ENN Equity Inns

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�