Net income for the quarter totaled $77 million, or 29 cents per share on a diluted basis, compared with $68 million, or 26 cents per diluted share last year -- an increase of 12 percent in per share earnings. First quarter earnings before interest, taxes, depreciation, amortization and non-cash items (EBITDA) totaled $270 million, up 17 percent from last year's $231 million. The increase was attributable primarily to continued strength at the majority of the company's owned and partially owned hotels, the addition of "The Wild Wild West" casino in Atlantic City, N.J., and the benefit of the newly opened hotel rooms at the company's casino in Punta del Este, Uruguay.
Net income for the quarter was impacted by an increase in net interest expense from $34 million to $45 million, primarily due to higher average debt levels resulting from acquisition spending and a full quarter of a higher average cost of debt resulting from the company issuing long-term fixed notes to replace floating rate debt in 1997.
EBITDA for Hilton's lodging division was $130 million, an increase of 17 percent from $111 million a year ago. Double-digit EBITDA gains were reported at the majority of Hilton's owned and partially owned hotels, with properties in Chicago, New York, Washington, D.C. and San Francisco showing particularly strong results.
In the first quarter, the company's "Top Ten" owned and partially owned hotels -- located in New York, Chicago, San Francisco, New Orleans, Washington and Honolulu -- contributed $79 million of EBITDA, compared with $65 million for the same period a year ago -- an increase of 22 percent. Average daily rate (ADR) at these 10 hotels was $173.13 in the first quarter, compared with $160.81 last year, with occupancy showing a 1.1 point decline to 72.8 percent, resulting in a revenue per available room (REVPAR) increase of 6 percent. EBITDA margin at these properties increased 2.4 percentage points. Impacting results at the "Top Ten" properties was the anticipated softness at the Hilton Hawaiian Village in Honolulu as a result of adverse economic conditions in Asia. Subtracting the impact of Hawaii from the "Top Ten," EBITDA was up 27 percent, with REVPAR increasing 8 percent.
Overall occupancy for Hilton's comparable United States hotels -- including owned, partially owned and managed properties -- was 71.9 percent, down from last year's 73.0 percent, with ADR improving nearly 8 percent to $158.39. REVPAR for this group of properties increased 6.2 percent from a year ago. In the first quarter of 1998, Hilton continued its strategy of acquiring full-service hotels in major markets seeing limited supply growth; the company acquired the 458-room McLean, Va. Hilton and the 300-room Hilton at Short Hills, a "Five Diamond" hotel, in New Jersey.
The company's Hilton Garden Inn program also continued on track. During the quarter, Hilton Garden Inn properties were either opened or under construction in Florida, Georgia, Illinois, Texas, Nevada, Oregon, California, Oklahoma and Mexico. The company is on pace to have 200 of these hotels either open, under construction or in development by 2000.
Gaming division EBITDA for the first quarter of $153 million represented a 15 percent increase from 1997's $133 million. Driving this improvement was the addition of "The Wild Wild West" casino at Bally's Park Place in Atlantic City (which opened in July 1997), the late 1997 introduction of 300 hotel rooms at the Conrad International Punta del Este in Uruguay and significantly improved results at the company's Reno hotel-casinos.
Despite an increasingly competitive marketplace, each of the company's three Las Vegas properties reported respectable quarter-over-quarter results and performed generally in line with the company's expectations. The Flamingo Hilton-Las Vegas reported EBITDA of $25 million, down 7 percent from last year's $27 million. Occupancy dipped to 90.0 percent from 92.2 percent a year ago, and ADR was down 5 percent to $77.95. Bally's Las Vegas also showed an EBITDA decrease of 7 percent to $25 million due principally to lower table game and slot hold percentages when compared with the prior year. Occupancy declined 1.8 points to 88.5 percent, while ADR improved 3 percent to $100.58.
The Las Vegas Hilton reported EBITDA of $17 million, an 11 percent decline from $19 million in 1997. Occupancy declined 2.1 points to 87.9 percent, while ADR showed a 4 percent increase to $110.46. The property benefited from a significant increase in non-baccarat table game play, as well as an above-normal baccarat hold percentage of 36 percent.
These factors helped mitigate the effects of a decrease in international baccarat play caused by the adverse economic conditions in Asia and a difficult comparison due to the exceptionally high level of baccarat play recorded in the 1997 period. Additionally, "Star Trek: The Experience" opened in January and is meeting the company's expectations of generating increased traffic at the hotel.
In Atlantic City, Bally's Park Place reported EBITDA of $37 million, an increase of 23 percent from last year's $30 million, attributable to continued outstanding results at "The Wild Wild West." The Atlantic City Hilton, which reported an EBITDA decrease of $1 million to $4 million, was impacted by a below-average table game win percentage.
Hilton's gaming operations in other markets demonstrated improved results, led by the Reno Hilton, which reported a significant EBITDA increase due to strong casino revenues and a re-emphasis on the convention market. Improved results were also reported at the Flamingo Hilton-Reno and the company's casinos in Tunica, New Orleans and Kansas City.
Internationally, the Conrad International Punta del Este in Uruguay
continued to exceed expectations, while the company's operations in the
Gold Coast and Brisbane, Australia also reported strong EBITDA increase.
"Our first-quarter results demonstrate the continued strength of the domestic
full-service hotel business and the favorable supply- demand environment
fueling it, as well as the benefits we've obtained from our new gaming
properties," said Stephen F. Bollenbach, president and chief executive
officer, Hilton Hotels Corp. "We are also pleased with the ability of our
established hotel-casinos to perform admirably in competitive market conditions
and continue to be very positive about the future strength of the industry.
We are delighted to report to our shareholders that we are showing strong
operating results while also making progress on our growth strategies of
acquiring full-service hotels and maintaining the leading position in the
|Total||$1,396||$ 1,303||7 %|
|Total operating income||186||157||18|
|Interest and dividend income||11||13||(15)|
|Net interest from equity investment||(6)||(4)||50|
|Net interest expense||(45)||(34)||32|
|Income before taxes and minority interest||141||123||15|
|Provision for taxes||(61)||(51)||20|
|Minority interest, net||(3)||(4)||(25)|
|Net Income per share|
|Average Rate $|