Equity Inns Expects Fourth Quarter Adjusted Funds from Operations to Exceed Expectations; Fourth Quarter AFFO Expected to Be in
06 January 2006 - 8:48AM
Business Wire
Equity Inns, Inc. (NYSE: ENN), the third largest hotel real estate
investment trust (REIT), today announced that the Company expects
adjusted funds from operations (AFFO) for the fourth quarter 2005
to be in the range of $0.23 per share to $0.25 per share versus
previous expectations of $0.17 per share to $0.19 per share. The
Company expects net income applicable to common shareholders for
the fourth quarter 2005 to be in the range of $0.07 per share to
$0.09 per share. The better than expected results are due primarily
to the Company's quarterly revenue per available room (RevPAR)
exceeding initial forecasts. A fourth quarter 2005 RevPAR increase
in excess of 8.0% has surpassed the Company's prior forecasts due,
in part, to higher than anticipated occupancies in the Company's
Florida and Gulf Coast hotels following Hurricanes Katrina and
Wilma. The Company estimates approximately $0.03 per share in AFFO
is attributable to positive business related to the effects from
the hurricane season. In addition, higher than anticipated demand
across the balance of the Company's portfolio enabled the Company
to significantly exceed earlier RevPAR projections. Howard Silver,
President and Chief Executive Officer commented, "We entered the
quarter mindful of the exceptionally strong year-over-year RevPAR
growth that our Florida portfolio exhibited in the fourth quarter
2004 and the impact of fewer available rooms due to the renovation
of four Northeast Residence Inn assets. We are pleased that market
operating dynamics afforded the Company growth in occupancy and the
ability to garner an increase in average daily rate across our
portfolio. However, we do not believe that incremental increased
occupancy for several of our hotels will be sustainable in 2006."
The Company anticipates providing a full report of its fourth
quarter 2005 earnings on February 16, 2006. 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 2005.
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 Current Report on Form 8-K filed
on March 16, 2005 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, 2004
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, and (ix)
Hotel Operating Statistics. 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
(computed in accordance with generally accepted accounting
principles), excluding gains (or losses) from sales of property,
plus depreciation and amortization, and after adjustments for
unconsolidated partnerships and joint ventures.. FFO is presented
on a per share basis after making adjustments for the effect of
dilutive securities. Equity Inns uses FFO per 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. FFO is also 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 share is also used by the Compensation Committee
of the Board of Directors as one of the criteria for
performance-based compensation. 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 share may not be comparable to those measures or similarly
titled measures as reported by other companies. 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
123 hotels with 14,788 rooms located in 36 states. For more
information about Equity Inns, visit the Company's Web site at
www.equityinns.com.
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