FORM 10−K HILTON HOTELS CORP − HLT Filed: March 11, 2004 (period: December 31, 2003) Annual report which provides a comprehensive overview of the company for the past year Table of Contents PART I Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters Item 6. Selected Financial Data Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 7A. Quantitative and Qualitative Disclosures About Market Risk Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Item 9A. Controls and Procedures PART III Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matt Item 13. Certain Relationships and Related Transactions Item 14. Principal Accountant Fees and Services PART IV Item 15. Exhibits, Financial Statement Schedules and Reports on Form 8−K SIGNATURES INDEX TO EXHIBITS EX−11 (Statement regarding computation of per−share earnings) EX−12 (Statement regarding computation of ratios) EX−21 (Subsidiaries of the registrant) EX−23 (Consents of experts and counsel) EX−31.1 EX−31.2 EX−32.1 EX−32.2 EX−99 (Exhibits not specifically designated by another number and by investment companies) QuickLinks −− Click here to rapidly navigate through this document UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10−K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2003 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1−3427 HILTON HOTELS CORPORATION (Exact Name of Registrant as Specified in its Charter) Delaware 36−2058176 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 9336 Civic Center Drive Beverly Hills, California 90210 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (310) 278−4321 Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered Common Stock, par value $2.50 per share New York, Pacific 8% Quarterly Interest Bonds due 2031 New York Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S−K is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10−K or any amendment to this Form 10−K. Yes No Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b−2 of the Act). Yes No Based upon the June 30, 2003, New York Stock Exchange closing price of $12.79 per share, the aggregate market value of the Registrant's outstanding Common Stock held by non−affiliates of the Registrant was approximately $4.5 billion. There were 377,302,886 and 381,468,001 shares of Common Stock outstanding as of June 30, 2003 and February 27, 2004, respectively. DOCUMENTS INCORPORATED BY REFERENCE Certain portions of Registrant's definitive proxy statement, to be filed with the Securities and Exchange Commission pursuant to Regulation 14A not later than 120 days after the close of the Registrant's fiscal year, are incorporated by reference under Part III. TABLE OF CONTENTS Page PART I 1 Item Business 1. 1 General Information 1 Current Operations 1 Recent Developments 1 Promus Acquisition 2 Separation of Gaming Business 2 Industry Segments 2 Operations 3 Hotel Properties 3 Hotel Brands 4 Timeshare Operations 6 Development 6 Alliances 7 Development Financing 8 Territorial Restrictions 9 Potential Acquisitions 9 Property Transactions 9 Statistical Information 10 Additional Information 12 Casino Windsor 12 Design and Furnishing Services 12 Reservation System 12 HHonors 13 Technology and Distribution 13 Trademarks 13 Marketing 14 Business Risks 14 Forward−Looking Statements 16 Competition 17 Environmental Matters 17 Regulation and Licensing 18 Employees 18 Available Information 18 Item Properties 2. 19 Item Legal Proceedings 3. 19 Item Submission of Matters to a Vote of Security Holders 4. 19 Executive Officers of the Company 19 i PART II 20 Item Market for Registrant's Common Equity and Related Stockholder Matters 5. 20 Rights Agreement 20 Item Selected Financial Data 6. 21 Item Management's Discussion and Analysis of Financial Condition and Results of Operations 7. 22 Overview 22 Critical Accounting Policies and Estimates 23 Development and Capital Spending 24 Liquidity and Capital Resources 26 Off−Balance Sheet Arrangements 32 Results of Operations 33 Other Matters 39 Item Quantitative and Qualitative Disclosures About Market Risk 7A. 41 Item Financial Statements and Supplementary Data 8. 42 Consolidated Statements of Income 42 Consolidated Balance Sheets 43 Consolidated Statements of Cash Flow 44 Consolidated Statements of Stockholders' Equity 45 Notes to Consolidated Financial Statements 46 Report of Independent Auditors 71 Predecessor Auditor's Report 72 Supplementary Financial Information 73 Five Year Summary 74 Item Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9. 75 Item Controls and Procedures 9A. 75 ii PART III 75 Item Directors and Executive Officers of the Registrant 10. 75 Item Executive Compensation 11. 75 Item Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 12. 76 Item Certain Relationships and Related Transactions 13. 76 Item Principal Accountant Fees and Services 14. 76 PART IV 76 Item Exhibits, Financial Statement Schedules and Reports on Form 8−K 15. 76 (a) Index to Financial Statements 76 (b) Reports on Form 8−K 76 (c) Exhibits 76 Signatures 77 Index to Exhibits 78 iii PART I Item 1. Business GENERAL INFORMATION Current Operations Hilton Hotels Corporation is engaged, together with its subsidiaries, in the ownership, management and development of hotels, resorts and timeshare properties and the franchising of lodging properties. As of December 31, 2003, our system contained 2,173 properties, totaling over 348,000 rooms. Of such properties, we owned an interest in and operated 122 hotels, leased seven hotels, managed 206 hotels owned by others and franchised 1,808 hotels owned and operated by third parties. Also included in the number of properties in our system are 30 timeshare properties which we managed or franchised. All of these properties are located in the United States, with the exception of 15 hotels which we own an interest in and/or manage and 50 hotels which we franchise. Our hotel brands include Hilton, Hilton Garden Inn, Doubletree, Embassy Suites, Hampton, Homewood Suites by Hilton and Conrad. We develop and operate timeshare resorts through Hilton Grand Vacations Company and its related entities, which we wholly own. We are also engaged in various other activities related or incidental to the operation of hotels. Hilton was organized in the State of Delaware on May 29, 1946. Our principal executive offices are located at 9336 Civic Center Drive, Beverly Hills, California 90210, and our telephone number is (310) 278−4321. Recent Developments Hotel Properties • In December 2003 and March 2004, we sold the Embassy Suites Tucson and the Doubletree La Posada—Scottsdale in Arizona, respectively, in two separate transactions for net proceeds of approximately $31 million. We retained management of the Scottsdale property and have a long−term franchise agreement for the Tucson property. • In December 2003, we commenced management of the Hilton Americas−Houston and the Hilton Austin, which are new, downtown convention hotels in Texas. We also have an agreement to manage the Hilton Omaha, which is a downtown convention hotel in Nebraska expected to open in April 2004. • In December 2003, we completed a transaction in which we formed a partnership with CNL Hospitality Corp. which then acquired the Capital Hilton and the Hilton La Jolla Torrey Pines, which properties had been wholly owned by us. We have a 25% interest in the partnership and manage both properties under long−term agreements. • In February 2003, we completed a transaction in which we formed a partnership with CNL Hospitality Corp. that has since acquired seven hotel properties, including the Hilton Rye Town which was wholly owned by us. We have a 25% interest in the partnership and manage each of these properties under long−term agreements. • In February 2003, we sold four Homewood Suites by Hilton properties in two separate transactions for approximately $40 million. We retained long−term management agreements for three of these properties and a long−term franchise agreement for the remaining property. Timeshare Properties • In December 2003, we completed the conversion of six floors of the Kalia Tower at the Hilton Hawaiian Village into 72 timeshare units. • In October 2003, we opened the first phase of a new timeshare resort in Las Vegas, Nevada. In February 2004, we opened the first phase of a new timeshare resort in Orlando, Florida. Financing Transactions • In August 2003, we entered into a new $1 billion five−year revolving credit facility, with an option to increase the size of the facility by an additional $250 million.