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The Company had not provided for sinking fund
requirements at January 1, 1956 but has since surrendered for cancellation and credit to the sinking
fund 1,240 shares of Treasury, Series "A" of $100.
par ($124,000.) and is depositing $76,000. to provide for sinking fund requirements of Series "B"
shares.
6-COMMITMENTS AND
CONTINGENT LIABILITIES
Contract commitments in connection with air-
conditioning and construction work approximated
$1,850,000. at December 31, 1955.
The Company is guarantor under a long-term
note payable of a wholly-owned subsidiary amounting to $1,450,000. at December 31, 1955.
7-LONG-TERM LEASES
Certain properties are operated by the Company
and its Subsidiaries under leases ranging from four
years and three months to twenty-three years and
ten months, from December 31, 1955, with option
to renew for various periods in certain instances.
Total minimum annual fixed or basic rentals payable under such leases approximated $10,950,000.
at December 31, 1955.
The wholly-owned subsidiary Hilton Hotels
International, Inc. has entered into leases and preliminary leases or contracts ranging from fifteen to
twenty years, subject to certain conditions, for the
operation of hotels under construction or to be
constructed in Mexico City and Acapulco, Mexico;
Havana, Cuba; Montreal, Canada; Cairo, Egypt;
Berlin, Germany; New Delhi, India; Rome, Italy;
Tokyo, Japan; and Honolulu, Hawaii. In general,
Hilton Hotels International, Inc., is required to
furnish initial operating inventories and to maintain sufficient working capital, except in the case of
the Cuban lease, which specifies that not less than
$250,000. shall be furnished for these purposes to
be maintained for the first five years of the lease.
The terms of the leases commence either on actual
occupancy or within ten days of receipts of architects certificate of occupancy. The leases provide
for a rental based on a percentage of gross operating profit and certain specific rental obligations
provide for additional annual rent based on a
percentage of the value of furnishings while other
leases provide for a flat basic minimum rent or a
minimum rent based on a percentage of gross sales
or a percentage of the cost of construction. Hilton
Hotels Corporation, by Board action, has limited
any additional investment by it in Hilton Hotels
International, Inc., not to exceed $500,000. of
which not to exceed $100,000. shall be used for any
one hotel project, such sum to be used for working
capital and expenses.
8-LIMITATIONS AND
RESTRICTIONS
The Company is prohibited under the terms of
certain loan agreements from declaring dividends
or distributions on its capital stock or making
certain acquisitions or redemptions of any of its
capital stock in excess of $1,600,000. plus 70% of
the consolidated net income of the Company and
certain subsidiaries.
The wholly-owned subsidiary, Hotel Waldorf-
Astoria Corporation, is restricted under the terms
of a certain note payable, from payment of cash
dividends without the written consent of the holder
and/or holders, if any, of at least two-thirds of the
principal amount of the note outstanding which at
December 31, 1955 was $1,450,000. Earnings so
restricted at December 31, 1955 amounted to
$1,050,000.
The wholly-owned subsidiary, Hilton Hotels
International, Inc., is restricted under the terms of
a certain note payable amounting to $400,000. at
December 31, 1955 from lending money to the
Parent or any affiliates, except wholly-owned subsidiaries; purchasing, redeeming, or retiring any of
its outstanding capital stock; or paying any dividends in cash or property except after (1) payment
in full of all installments of principal and interest
on the note ($50,000. principal per annum); (2)
full compliance with other provisions aforementioned, in which event dividends payable in cash
or property shall be limited to the aggregate of the
amount of payments made in such year on the note.
9-EVENTS SUBSEQUENT TO
DECEMBER 31, 1955
On February 27, 1956 the Company entered into a
contract for the sale of its investment in the wholly-
owned subsidiary, Hotel Roosevelt Corporation
for $2,130,000., plus other adjustments of which
$750,000. was paid in cash on closing March 1,
1956, and the balance was represented by a 3%
note payable in seven equal semi-annual installments of $175,000. each, with a final payment of
$155,000. in 1960. At the same time a contract was
entered into for the sale of the Mayflower Hotel,
Washington, D.C. for $12,800,000., plus adjustments for current assets. The contract calls for the
assumption of the present mortgage on the property; payment of $1,000,000. in cash; 250,000
shares of Hotel Corporation of America capital
stock on the basis of $6.00 per share and a note
secured by a second mortgage for the balance of
the purchase price payable in installments over
ten years; all to be consummated on the closing
date, April 2, 1956.
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