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received a 5% note, payable serially, secured by a second deed
of trust and mortgage of chattels for $450,000, paid down to
$448,875 at December 31, 1956.
The Company received a minority interest of 250,000 shares
of common stock of another Hotel Company as part consideration for a property sale in 1956 and the value ascribed to such
shares was $1,500,000. The total market value, computed on
the basis of the closing stock exchange price per share at
December 31, 1956, was $1,375,000. These shares are subject
to and are limited by the terms and conditions of a voting
trust agreement terminating on April 1, 1961.
The Board of Directors of the wholly-owned Subsidiary,
Hilton Hotels International, Inc., which is included in the
consolidated statements, approved a plan of recapitalization
on October 25, 1956 whereby 2,000 shares of $100 par value
preferred stock and 700,000 shares of $1.00 par value common
stock outstanding at November 15, 1956 were changed and
reclassified into 800,000 shares of $5.00 par value common
stock. In addition, the Board appraised the fair value of leases
and contracts held by the Subsidiary at June 30, 1956 at an
amount equal to the difference between the book value of the
Corporation at that date and $4,050,000, the excess of appraisal
of $1,583,665.39 being recorded on the Subsidiary's books,
all of which was eliminated in consolidation.
3—FIXED ASSETS
Substantially, all of these assets are pledged to secure mortgages
or other long-term debt of the consolidated companies. Furniture, furnishings and equipment owned by the Company in
"Statler Units," under lease from an affiliate, Statler Hotels
Delaware Corporation, are pledged as additional security
under a mortgage of that Company. Fixed assets were carried
at cost, or were carried over from predecessor companies together with related depreciation reserves at predecessor's basis,
plus additions at cost.
4—FEDERAL TAXES ON INCOME
Federal income tax returns of the Company for the years 1951
through 1954 are presently under the usual review by the
Internal Revenue Service. Returns of subsidiary and predecessor companies are subject to the usual review for 1953 in
the earliest instances or for years subsequent thereto.
5—LONG-TERM DEBT
The 4Vi% fifteen-year convertible debentures maturing January 1, 1970 are convertible to and including January 1, 1958
at the option of the holders thereof, into common stock of the
Company at the conversion price of $22.25 per share. The trust
indenture securing the debentures requires annual sinking
fund payments on January 15 of each year in an amount
sufficient to redeem at the principal amount and without
premium, 3% for each of the years through 1962 and 4% for
each of the years thereafter. The Company has complied with
provision of the sinking fund.
The aggregate annual sinking fund and maturity requirements on the total long-term debt for each of the next five years
ending December 31, follows: 1957, $4,514,680; 1958,
,554,350; 1959, $4,267,830; 1960, $4,444,460; and, 1961,
,144,780.
6 —CAPITAL STOCK
The 5% cumulative first preferred, Series "A" shares are
subject to redemption, without premium, out of sinking fund
payments, made on or before January 1st in each year in an
amount sufficient to redeem 2% of the maximum number of
such shares theretofore issued and outstanding. The Company
has complied with sinking fund provisions.
On December 19, 1956, the shareholders of the Company
approved a 500,000 share issue of $25.00 par value preferred
stock, issuable in series. The authorized amount of the initial
series was designated as 278,733 shares of 5Vi% cumulative
voting preferred stock, Series "A" which together with 278,733
shares of the Company's $2.50 par value common stock were
offered stockholders of Savoy-Plaza, Inc. in exchange for their
holdings in that Company which consisted of 70,081 Class A
and 22,830 Class B common shares outstanding. The basis of
the exchange, as contained in a certain exchange agreement,
dated November 8, 1956, was at the rate of three shares of
Hilton bVi% cumulative voting preferred stock, Series "A",
and three shares of Hilton common stock for each share of
Class A or Class B $1.00 par value common stock of Savoy-
Plaza, Inc. The exchange became effective February 8, 1957
at which time 229,869 shares of SV2% cumulative voting preferred stock, Series "A" and 229,869 common shares were
issued for 76,623 or approximately 82.4% of the outstanding-
common shares of Savoy-Plaza, Inc.
By action of the Board of Directors, and as approved by the
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