Gaming
Authorities. A failure to make such disclosure may be grounds for finding the
record holder unsuitable. The Company is also required to render maximum
assistance in determining the identity of the beneficial owner. The Gaming
Commission has the power to require the Company's stock certificates to bear a
legend indicating that the securities are subject to the Nevada Act. However, to
date, the Gaming Commission has not imposed such a requirement on the Company.
The Company may not make a public offering of its securities without the
prior approval of the Gaming Commission if the securities or the proceeds
therefrom are intended to be used to construct, acquire or finance gaming
facilities in Nevada, or to retire or extend obligations incurred for such
purposes. Such approval, if given, does not constitute a finding, recommendation
or approval by the Gaming Commission or the Control Board as to the accuracy or
adequacy of the prospectus or the investment merits of the securities. Any
representation to the contrary is unlawful. The Company was granted approval on
September 29, 1994 to make public offerings of securities for a period of one
year, subject to certain reporting requirements and the authority of the
Chairman of the Control Board to issue an interlocutory stop order for good
cause.
Changes in control of the Company through merger, consolidation, stock or
asset acquisitions, management or consulting agreements, or any act or conduct
by a person whereby such person obtains control, may not occur without the prior
approval of the Gaming Commission. Entities seeking to acquire control of a
Registered Corporation must satisfy the Control Board and Gaming Commission in a
variety of stringent standards prior to assuming control of such Registered
Corporation. The Gaming Commission may also require controlling stockholders,
officers, directors and other persons having a material relationship or
involvement with the entity proposing to acquire control, to be investigated and
licensed as part of the approval process relating to the transaction.
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The Nevada legislature has declared that some corporate acquisitions
opposed by management, repurchases of voting securities and corporate defense
tactics affecting Nevada gaming licensees, and Registered Corporations that are
affiliated with those operations, may be injurious to stable and productive
corporate gaming. The Gaming Commission has established a regulatory scheme to
ameliorate the potentially adverse effects of these business practices upon
Nevada's gaming industry and to further Nevada's policy to: (i) assure the
financial stability of corporate gaming operators and their affiliates; (ii)
preserve the beneficial aspects of conducting business in the corporate form;
and (iii) promote a neutral environment for the orderly governance of corporate
affairs. Approvals are, in certain circumstances, required from the Gaming
Commission before the Company can make exceptional repurchases of voting
securities above the current market price thereof and before a corporate
acquisition opposed by management can be consummated. The Nevada Act also
requires prior approval of a plan of recapitalization proposed by the Company's
Board of Directors in response to a tender offer made directly to its
stockholders for the purpose of acquiring control of the Company.
License fees and taxes, computed in various ways depending on the type of
gaming or activity involved, are payable to the State of Nevada and to the
counties and cities in which the Nevada licensee's respective operations are
conducted. Depending upon the particular fee or tax involved, these fees and
taxes are payable either monthly, quarterly or annually and are based upon
either: (i) a percentage of the gross revenues received; (ii) the number of
gaming devices operated; or (iii) the number of table games operated. A casino
entertainment tax is also paid by casino operations where entertainment is
furnished in connection with the selling of food or refreshments.
The Company and its affiliates and Licensees, who propose to become
involved in a gaming venture outside of Nevada, are required to deposit with the
Control Board, and thereafter maintain, a revolving fund in the amount of
$10,000 to pay the expenses of investigation of the Control Board of their
participation in such foreign gaming. The revolving fund is subject to increase
or decrease in the discretion of the Gaming Commission. Thereafter, the Company
and its affiliates and Licensees are required to comply with certain reporting
requirements imposed by the Nevada Act. These entities are also subject to
disciplinary action by the Gaming Commission if they knowingly violate any laws
of the foreign jurisdiction pertaining to the foreign gaming operation, fail to
conduct the foreign gaming operation in accordance with the standards of honesty
and integrity required of Nevada gaming operations, engage in activities that
are harmful to the State of Nevada or its ability to collect gaming taxes and
fees, or employ a person in the foreign operation who has been denied a license
or finding of suitability in Nevada on the ground of personal unsuitability.
Louisiana Gaming Laws. The ownership and operation of a riverboat gaming
vessel in the State of Louisiana is subject to the Louisiana Riverboat Economic
Development and Gaming Control Act (the "Act"). Gaming activities are regulated
by the Louisiana Riverboat Gaming Commission (the "Commission") and the
Louisiana Riverboat Gaming Enforcement Division (the "Division"), a department
within the Louisiana State Police. The Division is responsible for investigating
the background of all applicants seeking a riverboat gaming license, issuing the
license and enforcing the laws, rules and regulations relating to riverboat
gaming activities.
The applicant, its officers, directors, key personnel, partners and persons
holding a 5% or greater interest in the holder of a gaming license are required
to be found suitable by the Division. This requires the filing of an extensive
application to the Division disclosing personal, financial, criminal, business
and other information. On October 13, 1993, the Division issued a riverboat
gaming license to the Queen of New Orleans, a joint venture of which the Company
owns a 50% interest. The Company's joint venture commenced riverboat gaming
operations in New Orleans, Louisiana on February 10, 1994.
The transfer of a Louisiana gaming license is prohibited under the Act. The
sale, assignment, transfer, pledge or disposition of securities which represent
5% or more of the total outstanding shares issued by a holder of a license is
subject to Division approval and the transferee must be found suitable. In
addition, all contracts and leases entered into by a licensee are subject to
approval and certain enterprises which transact business with the licensee must
be licensed.
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The Commission must approve all security holders of the licensee and may
find any such security holder not qualified to own those securities. Louisiana
law may require that the charter or bylaws of the licensee provide that its
securities are held subject to the condition that, if a holder is found to be
disqualified by the Commission, the holder must dispose of the securities of the
licensee. If a security holder of a licensee is found disqualified, it will be
unlawful for the security holder to (i) receive any dividend or interest with
regard to the securities, (ii) exercise, directly or indirectly, any rights
conferred by the securities or (iii) receive any remuneration from the licensee
for services rendered or otherwise. The Commission may impose similar approval
requirements on holders of securities of any intermediary or holding company of
the licensee, but may waive those requirements with respect to holders of
publicly-traded securities of intermediary and holding companies if such holders
do not have the ability to control the publicly-traded corporation or elect one
or more directors thereof.
New Jersey Gaming Laws. The ownership and operation of hotel-casino
facilities in Atlantic City, New Jersey are subject to extensive state
regulation under the New Jersey Casino Control Act (the "Act"). No hotel-casino
facility may operate unless various licenses and approvals are obtained from New
Jersey regulatory authorities, including the Casino Control Commission (the
"Commission"). The Commission is authorized under the Act to adopt regulations
covering a broad spectrum of gaming and gaming related activities and to
prescribe the methods and forms of applications for licenses.
The Act permits an applicant to request a Statement of Compliance from the
Commission finding that it satisfies one or more of the eligibility criteria for
licensure. The Statement of Compliance request may be made prior to the
construction or acquisition of a casino in Atlantic City. It is only after all
eligibility criteria are met that a casino license may be issued. On February 4,
1991, the Company and a New Jersey subsidiary filed applications with the
Commission for a casino license under the Act. At the conclusion of the
application investigation, the Company requested a Statement of Compliance
regarding all non-facility related criteria. On June 26, 1991, the Commission
granted the Company's request for a Statement of Compliance. The Company does
not now own, nor has the Company entered into any agreement to manage, a
hotel-casino in Atlantic City. The Company filed the license application in
contemplation of possibly owning and/or operating a hotel-casino in Atlantic
City.
In order to be granted a casino license under the Act, officers and
directors of a licensee and its employees who are employed in hotel or casino
operations in Atlantic City are required to be licensed or approved by the
Commission. In addition, all contracts and leases entered into by a licensee
would be subject to approval and certain enterprises which transact business
with the licensee would themselves have to be licensed. New Jersey law also
authorizes the Commission to approve security holders of a licensee in the
manner described above under the caption "Louisiana Gaming Laws."
Queensland Gaming Laws. Queensland, Australia, like Nevada, Louisiana and
New Jersey, has comprehensive laws and regulations governing the conduct of
casino gaming. All persons connected with the ownership and operation of a
casino, including the Company, its subsidiary that manages the Hotel Conrad &
Jupiters Casino and certain of their principal stockholders, directors and
officers, must be found suitable and licensed. A casino license once issued
remains in force until surrendered or cancelled. Queensland law defines the
grounds for cancellation and, in such event, an administrator may be appointed
to assume control of the hotel-casino complex. The Queensland authorities have
conducted an investigation of, and have found suitable, the Company and its
subsidiary.
Ontario Gaming Laws. Ontario, Canada also has laws and regulations
governing the conduct of casino gaming. Ontario law requires that the operator
of a casino must be found suitable and be registered. A registration once issued
remains in force until revoked. Ontario law defines the grounds for
registration, as well as revocation or suspension of such registration. The
Company and two other shareholders formed Windsor Casino Limited ("WCL") to
operate the Casino Windsor. The Ontario authorities have conducted an
investigation of, and have found suitable, the Company and the other two
shareholders of WCL in connection with the Ontario registration of WCL.
Turkey Gaming Laws. Turkey has laws and regulations governing the
establishment and operation of casino gaming. The Turkish Ministry of Tourism
inspects all casino premises prior to the commencement of
17
19
operations and conducts random inspections of ongoing casino operations. Under
Turkish gaming laws, access to casinos is limited to persons carrying a foreign
passport or to Turkish citizens receiving a permit from the Ministry of Tourism.
The casino located in the Conrad Istanbul has been authorized to conduct casino
operations by the Turkish Ministry of Tourism.
IRS Regulations. The Internal Revenue Service ("IRS") requires operators
of casinos located in the United States to file information returns for U.S.
citizens (including names and addresses of winners) for keno and slot machine
winnings in excess of stipulated amounts. The IRS also requires operators to
withhold taxes on certain keno, bingo and slot machine winnings of nonresident
aliens. Management is unable to predict the extent, if any, to which such
requirements, if extended, might impede or otherwise adversely affect operations
of, and/or income from, such other games.
Regulations adopted by the IRS and the gaming regulatory authorities in
certain domestic jurisdictions in which the Company operates, or has applied for
licensing to operate, casinos require the reporting of currency transactions in
excess of $10,000 occurring within a gaming day, including identification of the
patron by name and social security number. This reporting obligation commenced
in May 1985 and may have resulted in the loss of gaming revenues to
jurisdictions outside the United States which are exempt from the ambit of IRS
regulations.
Other Laws and Regulations. Each of the hotels and hotel-casinos operated
by the Company is subject to extensive state and local regulations and, on a
periodic basis, must obtain various licenses and permits, including those
required to sell alcoholic beverages. Management believes that the Company has
obtained all required licenses and permits and its businesses are conducted in
substantial compliance with applicable laws.
EMPLOYEES
At February 1, 1995, Hilton employed approximately 44,000 persons, of whom
approximately 22,000 are covered by various collective bargaining agreements
providing, generally, for basic pay rates, working hours, other conditions of
employment and orderly settlement of labor disputes. Hilton believes that the
aggregate compensation benefits and working conditions afforded its employees
compare favorably with those received by employees in the hotel industry
generally. Although strikes of short duration have from time to time occurred at
certain of Hilton's facilities, Hilton believes its employee relations are
satisfactory.
ITEM 2. PROPERTIES
Hilton considers its hotels and casinos to be leading establishments with
respect to desirability of location, size, facilities, physical condition,
quality and variety of services offered in most of the areas in which they are
located. Obsolescence arising from age and condition of facilities is a factor
in the hotel and gaming industries. Accordingly, Hilton expends, and intends to
continue to expend, substantial funds to maintain its facilities in first-class
condition in order to remain competitive.
Hotels and casinos owned and operated, leased and managed by Hilton are
briefly described under Item 1 and, in particular, under the captions "Hotel
Operations" and "Gaming Operations." In addition, contemplated additions to, and
major refurbishing and remodeling of, existing properties and new hotels and
casinos presently under construction that will be operated by Hilton are briefly
described under the captions "Hotel Operations -- Expansion Program" and "Gaming
Operations -- Expansion Program" under Item 1.
ITEM 3. LEGAL PROCEEDINGS
In management's opinion, disposition of pending litigation against the
Company, including the lawsuit described under "Commitments and Contingent
Liabilities" in the Notes to the Company's Consolidated Financial Statements on
pages 54 and 55 in the 1994 Stockholders Report, is not expected to have a
material effect on the Company's financial position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
18
20
EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
executive officers of the Company:
POSITIONS AND OFFICES
NAME WITH THE COMPANY AGE
---- --------------------- ---
Barron Hilton Chairman of the Board and Chief 67
Executive Officer and, until February
1993, President
Raymond C. Avansino, Jr. President and Chief Operating Officer 51
since February 1993
Eric M. Hilton Vice Chairman of the Board since May 61
1993, Executive Vice President --
International Operations from May 1992
until May 1993, President, Conrad
International Hotels Corporation from
January 1990 until May 1993, and Senior
Vice President -- Real Estate
Development, International until May
1992
Floyd M. Celey, Jr. Executive Vice President and 55
President -- Gaming Operations since
September 1994, Senior Vice
President -- Global Gaming Operations
from May 1993 until September 1994, and
prior thereto, Senior Vice
President -- Corporate Casino
Operations, Conrad International Hotels
Corporation
Dieter H. Huckestein Executive Vice President and 51
President -- Hotel Operations since May
1994, Senior Vice
President -- Hawaii/California/Arizona
Region from May 1991 until May 1994,
and prior thereto, Senior Vice
President-Hawaiian Region
F. Michael O'Brien Executive Vice President -- Gaming and 54
Hotel Development since September 1994,
Senior Vice President -- Gaming and
Hotel Development from January 1994
until September 1994, and from May 1992
until January 1994, Senior Vice
President -- Corporate Properties
Steve Krithis Senior Vice President -- Finance since 65
November 1994, and prior thereto, Vice
President and Corporate Comptroller
William C. Lebo, Jr. Senior Vice President and General 51
Counsel
Unless otherwise noted in the table, all positions and offices with the
Company indicated have been continuously held since January 1990. The executive
officers are responsible for all major policy making functions and all other
corporate and divisional officers are responsible to, and are under the
supervision of, the executive officers. None of the above named executive
officers are related, except that Messrs. Barron and Eric Hilton are brothers.
Similar information for directors of the Company will be included under
"Election of Directors" in the Company's definitive proxy statement to be used
in connection with its annual meeting of stockholders scheduled to be held on
May 11, 1995 (the "Proxy Statement"). The Company expects to file the Proxy
Statement with the Securities and Exchange Commission prior to April 30, 1995,
and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
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21
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "HLT." Information regarding sales
prices, dividend payments and record holders with respect to the Company's
Common Stock is set forth under "Supplementary Financial Information" in the
Notes to the Company's Consolidated Financial Statements on page 55 in the 1994
Stockholders Report, which information is incorporated herein by reference.
On July 14, 1988, Hilton adopted a Preferred Share Purchase Rights Plan
("Plan") and declared a dividend distribution of one Preferred Share Purchase
Right ("Rights") on each outstanding share of Hilton Common Stock. The Rights
are transferable only with the Common Stock until they become exercisable.
Generally, the Rights become exercisable only if a person or group (other
than Hilton Interests, as hereinafter defined) acquires 20% or more of Hilton's
Common Stock or announces a tender offer, the consummation of which would result
in ownership by a person or group of 20% or more of the Common Stock. Each Right
entitles stockholders to buy one one-hundredth of a share of a new series of
junior participating preferred stock at an exercise price of $150.
If the Company is acquired in a merger or other business combination
transaction, each Right entitles its holder to purchase, at the Right's then
current price, a number of the acquiring company's common shares having a then
current market value of twice the Right's exercise price. In addition, if a
person or group (other than Hilton Interests) acquires 30% or more of the
Company's outstanding Common Stock, otherwise than pursuant to a cash tender
offer for all shares in which such person or group increases its stake from
below 20% to 80% or more of the outstanding shares of Common Stock, each Right
entitles its holder (other than such person or members of such group) to
purchase, at the Right's then current exercise price, shares of the Company's
Common Stock having a market value of twice the Right's exercise price.
Following the acquisition by a person or group of beneficial ownership of
30% or more of the Company's Common Stock and prior to an acquisition of 50% or
more of the Common Stock, Hilton's Board of Directors may exchange the Rights
(other than Rights owned by such person or group), in whole or in part, at an
exchange ratio of one share of Common Stock (or one one-hundredth of a share of
the new series of junior participating preferred stock) per Right.
Prior to the acquisition by a person or group of beneficial ownership of
20% or more of the Company's Common Stock, the Rights are redeemable for one
cent per Right at the option of the Company's Board of Directors.
"Hilton Interests" refer to Barron Hilton and the Conrad N. Hilton Fund and
the shares of Common Stock beneficially owned by them.
The full text of the Plan has been filed as Exhibit 4.5 hereto, and the
foregoing summary is qualified in its entirety by reference to Exhibit 4.5.
ITEM 6. SELECTED FINANCIAL DATA
See the Company's Ten Year Summary on pages 56 and 57 in the 1994
Stockholders Report and "Segments of Business" in the Notes to the Company's
Consolidated Financial Statements on pages 53 and 54 in the 1994 Stockholders
Report.
The ratio of earnings to fixed charges for the five years ended December
31, 1994 is as follows: 1994 - 2.8 to 1; 1993 - 2.7 to 1; 1992 - 2.9 to 1;
1991 - 2.6 to 1; and 1990 - 2.8 to 1. The computation of the aforesaid ratios is
set forth in Exhibit 12 hereto.
20
22
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
See pages 34 through 39 in the 1994 Stockholders Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplemental information required
by this Item are contained in the 1994 Stockholders Report on the pages
indicated, which information is incorporated herein by reference.
PAGE
----
Report of independent public accountants.................................... 55
Consolidated statements of income for the three years ended December 31,
1994..................................................................... 40
Consolidated balance sheets as of December 31, 1994 and 1993................ 41
Consolidated statements of cash flows for the three years ended December 31,
1994..................................................................... 42
Consolidated statements of stockholders' equity for the three years ended
December 31, 1994........................................................ 43
Notes to consolidated financial statements.................................. 44
Segment data for the five years ended December 31, 1994 contained in the Ten
Year Summary............................................................. 56
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Certain of the information respecting executive officers required by this
Item is set forth under the caption "Executive Officers" in Part I. Other
information respecting certain executive officers, as well as the required
information for directors, will be contained in the Proxy Statement, and
reference is expressly made thereto for the specific information incorporated
herein by the aforesaid reference.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth under "Executive
Compensation" in the Proxy Statement, and except for information set forth in
the Proxy Statement under "Personnel and Compensation Committee Report on
Executive Compensation" and "Stockholder Return Performance Graph," reference is
expressly made thereto for the specific information incorporated herein by the
aforesaid reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item will be set forth under "Common Stock
Ownership of Certain Beneficial Owners and Executive Officers" and "Election of
Directors" in the Proxy Statement, and reference is expressly made thereto for
the specific information incorporated herein by the aforesaid reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item will be set forth under "Election of
Directors -- Certain Relationships and Interests in Certain Transactions" and
"Compensation Committee Interlocks and Insider Participation" in the Proxy
Statement, and reference is expressly made thereto for the specific information
incorporated herein by the aforesaid reference.
21
23
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) INDEX TO FINANCIAL STATEMENTS
1. Financial Statements:
The index to consolidated financial statements and supplementary data is
set forth under Item 8 on page 21 hereof.
2. Financial Statement Schedules:
PAGE
----
Report of Independent Public Accountants....................................... 23
Schedule II -- Valuation and Qualifying Accounts............................... 24
Supplemental Note to Consolidated Financial Statements......................... 25
All other schedules are inapplicable or the required information is
included elsewhere herein.
(B) REPORTS ON FORM 8-K
The Company filed a Current Report on Form 8-K, dated November 17,
1994, under the caption "Item 5. Other Events." This filing reported that
the Company had engaged the investment banking firm of Smith Barney Inc. to
undertake a study and make recommendations to the Company's management and
Board of Directors for strategic alternatives to enhance shareholder value.
See "Item 1. Business -- Recent Developments."
(C) EXHIBITS
Reference is made to the Index to Exhibits immediately preceding the
exhibits hereto.
22
24
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
SUPPLEMENTAL SCHEDULE AND SUPPLEMENTAL NOTE
To Hilton Hotels Corporation:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements of Hilton Hotels Corporation and
subsidiaries included in the Annual Report to Stockholders incorporated by
reference in this Form 10-K, and have issued our report thereon dated February
1, 1995. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The supplemental schedule II and the supplemental
note to consolidated financial statements as shown on pages 24 and 25 are the
responsibility of the Company's management and are presented for purposes of
complying with the Securities and Exchange Commission's rules and are not part
of the basic consolidated financial statements. The supplemental schedule and
the supplemental note to the consolidated financial statements have been
subjected to the auditing procedures applied in the audit of the basic
consolidated financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Los Angeles, California
February 1, 1995
23
25
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
(IN MILLIONS)
BALANCE AT CHARGED TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OTHER PERIOD
---------- ---------- ---------- ---------- ----- ----------
YEAR ENDED DECEMBER 31, 1994
Allowance for doubtful
accounts
Hotel and other............ $ 11.6 1.7 .5 2.4 -- 11.4
Casino..................... 7.6 13.2 -- 4.8 -- 16.0
Reserve for loss on other
investments................ 12.5 -- -- -- 8.1 (A) 20.6
YEAR ENDED DECEMBER 31, 1993
Allowance for doubtful
accounts
Hotel and other............ $ 7.2 1.8 4.5 1.9 -- 11.6
Casino..................... 14.4 10.9 -- 17.7 -- 7.6
Reserve for loss on other
investments................ -- 12.5 -- -- -- 12.5
YEAR ENDED DECEMBER 31, 1992
Allowance for doubtful
accounts
Hotel and other............ $ 6.0 1.7 1.5 2.1 .1 (B) 7.2
Casino..................... 12.2 8.0 -- 6.3 .5 (B) 14.4
Reserve for loss on other
investments................ 14.3 -- -- 14.3 -- --
---------------
(A) Represents unrealized holding losses on certain equity securities.
(B) Represents allowance for doubtful accounts of the Reno Hilton on the date of
acquisition by the Company.
24
26
HILTON HOTELS CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL NOTE TO CONSOLIDATED FINANCIAL STATEMENTS
AT DECEMBER 31, 1994 AND 1993
(IN MILLIONS)
1994 1993
------- ------
Accounts payable and accrued expenses at December 31, consisted of:
Accounts and notes payable.............................................. $ 87.2 47.4
Accrued salaries and wages.............................................. 29.5 26.5
Insurance............................................................... 28.7 34.9
Interest................................................................ 20.6 18.9
Other accrued expenses.................................................. 118.0 100.8
------- ------
$ 284.0 228.5
====== =====
25
27
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on March 16, 1995.
HILTON HOTELS CORPORATION
(Registrant)
By STEVE KRITHIS
------------------------------------
Steve Krithis
Senior Vice President-Finance
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 16, 1995.
RAYMOND C. AVANSINO, JR. ROBERT L. JOHNSON
------------------------------------------ -----------------------------------------
Raymond C. Avansino, Jr. Robert L. Johnson
Director Director
A. STEVEN CROWN DONALD R. KNAB
------------------------------------------ -----------------------------------------
A. Steven Crown Donald R. Knab
Director Director
GREGORY R. DILLON STEVE KRITHIS
------------------------------------------ -----------------------------------------
Gregory R. Dillon Steve Krithis
Director Senior Vice President-Finance
(Chief Financial and
Accounting Officer)
BARRON HILTON BENJAMIN V. LAMBERT
------------------------------------------ -----------------------------------------
Barron Hilton Benjamin V. Lambert
Chairman of the Board Director
and Chief
Executive Officer
(Chief Executive Officer)
ERIC M. HILTON DONNA F. TUTTLE
------------------------------------------ -----------------------------------------
Eric M. Hilton Donna F. Tuttle
Director Director
DIETER H. HUCKESTEIN SAM D. YOUNG, JR.
------------------------------------------ -----------------------------------------
Dieter H. Huckestein Sam D. Young, Jr.
Director Director
26
28
INDEX TO EXHIBITS
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- -------------
3.1 Restated Certificate of Incorporation of Registrant, as amended
(incorporated herein by reference from Exhibit 3.1 to Registrant's
Annual Report on
Form 10-K for the year ended December 31, 1987)
3.2 By-Laws of Registrant, as amended (incorporated herein by reference
from Exhibit 3.2 to Registrant's Annual Report on Form 10-K for the
year ended December 31, 1992)
4.1 Indenture, dated as of July 1, 1988, between Registrant and
Citibank, N.A., regarding Registrant's Subordinated Debt Securities
(incorporated herein by reference from Exhibit 4.1 to Post-Effective
Amendment No. 2 to Registrant's Registration Statement on Form S-3
(File No. 2-95746))
4.2 Indenture, dated as of July 1, 1988, between Registrant and Morgan
Guaranty Trust Company of New York, regarding Registrant's Senior
Debt Securities (incorporated herein by reference from Exhibit 4.1
to Post-Effective Amendment No. 1 to Registrant's Registration
Statement on Form S-3 (File No. 2-99967))
4.3 First Supplemental Indenture, dated as of June 30, 1992, between
Registrant and Morgan Guaranty Trust Company of New York, regarding
Registrant's Senior Debt Securities, relating to Exhibit 4.2 hereto
(incorporated herein by reference from Exhibit 4.3 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1992)
4.4 Reimbursement Agreements, dated as of November 15, 1990, among
Regis-
trant, Swiss Bank Corporation and the financial institutions
signatory thereto (incorporated herein by reference from Exhibit 4.7
to Registrant's Annual Report on Form 10-K for the year ended
December 31, 1990)
4.5 Rights Agreement, dated as of July 14, 1988, between Registrant and
The First National Bank of Chicago (incorporated herein by reference
from Exhibit 1 to Registrant's Current Report on Form 8-K, dated
July 14, 1988)
10.1 1984 Stock Option and Stock Appreciation Rights Plan of Registrant,
together with the Stock Option Agreement relating thereto, both as
amended (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1989)*
10.2 Amendment, dated October 18, 1990, to the 1984 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibit
10.1 hereto (incorporated herein by reference from Exhibit 10.3 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990)*
10.3 1990 Stock Option and Stock Appreciation Rights Plan of Registrant,
together with the Stock Option Agreement relating thereto, both as
amended (incorporated herein by reference from Exhibit 10.4 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1990)*
10.4 Amendment, dated January 20, 1994, to the 1990 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibit
10.3 hereto (incorporated herein by reference from Exhibit 10.5 to
Registrant's Annual Report on Form 10-K for the year ended December
31, 1993)*
10.5 Amendment, dated January 19, 1995, to the 1990 Stock Option and
Stock Appreciation Rights Plan of Registrant, relating to Exhibits
10.3 and 10.4
hereto*.............................................................
27
29
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION PAGE
------ ----------- -------------
10.6 Incentive Compensation Plan of Registrant (incorporated herein by
reference from Exhibit 10.4 to Registrant's Annual Report on Form
10-K for the year ended December 31, 1980)*
10.7 Amendment, dated as of January 1, 1994, to the Incentive
Compensation Plan of Registrant, relating to Exhibit 10.6 hereto
(incorporated herein by reference from Exhibit 10.7 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1993)*
10.8 Retirement Plan of Registrant, as amended and restated*.............
10.9 Supplemental Executive Retirement Plan of Registrant, as amended
(incorporated herein by reference from Exhibit 10.6 to Registrant's
Annual Report on Form 10-K for the year ended December 31, 1991)*
10.10 Amendment, effective April 1, 1994, to the Supplemental Executive
Retirement Plan of Registrant, relating to Exhibit 10.9 hereto*.....
10.11 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)*
10.12 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)*
10.13 Amendment, dated as of January 1, 1994, to the Retirement Benefit
Replacement Plan of Registrant, relating to Exhibit 10.12 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)*
10.14 Amendment, effective April 1, 1994, to the Retirement Benefit
Replacement Plan of Registrant, relating to Exhibits 10.12 and 10.13
hereto*.............................................................
10.15 Thrift Savings Plan of Registrant, as amended and restated*.........
10.16 Form of Executive Employment Agreement, dated as of November 17,
1994*...............................................................
11 Computation of Earnings Per Share...................................
12 Computation of Ratios of Earnings to Fixed Charges..................
13 Registrant's Annual Report to Stockholders for the year ended
December 31, 1994...................................................
21 List of Registrant's Subsidiaries...................................
23 Consent of Independent Public Accountants...........................
99 Undertakings........................................................
---------------
* Management contracts or compensatory plans or arrangements required to be
filed as exhibits to this Form 10-K by Item 601(b)(10)(iii) of Regulation S-K,
previously filed where indicated and incorporated herein by reference.
Pursuant to Regulation sec. 229.601, Item 601(b)(4)(iii) of Regulation S-K,
upon request of the Securities and Exchange Commission, the Registrant hereby
undertakes to furnish a copy of any unfiled instrument which defines the rights
of holders of long-term debt of the Registrant and its consolidated subsidiaries
(and for any of its unconsolidated subsidiaries for which financial statements
are required to be filed) wherein the total amount of securities authorized
thereunder does not exceed 10% of the total consolidated assets of the
Registrant.
28