Hilton Hotels

(HLT) - Get Report

reported a fall in first-quarter profit, hurt by the war in Iraq.

Including certain items, the company earned $9 million, or 2 cents a share, compared with $34 million, or 9 cents a share, in the year-ago quarter. Analysts expected 2 cents a share.

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"What we anticipated would be a difficult period due to continued economic weakness was made even more challenging by world events," said Stephen F. Bollenbach, chief executive. "Despite the challenges, we were able to maintain solid occupancy levels in most of our larger markets, though changes in the mix of business made it difficult to achieve room rate growth and maintain our margins."

The company said business declines were related mainly to the conflict in Iraq. Room-rate pressure due to weakness in business and group travel, along with increased insurance costs, also adversely impacted the quarter's results.

Looking to full-year 2003 results, the company expects the soft economy to continue and predicts that EPS will be in the high 30-cent range on revenue of $3.9 billion. Analysts expect 38 cents a share. The company earned 54 cents a share in 2002.

Hilton reiterated that it plans to add 100 to 115 hotels and 12,000 to 15,000 rooms in 2003. The company said about two-thirds of the hotels are expected to be Hampton Inns and Hilton Garden Inns.

Shares of the Beverly Hills, Calif.-based company were up 0.2% at $13.03 in midafternoon trading.