(5) PROVISION FOR FEDERAL AND STATE TAXES ON INCOME
As of December 31, 1947 this account consisted of the following:
Federal Income Tax Liability of Predecessor Companies— (Unpaid Balances)
Palmer House Company $ 24,833.94
New Mexico Hilton Hotel Company 28,014.45
Federal and State Income Tax Liability of Hilton Hotels Corporation
Seven Months Ended December 31, 1946—(Unpaid Balance)
State of New Mexico $ 109.02
Estimated Taxes for the Year Ended December 31, 1947 3,100,000.00
The provision for Federal income taxes for the year ended December 31, 1947 has been estimated at approximately 38%
of the operating profits and 25% of capital gains for that period.
With the exception of the Lubbock Hilton Hotel Company, Inc., whose tax returns have been examined through the fiscal
year ended May 31, 1943, and the Palmer House Company whose tax returns have been examined through the calendar
year 1944, none of the predecessor corporations' tax returns for the years 1943, 1944 and 1945 or the period to date of
dissolution in 1946, nor the Hilton Hotels Corporation tax return for the seven months ended December 31, 1946
have been examined or passed upon by the United States Treasury Department.
As of the date of consolidation, the corporation set up a Reserve for Contingencies (See Note 6) to cover claims, taxes or
other charges, including additional income or excess profits taxes which might be asserted or assessed against the consolidating corporations.
(6) RESERVE FOR CONTINGENCIES
The Board of Directors established as of June 1, 1946 the Reserve for Contingencies of $1,700,000.00 to cover claims
which may be asserted under various Federal statutes and regulations, including claims for Federal income and excess
profits taxes of the consolidating corporations, such reserves so created being deemed by the Board of Directors to be
reasonably adequate to cover all such contingencies.
(7) CONVERTIBLE PREFERENCE STOCK
Since the date of consolidation the corporation has purchased for the treasury a total of 69,529-62/100 shares of its own
convertible preference stock at a total cost of $2,718,031.17, the discount thereon being credited to capital surplus. Of
the total shares so purchased 7,314-43/100 shares have been permanently retired and cancelled.
(8) COMMON STOCK
Common stock shares have been reserved for the conversion of convertible preference shares at the option of the holders
thereof at the rate of two shares of common stock for each share of convertible preference stock.
Contractual obligations and commitments of the Stevens Hotel were in existence at December 31, 1947 in the aggregate
amount of approximately $320,000.00 for new laundry equipment, Boulevard Room revisions, kitchen equipment and
(1) CONSOLIDATED INCOME
Consolidated Income includes the wholly-owned subsidiary State-Monroe Equipment Co. but not the partly-owned Palm
Beach Biltmore Co., Mayflower Hotel Corporation, Neil House Company or- hotels of the Bermuda Development Co. Ltd.
(See Analysis of Investments).
Other Income includes management fees and charges earned by Hilton Hotels Corporation as per contracts with non-
consolidated partly-owned subsidiaries and other Hilton operated hotels.
The corporation's share for the year 1947, of net profits, less dividends received, of unconsolidated subsidiaries, which has
not been reflected herein, amounted to $249,056.02, and, for the year 1946, such share amounted to a net loss of $67,043.99.
(2) QUALIFICATION OF 1946 INCOME INFORMATION
Results for the year ended December 31, 1946 represent combined operations of Hilton Hotels Corporation for the period
June 1, 1946 to December 31, 1946, and, for the period January 1, 1946 to May 31, 1946, results of the predecessor
corporations consolidated as of June 1, 1946 into Hilton Hotels Corporation. The results so combined are submitted for
information and comparison purposes.
Results for the year 1946 reflect adjustments from prior published reports for additional property and income taxes in
the amount of $27,606.20.
(3) INCOME FROM DISPOSED PROPERTY—LONG BEACH HILTON HOTEL
The figures for 1946 and 1947 include operations of the Long Beach Hilton Hotel which was sold as of July 31, 1947.
Net operating profit of this property, after depreciation for the seven months of 1947 amounted to $65,811.42.