Equity Inns Announces Second Quarter 2007 Results.GERMANTOWN, Tenn. -- Equity Inns, Inc. (NYSE NYSE See: New York Stock Exchange : ENN ENN Environmental News Network ENN Emergency Nutrition Network (Oxford, UK) ENN Electronic News Network ENN Electronic Neural Network ENN Expanded Neural Network ), the third largest hotel real estate investment trust (REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). ), today announced its results for the three and six months ended June 30, 2007. Adjusted funds from operations Funds From Operations (FFO) Used by real estate and other investment trusts to define the cash flow from trust operations; earnings with depreciation and amortization added back. (AFFO AFFO Adjusted Funds From Operation ) for the three months ended June 30, 2007 increased 35% to $0.50 per diluted share, as compared to $0.37 per diluted share for the three-month period ended June 30, 2006. Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) A metric used to show a company's profitability, but not its cash flow. EBITDA became popular in the 1980s to show the potential profitability of leveraged buyouts, but has become was $41.6 million for the second quarter of 2007 as compared to $33.5 million for the second quarter of 2006. Net income applicable to common shareholders for the second quarter of 2007 was $10.3 million, or $0.19 per diluted share, as compared to $8.6 million, or $0.16 per diluted share in the prior year period. The only difference between AFFO and funds from operations (FFO FFO See: Funds from operations ) for the second quarter of 2007 was approximately $1.6 million, or $0.03 per diluted share, related to transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). associated with the Company's pending definitive merger agreement with an affiliate of Whitehall Street Global Real Estate Limited Partnership 2007 (Whitehall), an affiliate of Goldman Sachs The Goldman Sachs Group, Inc., or simply Goldman Sachs (NYSE: GS) is one of the world's largest global investment banks. Goldman Sachs was founded in 1869, and is headquartered in the Lower Manhattan area of New York City at 85 Broad Street. & Co., Inc. These merger costs are included as a component of general and administrative expenses in the accompanying condensed con·dense v. con·densed, con·dens·ing, con·dens·es v.tr. 1. To reduce the volume or compass of. 2. To make more concise; abridge or shorten. 3. Physics a. consolidated statements of operations. The merger with Whitehall is expected to be completed in the fourth quarter of 2007. Financial Highlights for the Second Quarter 2007: Total hotel revenue increased to $117.5 million for the second quarter of 2007 as compared to $99.5 million for the second quarter of 2006. The Company's all comparable revenue per available room (RevPAR) growth for the second quarter of 2007 was 7.8% as compared to the second quarter of 2006. This improvement was driven primarily by a 7.7% increase in the average daily rate (ADR ADR - Astra Digital Radio ) to $106.47 and a slight improvement in occupancy to 77.1%. The Company's all comparable RevPAR results exclude the negative impact of the repositioning repositioning Laparoscopic surgery The changing of a Pt's position during a procedure to improve access or visualization of the operative field, which may be linked to complications, as it changes anatomic planes of operation. Cf Laparoscopic surgery. of the Company's 18 AmeriSuites hotels which are being converted to Hyatt Place  This article or section is written like an .Please help [ rewrite this article] from a neutral point of view. Mark blatant advertising for , using . hotels on an ongoing basis throughout 2007. Management believes that excluding these hotels is a more accurate measure of the normalized performance of the Company's hotel portfolio. Including the 18 AmeriSuites hotels, all comparable RevPAR growth for the second quarter of 2007 was 6.6%. The Company's gross operating profit margin Operating profit margin The ratio of operating profit to net sales. (GOP margin) increased 180 basis points to 47.4% in the second quarter of 2007 as compared to the second quarter of 2006, excluding the Company's 18 AmeriSuites hotels. Including the 18 AmeriSuites hotels, the Company's GOP margin improved 130 basis points to 46.7%. Capital Structure: At June 30, 2007, Equity Inns had $690.5 million of long-term debt Long-Term Debt Loans and financial obligations lasting over one year. Notes: For example debts obligations such as bonds and notes which have maturities greater than one year would be considered long-term debt. outstanding. Total debt represented 46.4% of the historical cost of the Company's hotels at the end of the second quarter 2007. Equity Inns' leverage ratio of 4.7 times at the end of the second quarter 2007 is near a five-year low for the Company. Fixed rate debt, together with variable rate debt hedged by an interest rate swap Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. , amounted to approximately 100% of total debt. At June 30, 2007, the Company's outstanding common stock and partnership units were a combined 56.0 million. Dividend: During the second quarter of 2007, the Company paid a cash dividend on its common stock of $0.25 per share. The $0.25 per share common dividend represents a 32% increase over the prior year quarter. Earnings Call and Forward-Looking Earnings Guidance: Given the pending merger with Whitehall, the Company does not intend to have an earnings call regarding today's announcement nor provide any further forward-looking earnings guidance. Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 and the anticipated closing of the Company's merger with an affiliate of Whitehall. 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. Such risks and uncertainties include, but are not limited to, the following: the ability of the Company to complete the merger with an affiliate of Whitehall on the terms and the conditions set forth in the agreement and plan of merger, the ability of the Company to cope with domestic economic and political disruption, war, terrorism, states of emergency or similar activities; risks associated with debt financing Debt Financing When a firm raises money for working capital or capital expenditures by selling bonds, bills, or notes to individual and/or institutional investors. In return for lending the money, the individuals or institutions become creditors and receive a promise to repay ; risks associated with the hotel and hospitality industry; the ability of the Company to successfully implement its operating strategy; availability of capital; changes in economic cycles; competition from other hospitality companies; and changes in the laws and government regulations applicable to it.. These risks and uncertainties are described in greater detail in Item 1.A. of our Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 10-K. for the year ended December 31, 2006 filed with the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. Securities and Exchange Commission (SEC) on February 28, 2007, and our other periodic filings with the 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 This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. in its Annual Report on Form 10-K for the year ended December 31, 2006 as filed with the SEC. Non-GAAP Financial Measures Periodically in press releases the Company uses 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 The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting , or GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (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 Payout Ratio The percentage of earnings paid out in dividends. It is calculated by dividing dividends per share by earnings per share. Notes: The payout ratio indicates how well earnings support the dividend payments: the lower the ratio, the more secure the dividend. , (vii) Capitalization Rate Capitalization Rate According to the Appraisal Institute, it is a method used to convert an estimate of a single year's income expectancy into an indication of value in one direct step, by dividing the income estimate by an appropriate 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, gross operating profit margin (GOP margin), to evaluate its operating results. GOP margin is defined as total hotel revenue minus hotel operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. before property taxes, insurance and management fees, divided by hotel revenues. Funds from Operations The National Association of Real Estate Investment Trusts, or NAREIT NAREIT National Association of Real Estate Investment Trusts , 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 Capitalized interest Interest that is not immediately expensed, but rather is considered as an asset and is then amortized through the income statement over time. In the context of project financing, interest that is paid by additional borrowing. . 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 The destruction or cancellation of a right, a power, a contract, or an estate. Extinguishment is sometimes confused with merger, though there is a clear distinction between them. of debt and other non-cash or unusual items, including transaction costs relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the pending merger with an affiliate of Whitehall. 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 Stock shares that have preferential rights to dividends or to amounts distributable on liquidation, or to both, ahead of common shareholders. Preferred stock is given preference over common stock. Holders of preferred stock receive dividends at a fixed annual rate. dividends, income or losses from discontinued operations Discontinued operations Divisions of a business that have been sold or written off and that no longer are maintained by the business. , 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 total hotel revenue from continuing operations continuing operations Parts of a business that are expected to be maintained as an ongoing segment of an overall business operation. Income and losses from continuing operations are reported separately if any segments have been discontinued during the . The Company computes the CAD Payout Ratio by dividing common dividends per share Dividends per share Dividend paid for the past 12 months divided by the number of common shares outstanding, as reported by a company. The number of shares often is determined by a weighted average of shares outstanding over the reporting term. 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 Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. 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 F&B is a common abbreviation in the United States and Commonwealth countries, including Hong Kong. F&B is typically the widely accepted abbreviation for "Food and Beverage," which is the sector/industry that specializes in the conceptualization, the making of, and delivery of foods. 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 See Income statement. , hotel operating statistics (i.e., RevPAR, ADR and average occupancy) are reported based on quarter end and year-to-date measures. 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 Long-Term Assets 1. Reported on the balance sheet, it's the value of a company's property, equipment and other capital assets, less depreciation. 2. A stock, bond or other asset that you plan on holding in your portfolio for a lengthy period of time. (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 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 133 hotels with 15,822 rooms located in 35 states. For more information about Equity Inns, visit the Company's Web site at www.equityinns.com. [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] [TABLE OMITTED] (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. [TABLE OMITTED] (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. |
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