HILTON HOTELS CORPORATION AND SUBSIDIARIES
(1) BASIS OF CONSOLIDATION
The Corporation has adopted the policy of consolidating all majority-owned subsidiaries whereas in previous years only
wholly-owned subsidiaries were consolidated. Accordingly, there are now included in the consolidation the wholly-owned
Hilton Hotels International, Inc. and the majority-owned Mayflower Hotel Corporation and Hotel Waldorf-Astoria
Corporation in which Hilton Hotels Corporation had respective interests of 70.30% and 83.88% at December 31, 1951.
On June 30, 1951 the wholly-owned subsidiary State-Monroe Equipment Corporation, which was a non-operating
unit and which held title to the furnishings and equipment of the Palmer House, Chicago was liquidated and its assets
were acquired by the Palmer House, an operating unit of Hilton Hotels Corporation. The Jefferson Hotel Company which
was carried as an investment in the preceding year's financial statements was liquidated on April 30, 1951 and the Jefferson
Hotel is now carried as an operating unit of Hilton Hotels Corporation.
(2) FIXED ASSETS
The properties included under fixed assets are the same as in the preceding year except as mentioned in Note 1 and except
for the acquisition of a lease, at no cost, on Arrowhead Springs Hotel, an operating unit of the Corporation since May 1,
1951, which lease is for a nine year and ten-month period ending February 28, 1961. Additions to furniture and equipment
and leasehold improvements respecting this property are carried at cost.
The securities of two of the majority-owned consolidated subsidiaries were acquired at $1,967,121.12 more than the
book values of the equities thus acquired. The difference has been treated in these statements as additional cost of fixed
assets and allocated on a pro-rata basis; $259,626.78 to land; $465,319.95 to buildings; $124,267.11 to furniture and equipment and $1,117,907.28 to leasehold. Depreciation and amortization of the depreciable assets is accordingly stated herein
at $308,319.54 more than is shown by the subsidiaries of which $71,437.87 is charged against consolidated income this year.
The investment in Jefferson Hotel Company, liquidated on April 30, 1951, was acquired at $585,468.38 more than the
book value of the equity thus acquired. Upon liquidation of the company the difference was treated as additional cost of
fixed assets of the operating unit, Jefferson Hotel, and allocated on a pro-rata basis; $150,931.93 to land; $378,115.29 to
building and $56,421.16 to furniture and equipment.
Other fixed asset values and depreciation reserves have been carried over from the predecessor companies, plus additions at cost.
Reference is made to Note 3.
(3) FEDERAL TAXES ON INCOME
Provision has been made for all Federal income taxes based on separate returns of the companies.
The Federal income tax returns of Hilton Hotels Corporation have been examined through the year 1948 and assessment of additional taxes of $82,912.44 for the period June 1, 1946 to December 31, 1948 has been proposed by the Bureau
of Internal Revenue to which the corporation has agreed. The returns of Hotel Waldorf-Astoria Corporation have been
examined through December 31, 1949. The Bureau of Internal Revenue has examined Federal income and excess profits
tax returns of Mayflower Hotel Corporation for 1950 and on the basis of such examination has issued a letter of proposed
assessment in the amount of $32,974.06 which the company is protesting.
Mayflower Hotel Corporation at December 31, 1951 carried land on the books at $1,348,530.98 as compared with a
valuation of $1,640,065.86 for income tax purposes. The undepreciated book value of the building was carried on the books
in the amount of $1,769,860.03 as compared with an undepreciated valuation of $2,825,350.96 for income tax purposes.
Accordingly, annual depreciation for income tax purposes is approximately $52,000.00 greater than book depreciation.
Depreciation claimed for income tax purposes in 1951 for Hilton Hotels Corporation is approximately $128,000.00
less than book depreciation due to, variations in the bases and estimated remaining lives of depreciable property, and,
adjustments made in prior years tax settlements not reflected on the books.
(4) CONVERTIBLE PREFERENCE STOCK
The Parent has purchased for the Treasury 187,041-97/100 shares of its own convertible preference stock at a total cost of
$7,129,862.87, the discount thereon being credited to capital surplus. Of the total shares so purchased 40,276-97/100
shares have been permanently retired. The corporation had options to purchase 36,376 shares of its convertible preference
stock for $40.00 per share at December 31, 1951 under a certain offer to stockholders which expired on August 15, 1949.
At December 31, 1951 the corporation had provided a reserve for dividends on convertible preference stock under option
in the amount of $210,278.00 which would be required to be paid were the corporation not to exercise its option under the
terms of the offer. As of January 31, 1952, the corporation exercised its option and purchased 18,188 shares of this stock in
accordance with the terms of the offer and accordingly the dividend reserve was reduced by $105,139.00 as of January 31,
1952. Under the terms of the offer, the corporation may purchase the remaining 18,188 shares under option on or before
January 31, 1953.