ENN Equity Inns

Equity Inns, Inc.: -0- *T ************Highlights************ -- AFFO and RevPAR Exceeds Previous Guidance -- -- RevPAR Increases 6.9%, with ADR Growing 7.7% -- -- Record Quarterly Hotel Revenue Rises 21% to $100 Million -- -- Gross Operating Profit Margin Improves to a Company Record 45.2% -- -- Adjusted EBITDA Grows Nearly 19% -- *T Equity Inns, Inc. (NYSE: ENN), the third largest hotel real estate investment trust (REIT), today announced its results for the three and the six months ended June 30, 2006. Adjusted funds from operations (AFFO) per diluted share for the second quarter ended June 30, 2006 increased 8.8% to $0.37 as compared to $0.34 per diluted share in the same period last year. Adjusted EBITDA rose 18.7% to $33.7 million in the second quarter 2006 as compared to $28.4 million in second quarter 2005. Net income applicable to common shareholders for the second quarter 2006 was $8.6 million, or $0.16 per diluted share, as compared to net income of $3.2 million, or $0.06 per diluted share in the prior year period. The Company recorded an impairment loss during the second quarter 2006 of approximately $3.0 million, or $0.05 per diluted share, related to the write-down of a 19 year-old Hampton Inn, located in Nashville, Tennessee, to its estimated net realizable value. The impairment loss was the only difference between funds from operations (FFO) and AFFO for the second quarter 2006. For the six months ended June 30, 2006, Equity Inns reported an 18.6% increase in AFFO per diluted share to $0.70, as compared to $0.59 per diluted share in the same period a year ago. Adjusted EBITDA increased 26.1% to $64.7 million for the six months ended 2006. Net income applicable to common shareholders for the six months ended June 30, 2006 was $5.3 million, or $0.10 per diluted share, as compared to net income of $5.0 million, or $0.09 per diluted share in the prior year period. Financial Highlights for the Second Quarter and Six Months of 2006: Total hotel revenue increased 21.3% to $100.1 million for the second quarter 2006 as compared to $82.5 million for the second quarter 2005. The Company's all comparable RevPAR growth of 6.9% was driven by a 7.7% increase in average daily rate (ADR) to $96.38, offset slightly by a 60 basis point decline in occupancy to 75.6%. The slight decline in occupancy was due to nine hotels that were under planned renovations during the second quarter 2006. RevPAR increased 4.9% in April, 9.0% in May and 6.3% in June, as compared to the same periods in 2005. Of the Company's total hotel revenue increase of $17.6 million, $12.6 million was due to net incremental revenue from hotel acquisitions completed during 2005 and 2006 and $5.0 million was due to same-store operations. The Company's total hotel revenue for the six months ended June 2006 was $192.6 million, an increase of 25.3% from $153.7 million for the six months ended June 2005. RevPAR increased 8.3% on a year-to-date basis for all comparable hotels, driven by 7.9% growth in ADR and a 30 basis point improvement in occupancy. Howard A. Silver, President and Chief Executive Officer, stated, "Our strategy continues to be to drive RevPAR growth through increasing our ADR, as our hotels continue to sustain historically strong occupancy levels. We executed well on this strategy during the quarter, as over 100% of our RevPAR growth came through rate. Our RevPAR performance exceeded our previous RevPAR guidance of 5% to 6%, while our AFFO exceeded our expectation of $0.34 to $0.36 per diluted share. We realized solid RevPAR growth, despite having nine hotels under significant planned renovations. Excluding the nine hotels under renovation, our RevPAR would have increased 8.2%." The Company's gross operating profit margin (GOP margin) increased 50 basis points to 45.2% in the second quarter 2006 as compared to the second quarter 2005, primarily due to the Company's growth in RevPAR through increased ADR. Same-store GOP margin for the second quarter 2006 increased 20 basis points to 44.8% on a year-over-year basis. GOP margin for the six months ended June 30, 2006 improved 150 basis points to 45.2% as compared to the same period last year. Same-store GOP margin for the six months ended June 30, 2006 improved 80 basis points to 44.3% on a year-over-year basis. Other Second Quarter 2006 Highlights: -- In April 2006, Equity Inns completed the purchase of the 66-suite Residence Inn in Mobile, Alabama from McKibbon Hotel Group. -- In April 2006, the Company sold a 122-room exterior corridor Hampton Inn in Chapel Hill, North Carolina for approximately $5.3 million. -- In May 2006, the Company sold a 126-room Hampton Inn in Scottsdale, Arizona for approximately $12.2 million, resulting in a gain of approximately $4.5 million. -- In June 2006, Equity Inns expanded its presence in the Orlando, Florida market with the purchase of the 246-suite Embassy Suites/International Drive for $28.0 million. Subsequent Events: -- In July 2006, Equity Inns signed an agreement to purchase three hotels from LinGate Hospitality for $26.2 million. The three hotels include two 122-suite SpringHill Suites by Marriott located in San Antonio, Texas and Houston, Texas and a 144-room Fairfield Inn & Suites located in the Atlanta suburb of Vinings. Capital Structure: At June 30, 2006, Equity Inns had $564.0 million of long-term debt outstanding, which included $51.0 million drawn under its $125.0 million line of credit. The weighted average interest rate of the Company's debt at the end of the second quarter 2006 was 6.7% versus 6.9% for the second quarter 2005. Total debt represented 41.3% of the historical cost of the Company's hotels and represented 35% of the Company's total enterprise value at the end of the second quarter 2006. Equity Inns' leverage ratio was 4.2 times at the end of the second quarter 2006, which is a five-year low for the Company. Fixed rate debt, including variable rate debt hedged by interest rate swaps, amounted to approximately 96.2% of total debt. At June 30, 2006, the Company's outstanding common stock and partnership units were a combined 55.6 million. Dividend: During the second quarter 2006, the Company declared a common stock dividend of $0.19 per share, an increase of 27% as compared to the second quarter 2005. The Company has increased its common stock dividend three times for a total of 46% since the second quarter of 2004. The Company's trailing twelve months' cash available for distribution (CAD) payout ratio was 62%, a low payout ratio based on the Company's history. Mr. Silver concluded, "During the quarter, we purchased a Residence Inn and an Embassy Suites hotel, two strong brands in the upscale segment market. Our transaction activity, during the quarter and over the long-term, is driven by our goal of increasing our focus on premium branded assets such as Marriott and Hilton in key markets that we believe have significant upside. This strategy has resulted in the acquisition of 42 hotels, at an average capitalization rate of approximately 10%, and the disposition of 11 older hotels since late 2003. Our portfolio management during this time has enabled us to reduce our portfolio's age to 13 years and increase our portfolio's average franchise life to 12 years, thus enabling the Company to maintain the highest portfolio value possible. Additionally, our capital structure continues to be in solid shape and our acquisition pipeline remains strong, which we expect will allow us to continue our strategy going forward." 2006 Guidance: Based upon the Company's expectations for continued improvement of the U.S. economy, moderate supply growth, further improvement in the upscale and mid-scale lodging sectors, recent acquisitions and divestitures, additional planned expense increases, room renovations, and given the results of the second quarter 2006, Equity Inns is updating the Company's RevPAR, Adjusted EBITDA, AFFO and net income per diluted share guidance, which is as follows: -- RevPAR growth for 2006 is expected to range from 6% to 8%, with the majority of the increase being attributed to rate. The third quarter increase is expected to be in the range of 5.5% to 7.5%, and the fourth quarter increase is expected to be in the range of 2% to 6.5% due to the difficult comparisons related to the positive 2005 hurricane impact. -- Adjusted EBITDA is expected to range from $126 million to $129 million. -- AFFO should be in the range of $1.30 to $1.35 per diluted share. -- Net income applicable to common shareholders should be in the range of $0.20 to $0.26 per diluted share. Equity Inns expects that its remaining 2006 results will contribute to full year AFFO as follows: third quarter, 29% and fourth quarter, 19%. Additionally, the Company continues to expect 2006 capital expenditures to be approximately $40.0 million. Conference Call: Equity Inns will hold a conference call and webcast to discuss the Company's second quarter results after the market close on August 3, 2006, at 4:30 p.m. (Eastern Time). Interested investors and other parties may listen to the conference call by dialing 800-819-9193 or 913-981-4911 for international participants. A simultaneous webcast of the conference call may be accessed by logging onto the Company's website at http://www.equityinns.com/ and selecting the microphone icon. A replay of the conference call will be available on the Internet at www.streetevents.com and the Company's website, http://www.equityinns.com for seven days following the call. A recording of the call will also be available by telephone August 3, 2006 through August 10, 2006 by dialing 888-203-1112 or 719-457-0820 for international participants. The pass code is 6473022. 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 2006. 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 our 2005 Annual Report on Form 10-K filed on March 15, 2006, 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, 2005 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) Gross Operating Profit Margin, (ii) Funds From Operations, (iii) Adjusted Funds From Operations, (iv) Adjusted EBITDA, (v) Cash Available for Distribution (CAD), (vi) CAD Payout Ratio, (vii) Capitalization Rate (viii) Leverage Ratio, (ix) Total Shareholder Return and (x) Hotel Operating Statistics. The following discussion defines these terms, which the Company believes can be useful measures of its performance. Gross Operating Profit Margin The Company uses a measure common in the hotel industry to evaluate its operating results. Gross operating profit margin (GOP margin) is defined as hotel revenues minus hotel operating costs before property taxes, insurance and management fees, divided by hotel revenues. 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. 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. Cash available for distribution (CAD) and CAD Payout Ratio Cash available for distribution (CAD) is defined as AFFO, adjusted for certain non-cash amortization and an allowance for recurring capital expenditures equal to four percent of hotel room revenue from continuing operations. The Company computes the CAD Payout Ratio by dividing common dividends per share and unit paid over the last twelve months by trailing twelve-month CAD per share for the same period. The Company believes the CAD Payout Ratio also helps improve equity holders' ability to understand the Company's ability to make distributions to its shareholders. Capitalization Rate The Company uses a measure common in the hotel industry to discuss its underwriting of acquired or disposed hotel assets. Capitalization rate, for this discussion, is defined as the percentage derived by dividing the net operating income of the hotel asset(s), less a management fee and an allowance for recurring capital expenditures, by the purchase price paid or received for the hotel asset(s). Leverage Ratio The Company uses a measure common in the hotel industry to evaluate its financial leverage. Leverage ratio is defined as the Company's long-term debt divided by EBITDA as defined in the financial covenants of its Line of Credit. Total Shareholder Return The Company uses a measure common in the hotel industry to discuss its return to common shareholders. Total shareholder return is defined as reinvested stock dividend income plus the percentage of stock price appreciation or minus the percentage of stock price reduction over the respective period. Total shareholder return is also used by the Compensation Committee of the Board of Directors as one of the criteria for performance-based executive compensation. Hotel Operating Statistics The Company uses a measure common in the hotel industry to evaluate the operations of its hotel room revenue per available room, or RevPAR. RevPAR is the product of the average daily rate, or ADR, charged and the average daily occupancy achieved. RevPAR does not include food and beverage or other ancillary revenues such as parking, telephone, or other guest services generated by the property. Similar to the reporting periods for the Company's statement of operations, hotel operating statistics (i.e., RevPAR, ADR and average occupancy) are reported based on a quarter end. This facilitates year-to-year comparisons of hotel results, as each reporting period will be comprised of the same number of days of operations as in the prior year. GOP Margin, FFO, AFFO, FFO per share, AFFO per share, Adjusted EBITDA, CAD, CAD Payout Ratio, Capitalization Rate, Leverage Ratio, Total Shareholder Return and Hotel Operating Statistics presented, may not be comparable to the same or similarly titled measures calculated by other companies and may not be helpful to investors when comparing Equity Inns to other companies. This information should not be considered as an alternative to net income, income from operations, cash from operations, or any other operating performance measure prescribed by GAAP. Cash expenditures for various long-term assets (such as renewal and replacement capital expenditures), interest expense (for Adjusted EBITDA purposes) and other items have been and will be incurred and are not reflected in the Adjusted EBITDA, FFO and AFFO per share presentations. Equity Inns' statement of operations and cash flows include disclosure of its interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating the Company's performance, as well as the usefulness of its non-GAAP financial measures. Additionally, FFO, AFFO, FFO per share, AFFO per share, Adjusted EBITDA and CAD should not be considered as a measure of the Company's liquidity or indicative of funds available to fund its cash needs, including the Company's ability to make cash distributions. In addition, FFO per share, AFFO per share and CAD do not measure, and should not be used as measures of, amounts that accrue directly to shareholders' benefit. 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 126 hotels with 15,091 rooms located in 36 states. For more information about Equity Inns, visit the Company's Web site at www.equityinns.com. -0- *T EQUITY INNS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data) June 30, December 31, 2006 2005 (unaudited) ASSETS Investment in hotel properties, net $1,016.378 $ 978,233 Assets held for sale 13,153 - Cash and cash equivalents 10,737 6,556 Accounts receivable, net of doubtful accounts of $200 and $175, respectively 9,264 8,960 Interest rate swaps 1,068 877 Note receivable 1,663 1,688 Deferred expenses, net 11,669 11,927 Deposits and other assets, net 20,195 17,595 Total Assets $1,084,127 $1,025,836 LIABILITIES AND SHAREHOLDERS' EQUITY Long-term debt $ 563,994 $ 557,475 Accounts payable and accrued expenses 44,065 39,204 Distributions payable 12,628 10,674 Minority interests in Partnership 5,274 8,363 Total Liabilities 625,961 615,716 Commitments and Contingencies Shareholders' Equity: Preferred Stock, $.01 par value, 10,000,000 shares authorized Series B, 8.75%, $.01 par value, 3,450,000 and 3,450,000 shares issued and outstanding 83,524 83,524 Series C, 8.00%, $.01 par value, 2,400,000 and 0 shares issued and outstanding 57,861 - Common stock, $.01 par value, 100,000,000 shares authorized, 55,464,961 and 54,749,308 shares issued and outstanding 555 547 Additional paid-in capital 576,120 573,473 Treasury stock, at cost, 747,600 shares (5,173) (5,173) Unearned directors' and officers' compensation - (2,815) Distributions in excess of net earnings (255,789) (240,313) Unrealized gain (loss) on interest rate swaps 1,068 877 Total Shareholders' Equity 458,166 410,120 Total Liabilities and Shareholders' Equity $1,084,127 $1,025,836 EQUITY INNS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data) (unaudited) For the For the Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Revenue: Room revenue $ 96,220 $79,013 $185,271 $147,196 Other hotel revenue 3,833 3,467 7,327 6,496 Total revenue 100,053 82,480 192,598 153,692 Operating expenses: Direct hotel expenses 54,680 44,698 104,947 83,591 Other hotel expenses 2,857 2,529 5,464 4,812 Depreciation 13,048 11,182 25,810 22,005 Property taxes, rental expense and insurance 6,469 5,113 12,203 10,230 General and administrative expenses: Non-cash stock-based compensation 1,040 328 2,043 763 Other general and administrative expenses 2,485 1,781 5,494 3,903 Loss on impairment of hotels 3,000 - 8,895 - Total operating expenses 83,579 65,631 164,856 125,304 Operating income 16,474 16,849 27,742 28,388 Interest expense, net 9,640 8,550 19,507 16,556 Income (loss) from continuing operations before minority interests and income taxes 6,834 8,299 8,235 11,832 Minority interests income (expense) (168) (70) (110) (118) Deferred income tax benefit (expense) - - - - Income (loss) from continuing operations 6,666 8,229 8,125 11,714 Discontinued operations: Gain (loss) on sale of hotel properties 4,552 - 4,535 - Loss on impairment of hotels held for sale - (3,500) (3,005) (3,500) Income (loss) from operations of discontinued operations 432 371 1,167 540 Income (loss) from discontinued operations 4,984 (3,129) 2,697 (2,960) Net income (loss) 11,650 5,100 10,822 8,754 Preferred stock dividends (3,087) (1,887) (5,560) (3,773) Net income (loss) applicable to common shareholders $ 8,563 $ 3,213 $ 5,262 $ 4,981 Net income (loss) per share data: Basic and diluted income (loss) per share: Continuing operations $ 0.07 $ 0.12 $ 0.05 $ 0.15 Discontinued operations 0.09 (0.06) 0.05 (0.06) Net income (loss) per common share $ 0.16 $ 0.06 $ 0.10 $ 0.09 Weighted average number of common shares outstanding, basic and diluted 54,630 53,984 54,470 53,031 EQUITY INNS, INC. RECONCILIATION OF NET INCOME (LOSS) TO FUNDS FROM OPERATIONS, ADJUSTED FUNDS FROM OPERATIONS AND CASH AVAILABLE FOR DISTRIBUTION (unaudited) The following is a reconciliation of net income (loss) to FFO and AFFO, both applicable to common shareholders, and cash available for distribution and illustrates the difference in these measures of operating performance (in thousands, except per share and unit data): For the For the Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Net income (loss) applicable to common shareholders $ 8,563 $ 3,213 $ 5,262 $ 4,981 Add (subtract): (Gain) loss on sale of hotel properties (4,552) - (4,535) - Minority interests (income) expense 168 70 110 118 Depreciation 13,048 11,182 25,810 22,005 Depreciation from discontinued operations 122 565 572 1,143 Funds From Operations (FFO) 17,349 15,030 27,219 28,247 Loss on impairment of hotels 3,000 3,500 11,900 3,500 Fees incurred on indefinitely postponed unsecured offering - 245 - 245 Adjusted Funds From Operations (AFFO) 20,349 18,775 39,119 31,992 Add: Amortization of debt issuance costs 511 497 977 961 Amortization of deferred expenses and stock-based compensation 1,132 413 2,227 932 Capital reserves (4,002) (3,299) (7,412) (5,888) Cash Available for Distribution $17,990 $16,386 $34,911 $27,997 Weighted average number of diluted common shares and Partnership units outstanding 55,627 55,406 55,591 54,460 FFO per Share and Unit $ 0.31 $ 0.27 $ 0.49 $ 0.52 AFFO per Share and Unit $ 0.37 $ 0.34 $ 0.70 $ 0.59 Cash Available for Distribution per Share and Unit $ 0.32 $ 0.30 $ 0.63 $ 0.51 EQUITY INNS, INC. RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA (unaudited) The following is a reconciliation of net income (loss) applicable to common shareholders to Adjusted EBITDA and illustrates the difference in these measures of operating performance (in thousands): For the For the Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Net income (loss) applicable to common shareholders $ 8,563 $ 3,213 $ 5,262 $ 4,981 Add (subtract): Preferred stock dividends 3,087 1,887 5,560 3,773 (Income) loss from discontinued operations (4,984) 3,129 (2,697) 2,960 Minority interests (income) expense 168 70 110 118 Interest expense, net 9,640 8,550 19,507 16,556 Loss on impairment of hotels 3,000 - 8,895 - Depreciation 13,048 11,182 25,810 22,005 Amortization of deferred expenses and stock-based compensation 1,132 413 2,227 932 Adjusted EBITDA $33,654 $28,444 $64,674 $51,325 EQUITY INNS, INC. 2006 GUIDANCE RECONCILIATION (unaudited) The following is a reconciliation of the Company's 2006 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 Ended Twelve Months Ended September 30, 2006 December 31, 2006 Low End High End Low End High End Range Range Range Range FFO AND AFFO RECONCILIATION: Net income (loss) applicable to common shareholders $ 7,100 $ 8,100 $ 11,235 $ 14,285 Add (subtract): (Gain) loss on sale of hotel properties - - (4,535) (4,535) Minority interests (income) expense 200 300 500 550 Depreciation 13,100 13,100 53,000 53,000 Funds From Operations (FFO) 20,400 21, 500 60,200 63,300 Loss on impairment of hotels - - 11,900 11,900 Other - - - - Adjusted Funds From Operations (AFFO) $20,400 $ 21,500 $ 72,100 $ 75,200 Weighted average number of diluted common shares and Partnership units outstanding 55,645 55,645 55,658 55,658 FFO per Share and Unit $ 0.37 $ 0.39 $ 1.08 $ 1.14 AFFO per Share and Unit $ 0.37 $ 0.39 $ 1.30 $ 1.35 ADJUSTED EBITDA RECONCILIATION: Net income (loss) applicable to common shareholders $ 7,100 $ 8,100 $ 11,235 $ 14,285 Add (subtract): Preferred stock dividends 3,100 3,100 11,850 11,850 (Income) loss from discontinued operations (185) (235) (2,880) (2,980) Minority interests (income) expense 200 300 500 550 Interest expense, net 9,500 9,700 39,100 39,400 Loss on impairment of hotels - - 8,895 8,895 Depreciation 13,100 13,100 53,000 53,000 Amortization of deferred expenses and stock-based compensation 1,200 1,200 4,200 4,200 Adjusted EBITDA $34,015 $ 35,265 $125,900 $129,200 Equity Inns, Inc. Hotel Performance For the Three Months Ended June 30, 2006 and 2005 All Comparable (1) RevPAR (2) Occupancy ADR ---------------- --------------- ------------ # of Variance Variance Variance Hotels 2006 to 2005 2006 to 2005 2006 to 2005 ------ ---- -------- ---- --------- ---- ------- Portfolio -0.6 126 $ 72.87 6.9% 75.6% pts. $ 96.38 7.7% Franchise AmeriSuites 2.2 18 $ 61.22 10.2% 72.4% pts. $ 84.56 6.9% Comfort Inn -3.1 2 $ 66.61 -1.9% 64.3% pts. $103.61 2.9% Courtyard -0.6 13 $ 86.71 7.4% 82.9% pts. $104.65 8.2% Embassy Suites 4.1 1 $ 96.53 14.1% 77.3% pts. $124.96 8.1% Hampton Inn 0.0 48 $ 65.98 8.0% 74.7% pts. $ 88.36 7.9% Hampton Inn & -4.3 Suites 2 $ 83.81 4.7% 75.9% pts. $110.38 10.7% Hilton Garden Inn -6.6 2 $ 79.82 -0.8% 69.4% pts. $114.97 8.7% Holiday Inn -1.7 4 $ 52.66 11.9% 65.7% pts. $ 80.15 14.8% Homewood Suites -1.0 10 $ 96.60 7.9% 81.8% pts. $118.06 9.2% Residence Inn -3.2 22 $ 82.28 2.0% 77.8% pts. $105.78 6.2% SpringHill Suites -0.4 3 $ 76.96 8.6% 78.8% pts. $ 97.64 9.2% TownePlace Suites -15.5 1 $ 46.71 -19.4% 64.9% pts. $ 71.97 -0.2% Region East North Central -1.2 18 $ 68.60 7.3% 71.4% pts. $ 96.06 9.0% East South Central -2.5 18 $ 66.90 4.4% 75.9% pts. $ 88.13 7.9% Middle Atlantic -3.2 6 $ 76.50 -0.2% 71.7% pts. $106.69 4.2% Mountain -1.7 9 $ 67.25 3.1% 76.2% pts. $ 88.24 5.4% New England 4.7 7 $ 65.25 8.8% 72.7% pts. $ 89.80 1.8% Pacific -0.3 3 $102.34 11.0% 83.4% pts. $122.67 11.4% South Atlantic -1.4 48 $ 77.36 6.6% 76.9% pts. $100.55 8.5% West North Central 6.2 7 $ 69.11 16.1% 75.5% pts. $ 91.58 6.5% West South Central 1.2 10 $ 69.88 11.3% 77.8% pts. $ 89.82 9.6% Type All Suite 2.4 19 $ 64.68 10.8% 72.9% pts. $ 88.75 7.2% Extended Stay -2.7 33 $ 86.71 4.0% 79.0% pts. $109.81 7.5% Full Service -3.9 5 $ 59.91 5.4% 65.7% pts. $ 91.13 11.6% Limited Service -0.3 69 $ 70.33 7.5% 75.8% pts. $ 92.74 8.0% (1) All Comparable is defined as our system-wide gross lodging revenues for hotels that the Company owned at period end. (2) RevPAR is calculated by multiplying the Company's average daily rate (ADR) by occupancy. Equity Inns, Inc. Hotel Performance For the Six Months Ended June 30, 2006 and 2005 All Comparable (1) RevPAR (2) Occupancy ADR ---------------- --------------- ------------ # of Variance Variance Variance Hotels 2006 to 2005 2006 to 2005 2006 to 2005 ------ ---- -------- ---- --------- ---- ------- Portfolio 0.3 126 $ 71.30 8.3% 73.1% pts. $ 97.54 7.9% Franchise AmeriSuites 2.8 18 $ 59.92 12.7% 70.5% pts. $ 85.00 8.2% Comfort Inn -4.1 2 $ 63.30 -5.6% 62.7% pts. $100.89 0.6% Courtyard 1.0 13 $ 86.37 8.6% 81.9% pts. $105.52 7.3% Embassy Suites 0.3 1 $103.76 5.7% 78.3% pts. $132.58 5.4% Hampton Inn 1.3 48 $ 63.96 10.8% 71.1% pts. $ 90.02 8.8% Hampton Inn & Suites -0.5 2 $103.69 12.4% 80.5% pts. $128.90 13.1% Hilton Garden Inn -7.0 2 $ 88.18 -0.2% 68.6% pts. $128.57 9.9% Holiday Inn -2.6 4 $ 44.07 9.7% 59.0% pts. $ 74.71 14.5% Homewood Suites 0.6 10 $ 91.63 8.9% 79.4% pts. $115.35 8.0% Residence Inn -3.3 22 $ 79.77 1.9% 75.4% pts. $105.77 6.3% SpringHill Suites 1.3 3 $ 75.51 10.2% 77.2% pts. $ 97.86 8.4% TownePlace Suites -8.6 1 $ 54.02 -8.8% 76.6% pts. $ 70.51 1.4% Region East North Central 1.1 18 $ 61.73 11.4% 66.1% pts. $ 93.43 9.5% East South Central 0.2 18 $ 64.33 8.1% 74.1% pts. $ 86.87 7.9% Middle Atlantic -5.9 6 $ 64.20 -5.1% 62.9% pts. $102.13 3.8% Mountain -1.2 9 $ 68.70 6.0% 74.5% pts. $ 92.16 7.8% New England 3.9 7 $ 59.47 7.9% 67.6% pts. $ 87.98 1.6% Pacific 3.7 3 $ 95.43 14.2% 80.2% pts. $118.97 8.9% South Atlantic -1.1 48 $ 81.23 6.8% 76.7% pts. $105.90 8.4% West North Central 4.9 7 $ 63.63 14.8% 70.9% pts. $ 89.77 6.9% West South Central 3.9 10 $ 67.70 16.8% 76.2% pts. $ 88.79 10.8% Type All Suite 2.6 19 $ 64.19 11.6% 71.3% pts. $ 90.09 7.6% Extended Stay -2.0 33 $ 83.54 4.4% 77.0% pts. $108.56 7.1% Full Service -3.8 5 $ 51.55 2.7% 60.1% pts. $ 85.73 9.3% Limited Service 1.0 69 $ 69.75 10.0% 73.1% pts. $ 95.42 8.5% (1) All Comparable is defined as our system-wide gross lodging revenues for hotels that the Company owned at period end. (2) RevPAR is calculated by multiplying the Company's average daily rate (ADR) by occupancy. *T