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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q
- -----
X Quarterly Report Pursuant to Section 13 or 15(d) of
- ----- The Securities Exchange Act of 1934

For The Quarterly Period Ended March 31, 2003 Commission File Number 01-12073


EQUITY INNS, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)


Tennessee 62-1550848
- ------------------------------- -------------------
(State or Other Jurisdiction of (I.R.S. Employer)
Incorporation or Organization Identification No.)


7700 Wolf River Boulevard, Germantown, TN 38138
--------------------------------------------------
(Address of Principal Executive Office) (Zip Code)


(901) 754-7774
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)


Not Applicable
----------------------------------------------------
(Former Name, Former Address and Former Fiscal Year,
if Changed Since Last Report)

Indicate by check mark whether the Registrant: (i) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

X Yes No
----- -----

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). Yes X No
----- -----

The number of shares of the Registrant's Common Stock, $.01 par value,
outstanding on May 9, 2003 was 40,545,657.

1 of 26






EQUITY INNS, INC.

INDEX


PAGE

PART I. Financial Information

Item 1. Financial Statements

Condensed Consolidated Balance Sheets - March 31, 2003
(unaudited) and December 31, 2002 3

Condensed Consolidated Statements of Operations
(unaudited) - For the three months ended March 31,
2003 and 2002 4

Condensed Consolidated Statements of Cash Flows
(unaudited) - For the three months ended March 31,
2003 and 2002 5

Notes to Condensed Consolidated Financial Statements 7


Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 12

Item 3. Quantitative and Qualitative Disclosures About
Market Risk 21

Item 4. Controls and Procedures 22


PART II. Other Information


Item 6. Exhibits and Reports on Form 8-K 23


2





PART I. Financial Information
Item 1. Financial Statements

EQUITY INNS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS




March 31, December 31,
2003 2002
------------ ------------
(unaudited)

ASSETS
Investment in hotel properties, net $723,822,053 $740,145,842
Cash and cash equivalents 9,207,020 5,916,209
Accounts receivable, net 5,204,751 4,142,901
Notes receivable, net 1,335,025 1,335,025
Deferred expenses, net 8,139,803 8,743,477
Deferred tax asset 12,119,000 9,777,000
Deposits and other assets 4,130,275 4,391,484
------------ ------------

Total assets $763,957,927 $774,451,938
============ ============

LIABILITIES AND SHAREHOLDERS' EQUITY
Debt $360,202,689 $362,881,131
Accounts payable and accrued expenses 26,896,846 27,817,365
Distributions payable 6,508,576 6,505,528
Interest rate swaps 2,372,466 2,198,809
Minority interest in Partnership 8,404,081 8,781,685
------------ ------------

Total liabilities 404,384,658 408,184,518
------------ ------------

Commitments and contingencies

Shareholders' equity:

Preferred Stock, $.01 par value, 10,000,000 shares
authorized, 2,750,000 shares issued and outstanding 68,750,000 68,750,000
Common Stock, $.01 par value, 100,000,000
shares authorized, 41,268,167 and 41,220,639
shares issued and outstanding 412,682 412,206
Additional paid-in capital 446,107,647 445,793,107
Treasury stock, at cost, 747,600 shares (5,173,110) (5,173,110)
Unearned directors' and officers' compensation (439,838) (545,528)
Distributions in excess of net earnings (147,711,646) (140,770,446)
Accumulated other comprehensive income:
Unrealized loss on interest rate swaps (2,372,466) (2,198,809)
------------ ------------

Total shareholders' equity 359,573,269 366,267,420
------------ ------------

Total liabilities and shareholders' equity $763,957,927 $774,451,938
============ ============



The accompanying notes are an integral
part of these condensed consolidated financial statements.

3





EQUITY INNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)




For the Three Months Ended
March 31,
------------------------------------
2003 2002
----------- -----------

Revenue:
Rooms $51,893,675 $52,745,752
Other operating departments 2,598,893 2,587,937
Other revenue 106,463 197,969
----------- -----------
Total revenue 54,599,031 55,531,658

Operating costs and expenses:
Rooms 14,838,153 14,710,739
Other operating departments 1,988,108 1,840,720
Property operating costs 16,973,615 16,825,957
Property taxes and insurance 4,660,261 4,346,775
Depreciation 9,953,906 10,241,581
Amortization of franchise fees 75,963 87,174
General and administrative:
Stock based or non-cash compensation 131,735 171,509
Other general and administrative expenses 1,835,006 1,535,621
Rental expense 222,787 329,718
----------- -----------
Total operating expenses 50,679,534 50,089,794
----------- -----------

Operating income 3,919,497 5,441,864

Amortization of debt costs 505,575 511,035
Interest 7,119,650 7,443,075
----------- -----------

Loss from continuing operations before minority
interest and income taxes (3,705,728) (2,512,246)

Minority interest (48,469) (73,381)
Income tax benefit 2,342,000 1,804,000
----------- -----------

Loss from continuing operations (1,315,259) (634,865)

Gain on sale of hotel properties 1,274,544
----------- -----------

Net loss (40,715) (634,865)

Preferred stock dividends 1,632,813 1,632,813
----------- -----------

Net loss applicable to common shareholders $(1,673,528) $(2,267,678)
=========== ===========

Net loss per common share $ (0.04) $ (0.06)
=========== ===========

Weighted average number of common shares 40,512,582 37,054,812
=========== ===========






The accompanying notes are an integral
part of these condensed consolidated financial statements.

4





EQUITY INNS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)




For the Three Months Ended
March 31,
-------------------------------
2003 2002
------------ -----------

Cash flows from operating activities:
Net loss $ (40,715) $ (634,865)
Adjustments to net income provided by operating activities:
Gain on sale of hotel properties (1,274,544)
Depreciation and amortization 10,029,869 10,328,755
Amortization of loan costs 505,575 511,035
Amortization of unearned directors' and officers' compensation 105,690 149,355
Directors' stock-based compensation 26,045 22,154
Income tax benefit (2,342,000) (1,804,000)
Minority interest (48,469) (73,381)
Changes in assets and liabilities:
Accounts receivable (1,061,850) (3,072,961)
Due from Lessees 162,265
Notes receivable (407,633)
Deposits and other assets 261,209 (1,510,410)
Accounts payable and accrued expenses (808,321) 1,570,054
----------- -----------
Net cash provided by operating activities 5,352,489 5,240,368
----------- ----------

Cash flows from investing activities:
Improvements and additions to hotel properties (2,690,470) (1,418,120)
Cash paid for franchise applications (116,601)
Proceeds from sale of hotel properties 10,358,577
----------- -----------
Net cash provided by (used in) investing activities 7,668,107 (1,534,721)
----------- -----------

Cash flows from financing activities:
Gross proceeds from public offering of common stock 28,520,000
Payment of offering expenses (1,497,300)
Distributions paid (7,049,799) (1,632,813)
Cash paid for loan costs (1,544) (125,798)
Proceeds from borrowings 13,625,000 8,578,885
Payments on debt (16,303,442) (33,373,371)
----------- -----------
Net cash (used in) provided by financing activities (9,729,785) 469,603
----------- -----------

Net increase in cash 3,290,811 4,175,250
Cash and cash equivalents at beginning of period 5,916,209 4,358,787
----------- -----------

Cash and cash equivalents at end of period $ 9,207,020 $ 8,534,037
=========== ===========








The accompanying notes are an integral
part of these condensed consolidated financial statements.

5





Supplemental disclosure of noncash investing and financing activities:

During January 2003, the Company issued to one of its officers, 19,081 shares of
common stock at $5.88 per share under the 1994 Stock Incentive Plan in lieu of
cash as a performance bonus.

During January 2003, 24,077 units of limited partnership interest in the
partnership ("Units") were exchanged for an identical number of shares of common
stock by certain limited partners.

During the quarter ended March 31, 2003, the Company issued 4,370 shares of
common stock at prices ranging from $5.82 to $6.02 per share to its independent
directors in lieu of cash as compensation.

During January 2002, the Company issued to certain officers 51,704 shares of
common stock at $6.62 per share under the 1994 Stock Incentive Plan in lieu of
cash as a performance bonus.

During the quarter ended March 31, 2002, the Company issued 2,264 shares of
common stock at $6.62 per share and 875 shares of common stock at $8.19 per
share to its independent directors in lieu of cash as compensation.

During the quarter ended March 31, 2002, the Company recorded $4 million of
investment in hotel properties and a liability related to the purchase of a
hotel property.
























The accompanying notes are an integral
part of these condensed consolidated financial statements.

6





EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
-----------------------

1. Organization

Equity Inns, Inc. (the "Company") is a hotel real estate investment trust
("REIT") for federal income tax purposes. The Company, through its wholly
owned subsidiary, Equity Inns Trust (the "Trust"), is the sole general
partner of Equity Inns Partnership, L.P. (the "Partnership") and at March
31, 2003 owned an approximate 97.2% interest in the Partnership.

On January 1, 2001, the REIT Modernization Act ("RMA") went into effect.
Among other things, the RMA permits a REIT to form taxable REIT
subsidiaries ("TRS") that lease hotels from the REIT provided that the
hotels continue to be managed by unrelated third parties. Effective
January 1, 2001, the Company completed transactions that resulted in its
newly formed TRSs acquiring leases for the 77 hotels that were previously
leased by subsidiaries of Interstate Hotels Corporation ("Interstate").
Effective January 1, 2002, the Company completed transactions that
resulted in its newly formed TRSs acquiring leases for the remaining 19
hotels that were previously leased by subsidiaries of Prime Hospitality
Corporation ('"Prime"). By acquiring these leases through its TRSs, the
Company acquired the economic benefits and risks of the operations of
these hotels and began reporting hotel revenues and expenses rather than
percentage lease revenues.

The managers of the Company's hotels are as follows:

Number of Hotels

Interstate Hotels Corporation 52
Promus Hotels, Inc. 18
Prime Hospitality Corporation 19
Other 6
--

95
==

The management agreements with Prime's subsidiaries are structured to
provide the TRS Lessees minimum net operating income at each of the 19
AmeriSuites hotels. In addition, the management agreements specify a net
operating income threshold for each of the 19 AmeriSuites hotels. As the
manager, the Prime subsidiaries can earn an incentive management fee of
25% of hotel net operating income above the threshold, to a maximum of
6.5% of gross hotel revenues. If the management fee exceeds 6.5% of gross
hotel revenue, the Prime subsidiaries may earn an additional fee of 10%
on any additional net operating income. If a hotel fails to generate net
operating income sufficient to reach the threshold, Prime's subsidiaries
are required to contribute 25% of the shortfall in net operating income
to the Company. Management records such shortfall contributions as
revenue when all contingencies related to

7




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


1. Organization, Continued

such amounts have been resolved. The result of this policy is that
shortfall contributions, if any, are recorded annually by the Company in
the fourth quarter. The management contracts for the Company's remaining
76 hotels have terms ranging up to five years and generally provide for
payment of management fees equal to a percentage of hotel revenues and an
incentive fee consisting of a percentage of gross operating profits in
excess of budget.

These unaudited condensed consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and
Exchange Commission ("SEC") and should be read in conjunction with the
financial statements and notes thereto of the Company included in the
Company's Annual Report on Form 10-K for the year ended December 31,
2002. The accompanying unaudited condensed consolidated financial
statements reflect, in the opinion of the Company's management, all
adjustments necessary for a fair presentation of the interim financial
statements. All such adjustments are of a normal and recurring nature.

2. Summary of Significant Accounting Policies

Net Income Per Common Share

Basic earnings per common share from continuing operations are computed
by dividing income from continuing operations as adjusted for gains or
losses on the sale of hotel properties and for dividends on preferred
stock by the weighted average number of shares of common stock
outstanding. Diluted earnings per common share from continuing operations
are computed by dividing income from continuing operations as adjusted
for gains or losses on the sale of hotel properties and for dividends on
preferred stock by the weighted average number of shares of common stock
outstanding plus other potentially dilutive securities.

Potential dilutive securities included in the Company's calculation of
diluted earnings per share include shares issuable upon exercise of stock
options. All of the options to purchase shares of the Company's common
stock that were outstanding during the three months ended March 31, 2003
and 2002 were not included in the computation of diluted EPS because
their effect would have been anti-dilutive.

Stock Based Compensation

The FASB issued SFAS No. 148, "Accounting for Stock-Based Compensation --
Transition and Disclosure." SFAS No. 148 amends SFAS No. 123,
"Accounting for Stock-Based Compensation," to provide alternative methods
of transition for a voluntary change to the fair value based method of
accounting for stock-based employee compensation. The Company will

8




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


2. Summary of Significant Accounting Policies, Continued

apply the fair value based method of accounting for stock-based employee
compensation prospectively to all awards granted, modified or settled
beginning January 1, 2003.

There were no grants of options to purchase shares of common stock or
units made during the three months ended March 31, 2003 and 2002.
Accordingly, under SFAS No. 148, there was no impact on the Company's net
loss and losses per share or unit for the three months ended March 31,
2003 and 2002, respectively.

3. Debt

The following details the Company's debt outstanding at March 31, 2003:



Interest
Rate Maturity
----------------- --------


Commercial Mortgage Bonds
Class A $ 4,900,098 6.83% Fixed Nov 2006
Class B 50,600,000 7.37% Fixed Dec 2015
Class C 10,000,000 7.58% Fixed Feb 2017
------------
65,500,098

Line of Credit 87,700,000 LIBOR plus Variable Oct 2003
Percentage

Mortgage 92,176,246 8.37% Fixed July 2009
Mortgage 67,628,684 8.25% Fixed Nov 2010
Mortgage 34,972,055 8.25% Fixed Nov 2010
Mortgage 2,977,500 8.50% Fixed Nov 2005
Mortgage 5,606,686 10.00% Fixed Sept 2005
Mortgage 3,641,420 6.37% Fixed Nov 2016
------------

$360,202,689
============


The Company's collateralized line of credit (the "Line of Credit") has a
borrowing capacity of $125 million and bears interest at a variable rate
of LIBOR plus 1.5%, 1.75%, 2.0%, 2.25%, 2.5%, 2.75% or 3.0% as determined
by the Company's percentage of total debt to earnings before interest,
taxes, depreciation and amortization ("EBITDA"), as defined in the loan
agreement (the "Percentage"). The Percentage is reviewed quarterly and
the interest rate is adjusted as necessary. At March 31, 2003, the
interest rate on the Line of Credit was LIBOR (1.31% at March 31, 2003)
plus 2.75%. Fees ranging from .25% to .55%, as determined by the
Company's ratio of total indebtedness to EBITDA, are paid quarterly on
the unused portion of the Line of Credit. The Line of Credit contains
various covenants including the maintenance of a minimum net worth,
minimum debt coverage and interest coverage ratios, and total
indebtedness limitations. At March 31, 2003, the Company was in
compliance with all covenants contained in the Line of Credit.

9




EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------


4. Interest Rate Swap Contracts

On March 20, 2003, the Company entered into an interest rate swap
agreement with a financial institution on a notional amount of $25
million. The agreement becomes effective November 2003 and expires in
November 2008. The agreement effectively fixes the interest rate on the
first $25 million of floating rate debt outstanding under the Line of
Credit at a rate of 3.875% plus the interest rate spread on the Line of
Credit, thus reducing exposure to interest rate fluctuations. The
notional amount does not represent amounts exchanged by the parties, and
thus is not a measure of exposure to the Company. The differences to be
paid or received by the Company under the interest rate swap agreement
are recognized as an adjustment to interest expense. The agreement is
with a major financial institution, which is expected to fully perform
under the terms of the agreement.

On March 20, 2003, the Company entered into an interest rate swap
agreement with a financial institution on a notional amount of $25
million. The agreement becomes effective in November 2003 and expires in
November 2006. The agreement effectively fixes the interest rate on the
second $25 million of floating rate debt outstanding under the Line of
Credit at a rate of 3.22% plus the interest rate spread on the Line of
Credit, thus reducing exposure to interest rate fluctuations. The
notional amount does not represent amounts exchanged by the parties, and
thus is not a measure of exposure to the Company. The differences to be
paid or received by the Company under the interest rate swap agreement
are recognized as an adjustment to interest expense. The agreement is
with a major financial institution, which is expected to fully perform
under the terms of the agreement.

5. Comprehensive Income

SFAS No. 130, "Reporting Comprehensive Income", requires the disclosure
of the components included in comprehensive income (loss). For the three
months ended March 31, 2003, the Company's comprehensive loss was
$214,372, comprised of a net loss of $40,715 and the change in the
unrealized loss on its interest rate swap of $173,657. For the three
months ended March 31, 2002, the Company's comprehensive income was
$95,688, comprised of a net loss of $634,865 offset by the change in the
unrealized loss on its interest rate swap of $730,553.




10





EQUITY INNS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(unaudited)
-----------------------



6. Income Taxes

The Company's income tax benefit related to its TRS Lessee subsidiaries
consists of the following:
2003 2002
------------ ------------
Deferred:
Federal $(2,095,000) $(1,614,000)
State (247,000) (190,000)
----------- -----------

Total $(2,342,000) $(1,804,000)
=========== ===========

The TRS Lessees' net deferred tax asset of $12,119,000 is comprised of
net operating loss carry-forwards which expire beginning on December 31,
2021. The Company believes that the TRS Lessees will generate sufficient
future taxable income to realize this deferred tax asset in full.
Accordingly, no valuation allowance has been recorded at March 31, 2003.


The difference between the TRS Lessees' effective income tax rate and the
statutory Federal income tax rate is as follows:

2003 2002
---- ----

Statutory Federal rate 34.0% 34.0%
State income taxes 4.0% 4.0%
---- ----

Effective tax rate 38.0% 38.0%
==== ====



11





Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations


BACKGROUND

The following chart summarizes information regarding the Company's hotels by
service type and franchise affiliation at March 31, 2003:



Number of Number of
Franchise Affiliation Hotel Properties Rooms/Suites
--------------------- ---------------- ------------

Premium Limited Service Hotels:
Hampton Inn 47 5,905
Holiday Inn Express 1 101
Comfort Inn 2 245
-- ------
Sub-total 50 6,251
-- ------

All-Suite Hotels:
AmeriSuites 19 2,403

Premium Extended Stay Hotels:
Residence Inn 11 1,351
Homewood Suites 9 1,295
-- ------
Sub-total 20 2,646
-- ------

Full Service Hotels:
Holiday Inn 4 557
Comfort Inn 1 177
Courtyard by Marriott 1 176
-- ------
Sub-total 6 910
-- ------

Total 95 12,210
== ======


Equity Inns Partnership, L.P., (the "Partnership") and its affiliates lease all
95 of the Company's hotels to wholly-owned taxable REIT subsidiaries of the
Company (the "TRS Lessees"). The Company, through its wholly-owned subsidiary,
Equity Inns Trust (the "Trust"), is the general partner of the Partnership and
at March 31, 2003 owned an approximate 97.2% interest in the Partnership.




12





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


RESULTS OF OPERATIONS

Three Months Ended March 31, 2003 and 2002

Hotel revenue decreased 1.5% for the quarter from $55.3 million to $54.5
million, due primarily to the continuing effects of a slow economy and the
uncertainty of armed conflict in Iraq. For the quarter, revenue per available
room declined 2.2% due to a 1.7% decline in average daily rate and a decline of
..3% in occupancy.

Hotel operating expenses for rooms and other operating departments increased
1.7% for the quarter from $16.6 million to $16.8 million. The primary factor
driving this increase in cost over the prior quarter was increased payroll and
employee benefit costs. This coupled with the stability of the occupancy levels
accompanied by the decrease in the average daily rate, resulted in a decline in
profit margins.

Other revenue decreased by approximately $92,000 as compared to the same period
last year, due primarily to a decrease in the income received from the provision
of certain management services to the Company's joint venture partner, GHII,
LLC.

Property operating costs increased over the prior quarter by approximately
$148,000, or .9%, due primarily to increases in energy costs and marketing
expenses which were partially offset by an increase in the amount of
supplemental income received from one of the Company's management companies on
hotels that did not perform to the level of minimum income thresholds.

Property taxes and insurance increased over the prior quarter by approximately
$313,000, or 7.2%, due primarily to increases in the cost of providing insurance
coverage in this post September 11, 2001 economic environment.

Depreciation expense decreased slightly as compared to the same period last
year, due primarily to certain components being fully depreciated in prior
periods.

Amortization of franchise fees decreased by approximately $11,000 due primarily
to extensions of certain of the Company's hotel franchise licenses for extended
periods and to the sale of two hotels in January 2003.

General and administrative expenses, including non-cash compensation, increased
approximately $260,000 over the prior quarter, due primarily to increased
professional fees relating to the formation of the TRS entities.


13





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


RESULTS OF OPERATIONS, Continued

Rental expense decreased by approximately $107,000, as compared to the prior
quarter.

Amortization of debt costs remained relatively stable, as compared to the prior
quarter.

Interest expense decreased by approximately $323,000 as compared to the prior
quarter, due to the decrease in average borrowings outstanding from $386.0
million to $361.6 million, offset by an increase in the weighted average
interest rate for the quarter, which increased from 7.82% to 7.98%. The decrease
in average borrowings is due primarily to the sale of approximately 3.6 million
shares of common stock in March 2002, with the proceeds of approximately $26.9
million being used to reduce outstanding debt.

Income tax benefit increased $538,000 over the prior quarter as taxable REIT
subsidiaries incurred larger losses.

Gain on sale of hotel properties relates to the sale of two hotels in January
2003.


LIQUIDITY AND CAPITAL RESOURCES

The Company's principal source of cash to meet its cash requirements, including
distributions to its shareholders and repayments of indebtedness, is from the
results of operations of the Hotels. For the three months ended March 31, 2003,
net cash flow provided by operating activities was $5.4 million and FFO was $7.0
million. The Company currently expects that its operating cash flow will be
sufficient to fund its continuing operations, including its required debt
service obligations (other than the maturity of the Line of Credit which we
expect to refinance in 2003 as discussed below) and distributions to
shareholders required to maintain its status as a REIT. The Company expects to
fund any short-term liquidity requirements above our operating cash flows
through short-term borrowings under its Line of Credit.

The Company may make additional investments in hotel properties and may incur,
or cause the Partnership to incur, indebtedness to make such investments or to
meet distribution requirements imposed on a REIT under the Internal Revenue Code
of 1986 (the "Code") to the extent that working capital and cash flow from the
Company's investments are insufficient to make such distributions. The Company's
Board of Directors has adopted a policy limiting aggregate indebtedness to 45%
of the Company's investment in hotel properties, at cost, after giving effect to
the Company's use of proceeds from any indebtedness. This policy may be amended
at any time by the Board of Directors without a shareholder vote.



14





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


LIQUIDITY AND CAPITAL RESOURCES, Continued

At March 31, 2003, the Company had outstanding debt of approximately $360.2
million, including $87.7 million under the Line of Credit, leaving approximately
$31.7 million available for borrowings under the Line of Credit, after
consideration of outstanding letters of credit. The Company's consolidated
indebtedness was 38.4% of its investment in hotels, at cost, at March 31, 2003.

The following details our debt outstanding at March 31, 2003:



Interest
Rate Maturity
----------------- --------

Commercial Mortgage Bonds
Class A $ 4,900,098 6.83% Fixed Nov 2006
Class B 50,600,000 7.37% Fixed Dec 2015
Class C 10,000,000 7.58% Fixed Feb 2017
------------
65,500,098

Line of Credit 87,700,000 LIBOR plus Variable Oct 2003
Percentage

Mortgage 92,176,246 8.37% Fixed July 2009
Mortgage 67,628,684 8.25% Fixed Nov 2010
Mortgage 34,972,055 8.25% Fixed Nov 2010
Mortgage 2,977,500 8.50% Fixed Nov 2005
Mortgage 5,606,686 10.00% Fixed Sept 2005
Mortgage 3,641,420 6.37% Fixed Nov 2016
------------

$360,202,689
============


The Line of Credit has a borrowing capacity of $125 million. The weighted
average interest rate incurred by the Company during the three months ended
March 31, 2003 was 7.98%. Payment of outstanding indebtedness under the Line of
Credit is due at maturity in October 2003. This indebtedness must be refinanced
on or before its maturity date. Although the Company believes it will be
successful in refinancing this obligation prior to maturity, there can be no
assurance that the Company will be able to complete the required refinancing, or
that refinancing will be available on terms that the Company considers to be in
the best interest of its shareholders. If the indebtedness is not refinanced,
the Company will be in default, and the holder of such indebtedness will be
entitled to the remedies provided in the debt instruments. Such an event would
have a material adverse effect on the Company's financial condition and results
of operations. The Company's success in refinancing this indebtedness will be
dependent upon a number of factors, including general economic and political
conditions, property appraisals and the general condition of the capital
markets.




15





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


LIQUIDITY AND CAPITAL RESOURCES, Continued

On March 20, 2003, the Company entered into an interest rate swap agreement with
a financial institution on a notional amount of $25 million. The agreement
becomes effective November 2003 and expires in November 2008. The agreement
effectively fixes the interest rate on the first $25 million of floating rate
debt outstanding under the Line of Credit at a rate of 3.875% plus the interest
rate spread on the Line of Credit, thus reducing exposure to interest rate
fluctuations. The notional amount does not represent amounts exchanged by the
parties, and thus is not a measure of exposure to the Company. The differences
to be paid or received by the Company under the interest rate swap agreement are
recognized as an adjustment to interest expense. The agreement is with a major
financial institution, which is expected to fully perform under the terms of the
agreement.

On March 20, 2003, the Company entered into an interest rate swap agreement with
a financial institution on a notional amount of $25 million. The agreement
becomes effective in November 2003 and expires in November 2006. The agreement
effectively fixes the interest rate on the second $25 million of floating rate
debt outstanding under the Line of Credit at a rate of 3.22% plus the interest
rate spread on the Line of Credit, thus reducing exposure to interest rate
fluctuations. The notional amount does not represent amounts exchanged by the
parties, and thus is not a measure of exposure to the Company. The differences
to be paid or received by the Company under the interest rate swap agreement are
recognized as an adjustment to interest expense. The agreement is with a major
financial institution, which is expected to fully perform under the terms of the
agreement.

During the three months ended March 31, 2003, the Company invested $2.7 million
to fund capital improvements to its hotels, including replacement of carpets,
drapes, renovation of common areas and improvements of hotel exteriors. In
addition, the Company expects to fund an additional $13.3 million during the
remainder of 2003 for capital improvements. The Company intends to fund such
improvements out of future cash from operations, present cash balances and
borrowings under the Line of Credit. Under certain of its loan agreements, the
Partnership is obligated to fund 4% of room revenues per quarter on a cumulative
basis, to a separate room renovation account for the ongoing replacement or
refurbishment of furniture, fixtures and equipment at the Hotels.

The Company intends to fund cash distributions to shareholders and limited
partners principally out of cash generated from operations. The Company may
incur, or cause its subsidiaries to incur, indebtedness to meet distribution
requirements imposed on a REIT under the Internal Revenue Code including the
requirements that a REIT distribute to its shareholders annually at least 90% of
its taxable income to the extent that working capital and cash flow from the
Company's investments are insufficient to make such distributions. The Company's
decision to pay a quarterly common dividend will be determined each quarter, at
the discretion of the Board of Directors, based upon the operating results of
that quarter, economic conditions, and other operating trends.

16





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


LIQUIDITY AND CAPITAL RESOURCES, Continued

The Company expects to meet its long-term liquidity requirements, such as
scheduled debt maturities and property acquisition, through long-term secured
and unsecured borrowings, the issuance of additional equity securities of the
Company or, in connection with acquisitions of hotel properties, the issuance of
Partnership Units. Under the Partnership's limited partnership agreement (the
"Partnership Agreement"), subject to certain holding period requirements,
holders of Units in the Partnership have the right to require the Partnership to
redeem their units. During the three months ended March 31, 2003, 24,077 Units
were tendered for redemption. Under the Partnership Agreement, the Company has
the option to redeem Units tendered for redemption on a one-for-one basis for
shares of Common Stock or for an equivalent amount of cash. The Company
anticipates that it will acquire any Units tendered for redemption in the
foreseeable future in exchange for shares of Common Stock and, to date, has
registered such shares so as to be freely tradeable by the recipient.

FUNDS FROM OPERATIONS

The Company generally considers Funds from Operations ("FFO") to be an
appropriate measure of the performance of an equity REIT. In accordance with the
resolution adopted by the Board of Governors of the National Association of Real
Estate Investment Trusts ("NAREIT"), FFO represents net income (loss) (computed
in accordance with generally accepted accounting principles), excluding gains
(or losses) from sales of property, plus depreciation, and after adjustments for
unconsolidated partnerships and joint ventures. For the periods presented,
depreciation, gains and losses from sales of property and minority interest were
the Company's only adjustments to net income for the definition of FFO. FFO
should not be considered an alternative to net income or other measurements
under generally accepted accounting principles as an indicator of operating
performance or to cash flows from operating, investing or financing activities
as a measure of liquidity. FFO does not reflect working capital changes, cash
expenditures for capital improvements or principal payments with respect to
indebtedness on the hotels.



17





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


FUNDS FROM OPERATIONS, Continued

The following reconciliation of net loss to FFO illustrates the difference in
the two measures of operating performance:



Three Months Ended
March 31,
---------------------------------------
2003 2002
------------ -----------

Net loss $ (40,715) $ (634,865)
Less:
Preferred stock dividends (1,632,813) (1,632,813)
Gain on sale of hotel properties (1,274,544)
Add:
Minority interest in partnership (48,469) (73,381)
Depreciation of buildings, furniture
and equipment 9,953,906 10,241,581
Deferred lease revenue
---------- ----------

Funds From Operations $6,957,365 $7,900,522
========== ==========

Weighted average number of outstanding
shares of Common Stock and Units of
the Partnership 41,685,927 38,253,888
========== ==========


INFLATION

Operators of hotels, including any third-party managers retained by the TRS
Lessees, in general possess the ability to adjust room rates quickly. However,
competitive pressures, a slow economy, the continued effects of September 11,
2001, armed conflict in Iraq and possible further large-scale armed conflict or
acts of terrorism have limited and may in the future limit the ability of the
third- party managers retained by the TRS Lessees to raise room rates in
response to inflation.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance with accounting principles generally accepted in the
United States of America. The preparation of these financial statements requires
the Company's management to make estimates and judgments that affect the
reported amount of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities.

18





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


CRITICAL ACCOUNTING POLICIES AND ESTIMATES, Continued

On an on-going basis, all estimates are evaluated by the Company's management,
including those related to bad debts, carrying value of investments in hotel
properties, income taxes, contingencies and litigation. All estimates are based
upon historical experience and on various other assumptions that are believed to
be reasonable under the circumstances, the results of which form the basis for
making judgments about the carrying values of assets and liabilities that are
not readily apparent from other sources. Actual results may differ from these
estimates under different assumptions or conditions.

The Company believes the following critical accounting policies affect its more
significant judgments and estimates used in the preparation of its consolidated
financial statements:

o The Company maintains allowances for doubtful accounts for estimated losses
resulting from the inability of its customers and other borrowers to make
required payments. If the financial condition of its customers or other
borrowers were to deteriorate, resulting in an impairment of their ability
to make payments, additional allowances may be required.

o The Company records an impairment charge when it believes an investment in
hotels has been impaired such that future undiscounted cash flows would not
recover the book basis of the investment in the hotel property. Future
adverse changes in market conditions or poor operating results of underlying
investments could result in losses or an inability to recover the carrying
value of the investments that may not be reflected in an investment's
carrying value, thereby possibly requiring an impairment charge in the
future.

o The Company records a valuation allowance to reduce its deferred tax assets
to the amount that is more likely than not to be realized. The Company's
management has considered future taxable income and ongoing prudent and
feasible tax planning strategies in assessing the need for a valuation
allowance. If management determines that the Company will not be able to
realize all or part of its net deferred tax asset in the future, an
adjustment to the deferred tax asset will be charged to income in the
periods such determination was made.

FORWARD-LOOKING STATEMENTS

This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, including without limitation, statements
containing the words "believes", "estimates", "projects", "anticipates",
"expects" and words of similar import. Such forward-looking statements relate to
future events and

19





Management's Discussion and Analysis of
Financial Condition and Results of Operations, Continued


FORWARD-LOOKING STATEMENTS, Continued

the future financial performance of the Company, and involve known and unknown
risks, uncertainties and other factors which may cause the actual results,
performance or achievements of the Company to be materially different from the
results or achievement expressed or implied by such forward-looking statements.
Such risks and uncertainties include, but are not limited to, the following: the
ability of the Company to cope with domestic economic and political disruption
and Federal and state governmental regulations or war, terrorism, states of
emergency or similar activities such as those resulting from the terrorist
attacks occurring on September 11, 2001; the ability of the Company to
successfully implement its operating strategy; changes in economic cycles;
competition from other hospitality companies; and changes in the laws and
government regulations applicable to the Company. Risk factors relating to such
forward-looking statements are contained from time to time in the Company's
filings with the SEC, including the Company's Current Report on Form 8-K dated
March 27, 2003 filed under the Securities Exchange Act of 1934, as amended. The
Company is not obligated to update any such forward-looking statements or risk
factors.

SEASONALITY

The hotel industry is seasonal in nature. The Company's hotel operations
historically reflect higher occupancy rates and ADR during the second and third
quarters. This seasonality can be expected to cause fluctuations in quarterly
operating income. To the extent that cash flow from the hotels for a quarter is
insufficient to fund all of the distributions for such quarter, the Company may
fund seasonal-related shortfalls with available cash or borrowing under the Line
of Credit.



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Item 3. Quantitative and Qualitative Disclosures About Market Risk

The Company is exposed to certain financial market risks, the most predominant
of which is the fluctuation in interest rates. At March 31, 2003, the Company's
exposure to market risk for a change in interest rates is related solely to its
debt outstanding under the Line of Credit. Total debt outstanding under the Line
of Credit totaled $87.7 million at March 31, 2003.

The Company's Line of Credit bears interest at a variable rate of LIBOR plus
1.5%, 1.75%, 2.0%, 2.5%, 2.75% or 3.0% as determined by the Company's percentage
of total debt to earnings before interest, taxes, depreciation and amortization,
as defined in the loan agreement (the "Percentage"). At March 31, 2003, the
interest rate on the line of credit was LIBOR (1.31% at March 31, 2003) plus
2.75%. The Company's interest rate risk objective is to limit the impact of
interest rate fluctuations on earnings and cash flows and to lower its overall
borrowing costs. To achieve this objective, the Company manages its exposure to
fluctuations in market interest rates for its borrowings through the use of
fixed rate debt instruments to the extent that reasonably favorable rates are
obtainable through such arrangements and derivative financial instruments such
as interest rate swaps, to effectively lock the interest rate on a portion of
its variable rate debt. The Company does not enter into derivative or interest
rate transactions for speculative purposes. The Company regularly reviews
interest rate exposure on its outstanding borrowings in an effort to minimize
the risk of interest rate fluctuations.

On March 20, 2003, the Company entered into an interest rate swap agreement with
a financial institution on a notional amount of $25 million. The agreement
becomes effective November 2003 and expires in November 2008. The agreement
effectively fixes the interest rate on the first $25 million of floating rate
debt outstanding under the Line of Credit at a rate of 3.875% plus the interest
rate spread on the Line of Credit, thus reducing exposure to interest rate
fluctuations. The notional amount does not represent amounts exchanged by the
parties, and thus is not a measure of exposure to the Company. The differences
to be paid or received by the Company under the interest rate swap agreement are
recognized as an adjustment to interest expense. The agreement is with a major
financial institution, which is expected to fully perform under the terms of the
agreement.

On March 20, 2003, the Company entered into an interest rate swap agreement with
a financial institution on a notional amount of $25 million. The agreement
becomes effective in November 2003 and expires in November 2006. The agreement
effectively fixes the interest rate on the second $25 million of floating rate
debt outstanding under the Line of Credit at a rate of 3.22% plus the interest
rate spread on the Line of Credit, thus reducing exposure to interest rate
fluctuations. The notional amount does not represent amounts exchanged by the
parties, and thus is not a measure of exposure to the Company. The differences
to be paid or received by the Company under the interest rate swap agreement are
recognized as an adjustment to interest expense. The agreement is with a major
financial institution, which is expected to fully perform under the terms of the
agreement.

Thus, at March 31, 2003, the Company has $37.7 million of variable rate debt
outstanding under the Line of Credit that was exposed to fluctuations in the
market rate of interest.

21





The Company's Line of Credit matures in October 2003. As discussed above, the
Company's Line of Credit bears interest at variable rates, and therefore, cost
approximates market value. As of March 31, 2003, the fair value liability of the
Company's interest rate swaps was approximately $2.4 million.

The Company's operating results are affected by changes in interest rates,
primarily as a result of its borrowing under the Line of Credit. If interest
rates increased by 25 basis points, the Company's interest expense for the three
months ended March 31, 2003 would have increased by approximately $23,600, based
on balances outstanding during the period ended March 31, 2003.


Item 4. Controls and Procedures

The Company has established internal controls and procedures as defined in
Exchange Act Rules 13a- 14(c) and 15d-14(c). As of May 9, 2003, the Company
completed an evaluation of the effectiveness of the design and operation of the
Company's controls and procedures pursuant to such Exchange Act rules under the
supervision of and with the participation of the Company's management, including
Phillip H. McNeill, Sr., the Company's chief executive officer ("CEO"), and
Donald H. Dempsey, the Company's chief financial officer ("CFO"). Based on that
evaluation, the CEO and the CFO have concluded that the Company's controls and
procedures were effective as of May 9, 2003.

No significant changes in the Company's internal controls or in other factors
that could significantly affect these controls after May 9, 2003 have occurred,
and no corrective actions with regards to significant deficiencies and material
weaknesses were required.




22






PART II - OTHER INFORMATION



Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits -- The following exhibits were filed with this Quarterly
Report on Form 10-Q:

99.1 -- Certification of Phillip H. McNeill, Sr., Chief Executive
Officer of Equity Inns, Inc., pursuant to 18 U.S.C. Section 1350 as
adopted pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 and
dated May 13, 2003

99.2 -- Certification of Donald H. Dempsey, Chief Financial Officer of
Equity Inns, Inc., pursuant to 18 U.S.C. Section 1350 as adopted
pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 and dated
May 13, 2003

(b) Reports on Form 8-K -- During the period covered by this Quarterly
Report on Form 10-Q, the Company filed the following two (2) Current
Reports on Form 8-K:

(1) Current Report on Form 8-K dated February 13, 2003 and filed on
February 18, 2003, reporting the issuance of a press release
reporting the Company's fourth quarter and year-end results for
2001 (no financial information required).

(2) Current Report on Form 8-K dated March 27, 2003 and filed on
March 27, 2003, disclosing the Company's annual updated material
risk factors (no financial information required).










23





SIGNATURES


Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.



Equity Inns, Inc.



May 13, 2003 By: /s/Donald H. Dempsey
- ------------------ --------------------------------------------
Date Donald H. Dempsey
Executive Vice President, Secretary,
Treasurer, and Chief Financial Officer
(Principal Financial and Accounting Officer)

(a) CEO CERTIFICATION

I, Phillip H. McNeill, Sr., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Equity Inns, Inc. (the
"Company");

2. Based on my knowledge, the financial statements and other financial
information included in this quarterly report do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and

(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;


24





5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in the
financial statements and other financial information included in this quarterly
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.




Date: May 13, 2003 /s/ Phillip H. McNeill, Sr.
---------------------------
Phillip H. McNeill, Sr.
Chairman of the Board and
Chief Executive Officer

(b) CFO CERTIFICATION

I, Donald H. Dempsey, certify that:

1. I have reviewed this quarterly report on Form 10-Q of Equity Inns, Inc. (the
"Company");

2. Based on my knowledge, the financial statements and other financial
information included in this quarterly report do not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this quarterly
report.

3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all material
respects the financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this quarterly report;

4. The registrant's other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

(a) designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities, particularly
during the period in which this quarterly report is being prepared;

(b) evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and


25




(c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our evaluation
as of the Evaluation Date;

5. The registrant's other certifying officer and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):

(a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and

(b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and

6. The registrant's other certifying officer and I have indicated in the
financial statements and other financial information included in this quarterly
report whether there were significant changes in internal controls or in other
factors that could significantly affect internal controls subsequent to the date
of our most recent evaluation, including any corrective actions with regard to
significant deficiencies and material weaknesses.




Date: May 13, 2003 /s/ Donald H. Dempsey
---------------------------
Donald H. Dempsey
Executive Vice President,
Chief Financial Officer,
Secretary and Treasurer


26