Equity Inns (NYSE:ENN)
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Equity Inns, Inc. (NYSE: ENN), the third largest hotel real estate
investment trust (REIT), today announced that the Company expects funds
from operations (FFO) for the first quarter 2007 to be in the range of
$0.36 to $0.37 per diluted share versus previous expectations of $0.31
to $0.33 per diluted share. The Company expects net income applicable to
common shareholders for the first quarter 2007 to be in the range of
$0.07 to $0.09 per diluted share. The better than expected performance
is primarily due to the Company achieving higher than anticipated
results from hotel operations due to higher average daily rate.
The Company is increasing its full year 2007 FFO guidance to a range of
$1.45 to $1.52 per share from its initial range of $1.40 to $1.48 per
share. In addition, Equity Inns is raising its 2007 full year net income
per diluted share to $0.30 to $0.38 from its previous per share range of
$0.25 to $0.33.
Howard Silver, President and Chief Executive Officer commented, “As
we communicated earlier this year, we anticipated that normalized
results for the first quarter of 2007 would be difficult to predict
because of the unusual positive impact that unexpected hurricane
business had on the Company’s financial
performance in the first quarter of 2006. Our expectations proved to be
conservative, resulting in better than expected gross operating margins
during the first quarter of 2007.”
The Company anticipates providing a full report of its first quarter
2007 earnings on May 7, 2007.
Forward Looking Statements
Certain matters discussed in this press release which are not historical
facts are “forward-looking statements”
within the meaning of the federal securities laws and involve risks and
uncertainties. The words “may,”
“plan,” “project,”
“anticipate,” “believe,”
“estimate,” “forecast,
“expect,” “intend,”
“will,” and
similar terms are intended to identify forward-looking statements, which
include, without limitation, statements concerning our outlook for the
hotel industry, acquisition and disposition plans for our hotels and
assumptions and forecasts of future results for fiscal year 2007.
Forward-looking statements are not guarantees of future performance and
involve numerous risks and uncertainties which may cause our actual
financial condition, results of operations and performance to be
materially different from the results of expectations expressed or
implied by such statements. General economic conditions, future acts of
terrorism or war, risks associated with the hotel and hospitality
business, the availability of capital, risks associated with our debt
financing, hotel operating risks and numerous other factors, may affect
our future results and performance and achievements. These risks and
uncertainties are described in greater detail in Item 1.A. of our 2006
Annual Report on Form 10-K filed on February 28th,
2007, and our other periodic filings with the United States Securities
and Exchange Commission (SEC). We undertake no obligation and do not
intend to publicly update or revise any forward-looking statement,
whether as a result of new information, future events or otherwise.
Although we believe our current expectations to be based upon reasonable
assumptions, we can give no assurance that our expectations will be
attained or that actual results will not differ materially.
Notes to Financial Information
The Company operates as a self-managed and self-administered real estate
investment trust, or REIT. Readers are encouraged to find further detail
regarding Equity Inns’ organizational
structure in its annual report on Form 10-K for the year ended December
31, 2006 as filed with the SEC.
Non-GAAP Financial Measures
Included in this press release are certain "non-GAAP financial
measures," which are measures of the Company's historical or future
financial performance that are different from measures calculated and
presented in accordance with generally accepted accounting principles,
or GAAP, within the meaning of applicable SEC rules. These include: (i)
Funds From Operations, (ii) Adjusted Funds From Operations and (iii)
Adjusted EBITDA. The following discussion defines these terms, which the
Company believes can be useful measures of its performance.
Funds from Operations
The National Association of Real Estate Investment Trusts, or NAREIT,
defines funds from operations, or FFO, as net income (loss) applicable
to common shareholders, excluding gains (or losses) from sales of real
estate, the cumulative effect of changes in accounting principles, real
estate-related depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures. FFO does not include the
cost of capital improvements or any related capitalized interest.
Equity Inns uses FFO per diluted share as a measure of performance to
adjust for certain non-cash expenses such as depreciation and
amortization because historical cost accounting for real estate assets
implicitly assumes that the value of real estate assets diminishes
predictably over time. Because real estate values have historically
risen or fallen with market conditions, many industry investors have
considered presentation of operating results for real estate companies
that use historical cost accounting to be less informative. NAREIT
adopted the definition of FFO in order to promote an industry-wide
standard measure of REIT operating performance. Accordingly, as a member
of NAREIT, Equity Inns adopted FFO as a measure to evaluate performance
and facilitate comparisons between the Company and other REITs, although
FFO and FFO per diluted share may not be comparable to those measures,
or similarly titled measures, as reported by other companies.
Additionally, FFO is used by management in the annual budget process.
Adjusted Funds From Operations
Equity Inns further adjusts FFO for losses on impairment of hotels,
prepayment penalties on extinguishment of debt and other non-cash or
unusual items. We refer to this as adjusted funds from operations, or
AFFO. The Company’s computation of AFFO and
AFFO per diluted share is not comparable to the NAREIT definition of FFO
or to similar measures reported by other REITs, but the Company believes
it is an appropriate measure for this Company. The Company uses AFFO
because it believes that this measure provides investors a useful
indicator of the operating performance of the Company’s
hotels by adjusting for the effects of certain non-cash or non-recurring
items arising from the Company’s financing
activities, impairment charges on hotels held for sale and other areas.
In addition to being used by management in the annual budget process,
AFFO per diluted share is also used by the Compensation Committee of the
Board of Directors as one of the criteria for performance-based
executive compensation.
EBITDA and Adjusted EBITDA
Earnings before Interest Expense, Income Taxes, Depreciation and
Amortization, or EBITDA, is a commonly used measure of performance in
many industries, which the Company believes provides useful information
to investors regarding its results of operations. The Company believes
that EBITDA helps investors evaluate the ongoing operating performance
of its properties and facilitates comparisons with other lodging REITs,
hotel owners who are not REITs, and other capital-intensive companies.
The Company uses EBITDA to provide a baseline when evaluating hotel
results.
The Company also uses EBITDA as one measure in determining the value of
acquisitions and dispositions and, like FFO and AFFO, it is also used by
management in the annual budget process.
The Company further adjusts EBITDA to exclude preferred stock dividends,
income or losses from discontinued operations, minority interests and
losses on impairment of hotels because it believes that including such
items in EBITDA is not consistent with reflecting the ongoing operating
performance of the remaining assets.
The Company has historically adjusted EBITDA when evaluating its
performance because management believes that the exclusion of certain
non-cash and non-recurring items described above assists the Company in
measuring the performance of its hotels and reflects the ongoing value
of the Company as a whole. Therefore, the Company modifies EBITDA and
refers to this measure as Adjusted EBITDA.
About Equity Inns
Equity Inns, Inc. is a self-advised REIT that focuses on the upscale
extended stay, all-suite and midscale limited-service segments of the
hotel industry. The Company, which ranks as the third largest hotel REIT
based on number of hotels, currently owns 132 hotels with 15,731 rooms
located in 35 states. For more information about Equity Inns, visit the
Company's Web site at www.equityinns.com.
EQUITY INNS, INC.
2007 GUIDANCE RECONCILIATION
(unaudited)
The following is a reconciliation of the Company’s
2007 forecast of net income (loss) to FFO and AFFO, both
applicable to common shareholders, and Adjusted EBITDA, and
illustrates the difference in these measures of operating
performance (in thousands, except per share and unit data):
Three Months EndedMarch 31, 2007
Twelve Months EndedDecember 31, 2007
Low End Range
High End Range
Low End Range
High End Range
FFO AND AFFO RECONCILIATION:
Net income (loss) applicable to common shareholders
$3,800
$4,800
$16,400
$20,800
Add (subtract):
(Gain) loss on sale of hotel properties
-
-
-
-
Minority interests (income) expense
70
70
385
385
Depreciation
16,000
16,000
64,000
64,000
Depreciation from discontinued operations
-
-
-
-
Funds From Operations (FFO)
19,870
20,870
80,785
85,185
Loss on impairment of hotels
-
-
-
-
Other
-
-
-
-
Adjusted Funds From Operations (AFFO)
$19,870
$20,870
$80,785
$85,185
Weighted average number of diluted common shares and Partnership
units outstanding
55,864
55,864
55,892
55,892
FFO per Share and Unit
$0.36
$0.37
$1.45
$1.52
AFFO per Share and Unit
$0.36
$0.37
$1.45
$1.52
ADJUSTED EBITDA RECONCILIATION:
Net income (loss) applicable to common shareholders
$3,800
$4,800
$16,400
$20,800
Add (subtract):
Preferred stock dividends
3,087
3,087
12,347
12,347
(Income) loss from discontinued operations
-
-
-
-
Minority interests (income) expense
70
70
385
385
Interest expense, net
11,000
11,000
47,000
48,000
Loss on impairment of hotels
-
-
-
-
Depreciation
16,000
16,000
64,000
64,000
Amortization of non-cash stock-based compensation and deferred
expenses
875
875
3,600
3,600
Adjusted EBITDA
$34,832
$35,832
$143,732
$149,132