THE HILTON DOLLAR
INCOME FROM OPERATIONS
Store and office building rentals
Other income ,
Payroll and related expenses
Cost of goods sold
Repairs and maintenance (excluding
payroll and related expenses)
I ncome taxes
Reinvested in the business
1 /. 1
Capital expenditure requirements for new properties through 1961
are estimated at $45 million. This is in addition to amounts already
expended prior to December 31, 1959. Approximately two-thirds of
this amount will be invested in hotels and the remainder in Inns. Arrangements were completed during 1959 to cover the costs of this expansion program. On October 29, Hilton Hotels Corporation sold $30
million of 6% subordinated sinking fund debentures, maturing in 1984,
with detachable stock purchase warrants. The underwriting group was
composed of 63 leading investment banking firms. Each $1,000 debenture carried a warrant to purchase 15 shares of Hilton Hotels common
stock. The warrants provide that this stock can be purchased at $42 a
share until October 15, 1963; at $46 from then until October 15, 1967;
and at $50 from then until October 15, 1971, the expiration date for
the warrants. The indenture calls for a sinking fund to begin in 1965.
Stock purchased upon exercise of the warrants may be paid for by the
surrender of the debentures at par. We anticipate that any cash proceeds resulting from the exercise of the warrants will be used to increase
working capital or for other corporate purposes. If all of the warrants
are exercised, 450,000 additional common shares will be issued between
now and 1971.
Nearly $23,500,000 of the proceeds of the debenture issue was temporarily invested in highly liquid short term securities. These consisted
of $2,500,000 of U. S. Treasury tax anticipation bills which matured
in March, 1960; finance company notes with a May, 1960, maturity
value of $10,000,000; New York City Public Housing Authority notes
with a May, 1960, maturity value of $2,500,000; and $8,500,000 in
certificates of deposit and time deposits. Interest received partially offsets interest payments on the debentures.
To insure having adequate funds to carry out its expansion program
in view of the tight money market, the Corporation entered into a
credit agreement on September 22, 1959, with a group of 17 leading
banks. This makes available up to $25,000,000 at 5/4 per cent interest.
The agreement provides for quarterly payments on the sums borrowed,
beginning January 15, 1962, with a final maturity of September 15,
1966. During the first two years a standby fee is payable on funds not
drawn. No funds as yet have been taken down under this agreement.
Any funds not borrowed during the first two years will no longer be
available to the Corporation.
The Company took down $10,000,000 under the $12,000,000, 4 per
cent mortgage commitment on The Pittsburgh Hilton. The remaining
$2,000,000 will be drawn on April 1, 1960.
The long term indebtedness of the Company at year-end was equal
to only 45.9 per cent of the sum of depreciated book value of capital
assets, investments at cost and net working capital.
Working capital, at the year-end was $32,925,130, or $8.69 per share
of common stock, compared with $19,815,494, or $5.14 per share, a
year earlier. Current assets, including cash of $33,545,411, totaled
$68,295,723. Current liabilities equalled $35,370,593; thus the current