SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): OCTOBER 5, 1998
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RESORTQUEST INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 01-14115 62-1750532
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OF INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
530 OAK COURT DRIVE
SUITE 360
MEMPHIS, TN 38117
(901) 762-0600
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT
Not Applicable
ITEM 2. ACQUISITION OF ASSETS
On October 5, 1998, the Company completed the acquisition of all of the
outstanding stock of Abbott Realty Services, Inc. and Tops'l Sales Group, Inc.
(together, "Abbott Resorts"), property management and realty companies based in
Destin, Florida. Under the Stock Purchase Agreement by and among the Company,
Abbott Resorts and its shareholders, the Company agreed to pay a total of $33.7
million in shares of Company common stock and cash as well as to assume certain
indebtedness of Abbott Resorts. The aggregate consideration paid for Abbott
Resorts consisted of $26.7 million in cash, 757,040 shares of Common Stock of
the Company (valued at approximately $7.0 million based on the average of the
closing prices of the Company's Common Stock for the ten trading days prior to
the effective date of the Stock Purchase Agreement) and $6.9 million in debt
assumed. The amount of consideration was determined based on arms-length
negotiations. The Company utilized funds available under its credit facility
with NationsBank, N.A. and First Tennessee Bank, National Association to fund
the cash portion of the purchase price. The acquisition will be accounted for as
a purchase.
Abbott Resorts manages approximately 2,400 condominium and home rentals on
the Florida Gulf Coast. Abbott Resorts is the largest resort property management
company in Florida and has rental properties located in Fort Walton Beach,
Destin and South Walton, Florida. Abbott Resorts also operates Tops'l Beach &
Racquet Resort, a 55-acre tennis complex rated among the top 50 tennis resorts
in the U.S. by TENNIS magazine.
Revenues for Abbott Resorts for the 12 months ended June 30, 1998 totaled
$28.1 million. The Company's pro forma revenue for the 12 months ended June 30,
1998 totaled $87.8 million.
The primary assets of Abbott Resorts include cash and cash equivalents,
trade and other receivables, property and equipment, and deferred income taxes
and other taxes. The Company expects to continue to utilize these assets in a
manner consistent with that of their historical usage.
Prior to the acquistion, the capital stock of Abbott Resorts was owned by
William W. Abbott, Jr., Stephen J. Abbott, James R. Steiner, Charles H. Van
Driver, Sue C. Van Driver and Angus G. Andrews. Upon the closing of the
acquisition of Abbott Resorts, William W. Abbott, Jr., Vice Chairman of Abbott
Resorts, became a director of the Company. James S. Olin, President of Abbott
Resorts, will remain as president of Abbott Resorts.
The foregoing descriptions are qualified in all respects by reference to
the full text of the acquisition agreement which is included as an exhibit to
this report.
-2-
<PAGE>
ITEM 3. BANKRUPTCY OR RECEIVERSHIP
Not Applicable
ITEM 4. CHANGES IN REGISTRANT'S CERTIFYING ACCOUNTANTS
Not Applicable
ITEM 5. OTHER EVENTS
Not Applicable
ITEM 6. RESIGNATION OF REGISTRANT'S DIRECTORS
Not Applicable
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
A. Financial Statements of Business Acquired.
Audited Financial Statements of Abbott Resorts for the year ended July
31, 1998, as previously filed by the Company on October 16, 1998 as
pages F-33 through F-43 of Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-1 (File No. 333-10623) and
incorporated herein by reference.
B. Pro Forma Financial Information.
Unaudited Pro Forma Consolidated Financial Statements and Notes (which
include the acquisition of Abbott Resorts), as previously filed by the
Company on October 16, 1998 as pages F-3 through F-14 of
Post-Effective Amendment No. 1 to the Company's Registration Statement
on Form S-1 (File No. 333-10623) and incorporated herein by reference.
C. Exhibits.
Stock Purchase Agreement, effective as of September 30, 1998, among
ResortQuest International, Inc., Abbott Realty Services, Inc., Tops'l
Sales Group, Inc., William W. Abbott, Jr., Stephen J. Abbott, James R.
Steiner, Charles H. Van Driver, Sue C. Van Driver and Angus G.
Andrews, as previously filed as Exhibit 2.15 to the Post-Effective
Amendment No. 1 to the Company's Registration Statement on Form S-1
(File No. 333-10623).
-3-
<PAGE>
ITEM 8. CHANGE IN FINANCIAL YEAR
Not Applicable
ITEM 9. SALES OF EQUITY SECURITIES PURSUANT TO REGULATION S
Not Applicable
-4-
<PAGE>
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 hereunto duly authorized.
RESORTQUEST INTERNATIONAL, INC.
Dated: October 20, 1998 By: /s/ Jeffery M. Jarvis
----------------------------
Name: Jeffery M. Jarvis
Title: Senior Vice President & Chief
Financial Officer
-5-
<PAGE>
EXHIBIT INDEX
1. Stock Purchase Agreement, effective as of September 30, 1998, by
and among ResortQuest International, Inc., Abbott Realty
Services, Inc., Tops'l Sales Group, Inc., William W. Abbott, Jr.,
Stephen J. Abbott, James R. Steiner, Charles H. Van Driver, Sue
C. Van Driver and Angus G. Andrews, as previously filed as
Exhibit 2.15 to the Post-Effective Amendment No. 1 to the
Company's Registration Statement on Form S-1 (File No.
333-10623).
2. Audited Financial Statements of Abbott Resorts for the year ended
July 31, 1998, as previously filed by the Company on October 16,
1998 as pages F-33 through F-43 of Post-Effective Amendment No. 1
to the Company's Registration Statement on Form S-1 (File No.
333-10623).
3. Unaudited Pro Forma Consolidated Financial Statements and Notes
(which include the acquisition of Abbott Resorts), as previously
filed by the Company on October 16, 1998 as pages F-3 through
F-14 of Post-Effective Amendment No. 1 to the Company's
Registration Statement on Form S-1 (File No. 333-56703).
-6-
Exhibit 2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Abbott Realty Services, Inc.:
We have audited the accompanying consolidated balance sheet of Abbott
Realty Services, Inc. (a Florida corporation) and Subsidiaries (collectively the
"Company") as of July 31, 1998, and the related consolidated statements of
operations, changes in stockholders' equity and cash flows for the year then
ended. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Abbott Realty Services, Inc. and Subsidiaries, as of July 31, 1998, and the
results of their operations and their cash flows for the year then ended, in
conformity with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Memphis, Tennessee,
September 18, 1998
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
JULY 31, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ...................................................... $14,580
Cash held in escrow ............................................................ 392
Trade and other receivables .................................................... 726
Deferred income taxes .......................................................... 116
Other current assets ........................................................... 899
-------
Total current assets .......................................................... 16,713
PROPERTY AND EQUIPMENT, net ..................................................... 9,501
DEFERRED INCOME TAXES ........................................................... 72
OTHER ASSETS .................................................................... 1,381
-------
Total assets ................................................................. $27,667
=======
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Current maturities of long-term debt ........................................... $ 806
Customer deposits, deferred revenue and payable to property owners ............. 12,055
Accounts payable and accrued liabilities ....................................... 3,818
Other current liabilities ...................................................... 308
-------
Total current liabilities ..................................................... 16,987
LONG-TERM DEBT, net of current maturities ....................................... 6,039
OTHER LONG-TERM OBLIGATIONS ..................................................... 732
MINORITY INTEREST ............................................................... 438
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Common stock, $1 par value, 1,000 shares authorized, issued and outstanding..... 1
Additional paid in capital ..................................................... 7
Retained earnings .............................................................. 3,463
-------
Total stockholders' equity .................................................... 3,471
-------
Total liabilities and stockholders' equity .................................... $27,667
=======
</TABLE>
The accompanying notes are an integral part of this consolidated balance sheet.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUES:
Property management fees ............................................................ $13,572
Service fees and other .............................................................. 11,376
Real estate commissions, net including related party commissions of approximately
of $590,000 ....................................................................... 3,484
-------
Total revenues ..................................................................... 28,432
OPERATING EXPENSES ................................................................... 15,612
GENERAL AND ADMINISTRATIVE EXPENSES .................................................. 11,770
-------
Income from Operations ............................................................ 1,050
OTHER INCOME (EXPENSE):
Interest Expense, net ............................................................. (208)
-------
Income before provision for income taxes and minority interest .................... 842
PROVISION FOR INCOME TAXES ........................................................... 337
MINORITY INTEREST .................................................................... 132
-------
NET INCOME ........................................................................... $ 373
=======
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JULY 31, 1998
(IN THOUSANDS EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
-------------------
ADDITIONAL RETAINED
SHARES AMOUNT PAID IN CAPITAL EARNINGS TOTAL
-------- -------- ----------------- ---------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE, July 31, 1997 ......... 1,000 $ 1 $ 7 $3,090 $3,098
Net income ..................... -- -- -- 373 373
----- --- --- ------ ------
BALANCE, July 31, 1998 ......... 1,000 $ 1 $ 7 $3,463 $3,471
===== === === ====== ======
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JULY 31, 1998
(IN THOUSANDS)
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................... $ 373
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization ................................................... 645
Changes in operating assets and liabilities:
Cash held in escrow ........................................................... 322
Trade and other receivables ................................................... 484
Deferred income taxes ......................................................... 66
Other assets .................................................................. (249)
Customer deposits, deferred revenue and payable to property owners ............ 781
Accounts payable and accrued liabilities ...................................... 944
Other liabilities ............................................................. (3)
-------
Net cash provided by operating activities .................................... 3,363
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment ............................................. (1,757)
Proceeds from sale of property and equipment .................................... 59
-------
Net cash used in investing activities ...................................... (1,698)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt .................................................... 1,224
Principal payments on long-term debt ............................................ (900)
Repayment of loan from shareholders ............................................. (88)
Change in minority interest payable ............................................. 132
-------
Net cash provided by financing activities .................................. 368
-------
NET INCREASE IN CASH AND CASH EQUIVALENTS ........................................ 2,033
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD ................................... 12,547
-------
CASH AND CASH EQUIVALENTS, END OF PERIOD ......................................... $14,580
=======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest .......................................................... $ 550
=======
</TABLE>
The accompanying notes are an integral part of this consolidated statement.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS
JULY 31, 1998
1. BUSINESS AND ORGANIZATION:
Abbott Realty Services, Inc. is a Florida corporation comprised of Abbott
Resorts, Inc. and an 80% ownership in Abbott and Andrews Realty, Inc. ("Abbott
and Andrews"), which owns Tops'l Club of NW Florida, Inc., Tops'l Group, Inc.,
and SIIK, Inc. (collectively the "Company" or "Abbott"). The Company's two
principal operations include providing property management services to owners
of vacation properties and providing real estate services for sales of new and
previously owned vacation properties in the Destin, Fort Walton and South
Walton areas of Florida.
The Company provides management services to property owners pursuant to
management contracts, which are generally one-year in length. The majority of
such contracts allow property owners to terminate the contract at any time. At
July 31, 1998, the Company had approximately 2,400 rental homes and condominiums
under management. Abbott's operations are seasonal, with primary customer
concentration during May through August of each year.
In conjunction with providing property management services, the Company
realizes certain revenues related to food and beverage, housekeeping,
maintenance, laundry, etc. Revenues realized related to these activities are
classified as service fees and other in the accompanying consolidated statement
of income.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting and Principles of Consolidation
The accompanying consolidated financial statements are prepared on the
accrual basis of accounting and include the accounts of the Company and its
majority-owned subsidiaries. All significant intercompany accounts and
transactions have been eliminated in consolidation.
Cash and Cash Equivalents
For purpose of the statement of cash flows, the Company considers all
investments with original maturities of three months or less to be cash
equivalents.
Cash Held in Escrow
Cash held in escrow represents customer deposits related to real estate
sales that have been placed in escrow accounts until such sales are finalized.
Other Current Assets
Other current assets consist of prepaid advertising, prepaid insurance
premiums and inventories.
Advertising and insurance costs are expensed ratably over the expected
benefit period. At July 31, 1998, the Company maintained a prepaid balance of
approximately $718,000 related to these items.
Inventories are carried at weighted average cost and consist primarily of
linens, food and beverage. At July 31, 1998, the Company maintained an inventory
balance of approximately $180,000 related to these items.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Other Assets
Other assets primarily consist of a note receivable and certain
investments.
On June 1, 1995, in conjunction with purchasing certain property, Abbott
agreed to accept a note receivable for a portion of the property that was
previously sold. The note receivable represents a 50-month note for $700,000,
which bears interest at 8.7% per annum. Principal and interest payments
approximating $7,000 are due monthly with a final balloon payment of
approximately $593,000 due on August 1, 1999. At July 31, 1998, the note
receivable approximated $664,000.
The Company maintains a common stock investment in a local financial
institution. The Company accounts for this stock using the cost method, and the
investment balance approximated $90,000 at July 31, 1998. Subsequent to July 31,
1998, the Company recorded shareholder receivables for this balance as the
common stock was transferred to Abbott stockholders.
The Company has an ultimate 10% limited partnership interest in a
condominium development located in Destin, Florida. Due to the nature of this
investment, the Company accounts for this investment under the cost method. At
July 31, 1998, the investment balance approximated $600,000.
Minority Interest
As the Company owns 80% of Abbott and Andrews, the accompanying
consolidated financial statements reflect minority interest for 20% of the
current year net income of Abbott and Andrews and a minority interest payable to
shareholder for 20% of the retained earnings of Abbott and Andrews.
Revenue Recognition
The Company records property rental fees on the accrual basis of
accounting, ratably over the term of guest stays, as earned. The Company
requires a minimum deposit of $50 when the reservation is booked. These deposits
are non-refundable and are recorded as a component of customer deposits,
deferred revenue and payable to property owner in the accompanying consolidated
balance sheet. The Company records revenue for cancellations upon occurrence.
Service fees are recorded for a variety of services and are recognized as
the service is provided.
Commissions on real estate sales are recognized at closing and are recorded
net of the related commission expense to agents. The Company recognized gross
commission revenues of approximately $10,077,000 and commission expenses of
approximately $6,593,000 for the year ended July 31, 1998.
Operating Expenses
Operating expenses include travel agent commissions, salaries, marketing
expense and other costs associated with property management and real estate
sales.
Property and Equipment
Property and equipment are stated at cost, and depreciation is computed
using the straight-line method over the estimated useful lives of the assets.
Expenditures for repairs and maintenance are charged to expense when
incurred. Expenditures for major renewals and betterments, which extend the
useful lives of existing equipment, are capitalized and depreciated. Upon
retirement or disposition of property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any resulting gain or
loss is recognized in the statement of operations. The gross amount of assets
recorded under capital leases totaled $692,649 and accumulated amortization
related to those assets totaled $352,382.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Income Taxes
The company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS No.
109"). Under SFAS No. 109, the current provision for income taxes represents
actual or estimated amounts payable or refundable on tax returns filed or to be
filed for each year. Deferred tax assets and liabilities are recorded for the
estimated future tax effects of: (a) temporary differences between the tax bases
of assets and liabilities and amounts reported in the consolidated balance
sheets, and (b) operating loss and tax credit carryforwards. The overall change
in deferred tax assets and liabilities for the period measures the deferred tax
expense for the period. Effects of changes in enacted tax laws on deferred tax
assets and liabilities are reflected as adjustments to tax expense in the period
of enactment. The measurement of deferred tax assets may be reduced by a
valuation allowance based on judgemental assessment of available evidence if
deemed more likely than not that some or all of the deferred tax assets will not
be realized.
Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, revenues,
and expenses and the disclosure of contingent assets and liabilities. While
management endeavors to make accurate estimates, actual results could differ
from these estimates.
Concentration of Risk
The Company's operations are exclusively in the Destin, Fort Walton and
South Walton, Florida area and are subject to significant changes due to weather
conditions.
3. PROPERTY AND EQUIPMENT:
At July 31, 1998, property and equipment consisted of the following (in
thousands):
ESTIMATED
USEFUL LIFE
IN YEARS AMOUNT
------------ -----------
Leasehold improvements .................... 5 - 15 $ 904
Building .................................. 15 - 40 5,248
Furniture, fixtures and equipment ......... 3 - 10 4,259
Vehicles .................................. 3 - 7 479
Land ...................................... 1,581
--------
12,471
Less: Accumulated Depreciation ............ (2,969)
--------
$ 9,502
========
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
4. LONG TERM DEBT:
Long-term debt consisted of the following at July 31, 1998 (in thousands):
<TABLE>
<CAPTION>
DESCRIPTION AMOUNT
- ------------------------------------------------------------------------------------ ----------
<S> <C>
Various notes secured by certain assets held with Regions Bank. At July 31, 1998 the
interest rates on these obligations ranged from 7.5% to 9% and mature at various
dates between December, 1998 through December 2002. ............................... $ 5,058
Two notes secured by certain assets held with SunTrust Bank. At July 31, 1998 the
interest rates on these obligations were 8.5% and Prime+1% and mature in August
and September 2001. ............................................................... 598
Two notes secured by buildings held with First City Bank. At July 31, 1998 the
variable interest rates on these obligations were 7.5% and mature in February
2013. ............................................................................. 404
Various notes secured by certain assets and a line of credit held with AmSouth Bank.
At July 31, 1998 the interest rates on these obligations ranged from Prime to 8.75%
and mature at various dates between December, 1998 through December 2002. ......... 356
Other secured and unsecured notes held with various entities. At July 31, 1998 the
interest rates on these obligations were 7.3% and Prime+.5% and mature in
December 1998 and May 1999. ....................................................... 31
Various capital leases with IBM Credit for computer hardware. At July 31, 1998 the
interest rates on these obligations ranged from 8.1% to 10.3% and expire in
January 2000 and April 2002. ...................................................... 398
-------
Less current maturities .......................................................... (806)
-------
$ 6,039
=======
</TABLE>
At July 31, 1998, the estimated future maturities of long-term debt were as
follows (in thousands):
YEAR
ENDED
JULY 31 AMOUNT
--------------------------------- ------
1999 .......................... $ 806
2000 .......................... 538
2001 .......................... 3,463
2002 .......................... 771
2003 .......................... 305
Thereafter..................... 962
------
$6,845
======
5. INCOME TAXES:
Abbott recorded the following income tax provision for the year ended July
31, 1998 (in thousands):
AMOUNT
-------
Current ............................... $271
Deferred .............................. 66
----
$337
====
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
At July 31, 1998, the Company recorded the following deferred tax assets
and liabilities:
DESCRIPTION AMOUNT
- ------------------------------------------------- ---------
Deferred tax assets
Vacation liability ...................... $ 116
Workers' compensation liability ......... 178
------
Total deferred tax assets .............. 294
Deferred tax liability
Property and equipment .................. (106)
------
$ 188
======
The provision for income taxes differs from the amount computed by applying
the statutory federal income tax rate of 34% for the following reasons (in
thousands):
DESCRIPTION AMOUNT
- -------------------------------------------------------------- -------
Income tax expense at federal statutory rate .......... $286
State taxes, net of federal tax benefit ............... 30
Other ................................................. 21
----
$337
====
6. COMMITMENTS AND CONTINGENCIES:
Guaranty
The Company is a partial guarantor on a $26,000,000 construction loan
pertaining to the condominium development which the Company has a 10% limited
partnership interest as discussed in Note 2. The Company's guarantee under this
arrangement is not to exceed approximately $1,700,000.
Litigation
The Company is involved in various legal actions arising in the ordinary
course of business. Management does not believe that the outcome of such legal
actions will have a material adverse effect on the Company's financial position
or results of operations.
Benefit Plans
The Company has a 401(k) profit-sharing plan for all employees who have
completed 1,000 hours of service in a 12-month period and are 21 or older.
Eligible employees may elect to make pre-tax contributions to the plan subject
to statutory limits. The Company matches 25 percent of employee contributions on
the first four percent of base compensation. All contributions to the plan are
invested in one or more investment funds at each participant's option. The
Company's contributions were $50,105 for the year ended July 31, 1998.
Future Minimum Lease Payments
The Company rents office space, automobiles, and equipment under operating
leases. Rental expense related to these leases was approximately $550,000 for
the year ended July 31, 1998. Rental expense related to leases with related
parties was approximately $109,860 for the year ended July 31, 1998.
<PAGE>
ABBOTT REALTY SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
Minimum future lease payments under these noncancelable operating leases in
effect at July 31, 1998 are as follows (in thousands):
YEAR AMOUNT
-------------------------- ---------
1999 ................... $ 462
2000 ................... 326
2001 ................... 204
2002 ................... 174
2003 ................... 92
------
Total .................. $1,258
======
7. RELATED PARTY TRANSACTIONS:
The Company manages at favorable rental commission rates approximately 100
rental units owned by stockholders and employees of the Company. For the year
ended July 31, 1998, property management fee revenue and service fee revenue
approximated $417,000 and $776,000, respectively, related to the management of
these properties.
All stockholders are employed by the Company. For the year ended July 31,
1998, the shareholders received approximately $2,203,000 in salaries and
benefits. Additionally, the Company paid approximately $590,000 in real estate
commissions to certain stockholders for the year ended July 31, 1998.
At July 31, 1998, trade and other accounts receivable includes unsecured,
non-interest bearing receivables from certain stockholders approximating
$104,000.
The Company processes payroll for certain non-consolidated affiliates and
is reimbursed by these affiliates in the subsequent month. These receivables are
unsecured, non-interest bearing and approximated $90,000 at July 31, 1998.
8. SUBSEQUENT EVENT:
On September 30, 1998, ResortQuest International, Inc. ("ResortQuest")
acquired all of the outstanding common stock of Abbott in exchange for cash and
shares of ResortQuest common stock (the "Acquisition"). In connection with the
Acquisition, the owners and certain key employees have agreed to reductions and
or terminations of salary and benefits.
Exhibit 3
RESORTQUEST INTERNATIONAL, INC.,
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
On May 26, 1998, ResortQuest International, Inc. ("ResortQuest" or the
"Company") consummated its initial public offering (the "IPO") and the
combination (the "Combinations") of 12 vacation rental and property management
companies and one leading vacation rental and property management software
company. Additionally, on September 30, 1998, ResortQuest completed the
acquisition of Abbott Realty Services, Inc. ("Abbott Resorts"). The following
unaudited pro forma combined financial statements give effect to the
acquisition of Abbott Resorts and the acquisitions by ResortQuest, of the
outstanding capital stock of Hotel Corporation of the Pacific, Inc. ("Aston
Hotels & Resorts"), Brindley & Brindley Realty, Inc. and B&B On The Beach, Inc.
(collectively "Brindley and Brindley"), Coastal Resorts Management, Inc. and
Coastal Resorts Realty, L.L.C. (collectively "Coastal Resorts"), Collection of
Fine Properties, Inc. ("CFP"), First Resort Software, Inc. ("FRS"), Houston and
O'Leary Company ("H&O"), Maui Condo & Home Realty, Inc. ("Maui"), The Maury
People, Inc. ("Maury"), Howey Acquisition, Inc. and Priscilla Murphy Realty,
Inc. (collectively "PMR"), Resort Property Management, Inc. ("RPM"), Telluride
Resort Accommodations, Inc. ("TRA"), Trupp-Hodnett Enterprises, Inc. and THE
Management Company (collectively "THE"), and Whistler Chalets Limited
("Whistler"), (collectively the "Founding Companies"). The acquisitions of
Abbott Resorts and the Combinations are accounted for using the purchase method
of accounting. Aston Hotels & Resorts, one of the Founding Companies, has been
designated as the accounting acquiror (for financial statement presentation
purposes) in the Combinations in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 97 ("SAB 97"), which states that the
combining company which receives the largest portion of voting rights in the
combined corporation is presumed to be the acquiror for accounting purposes
unless other evidence clearly indicates that another company is the acquiror.
Management has analyzed the factors as set forth in SAB 97 that may indicate
Aston Hotels & Resorts should not be deemed to be accounting acquiror,
including (1) the existing conversion rights of the Restricted Common Stock,
(2) Aston Hotels & Resorts' level of representation on the Board and in the
holding company management team and (3) the market value of the shares held by
Aston Hotels & Resorts and the existing shareholder group. Management has
concluded that none of these factors, either individually, or in the aggregate,
is sufficient to rebut the presumption that the shareholders of Aston Hotels &
Resorts should be deemed the accounting acquiror.
The unaudited pro forma combined balance sheets give effect to i) the
recorded balances of ResortQuest at June 30, 1998, and ii) the acquisition of
Abbott Resorts by ResortQuest as if such transaction had occurred on June 30,
1998. The unaudited pro forma combined statements of operations give effect to
the Combinations, the IPO and the acquisition of Abbott Resorts as if such
transactions had occurred on January 1, 1997.
The unaudited pro forma combined statement of operations of ResortQuest for
the six months ended June 30, 1998 does not include the compensation expense and
management recruitment expense, relating to the non-recurring charge of $6.1
million, in conjunction with the issuance of common stock to management and
founders of ResortQuest and other costs, prior to the Offering. Additionally,
the unaudited pro forma combined balance sheets and statements of operations do
not include the effects of the Company's acquisitions of Plantation Resort and
Whistler Exclusive, as such acquisitions are immaterial to ResortQuest for
presentation purposes.
In conjunction with the consummation of the above transactions, the Company
expects to realize certain savings as a result of (i) volume purchasing and
national contracts for telecommunications, credit fees, advertising, printing,
housekeeping supplies and other operating expenses and (ii) consolidation of
insurance, employee benefits and other general and administrative expenses. The
Company cannot quantify these savings accurately at this time. It is anticipated
that these savings will be partially offset by the costs of being a publicly
traded company and the incremental costs related to the Company's new management
team. However, these costs, like the savings that they offset,
<PAGE>
cannot be quantified accurately. Neither these anticipated savings nor these
anticipated costs have been included in the pro forma combined financial
information of the Company. To the extent the owners and certain key employees
of the Combinations and Abbott Resorts have agreed prospectively to reductions
in salary, bonuses and benefits, these reductions have been reflected in the
unaudited pro forma combined statements of operations.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. In management's opinion, the pro forma information presented
herein should not materially change from the preliminary estimates. The
unaudited pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions in fact had occurred on those dates and are not necessarily
representative of the Company's financial position or results of operations for
any future period. Since the Founding Companies and Abbott Resorts were not
under common control or management, historical combined results may not be
comparable to, or indicative of, future performance. The unaudited pro forma
combined financial statements should be read in conjunction with the other
financial statement and notes thereto included elsewhere in the Prospectus. See
"Risk Factors" included elsewhere herein.
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET - JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
PRO FORMA
ABBOTT ADJUSTMENTS
RESORTQUEST RESORTS (NOTE 2) AS ADJUSTED
------------- --------- ------------ ------------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents ................................. $ 6,037 $11,409 $ -- $ 17,446
Cash held in trust ........................................ 6,064 604 -- 6,668
Trade and other receivables, net of allowance ............. 3,627 851 -- 4,478
Other current assets ...................................... 5,890 1,098 -- 6,988
--------- ------- -------- ---------
Total current assets ..................................... 21,618 13,962 -- 35,580
Property and equipment, net ................................ 4,075 9,376 -- 13,451
Goodwill ................................................... 95,429 -- 31,547 126,976
Other assets ............................................... 3,206 1,461 -- 4,667
--------- ------- -------- ---------
Total assets ............................................. $ 124,328 $24,799 $ 31,547 $ 180,674
========= ======= ======== =========
Current Liabilities:
Current maturities of long-term debt ...................... $ 1,396 $ 827 $ -- $ 2,223
Customer deposits, deferred revenue and payable to
homeowners ............................................... 11,357 11,820 -- 23,177
Accounts payable and accrued liabilities .................. 9,712 3,400 -- 13,112
Other current liabilities ................................. 627 315 -- 942
--------- ------- -------- ---------
Total current liabilities ................................ 23,092 16,362 -- 39,454
Long-term debt, net of current maturities .................. 1,992 6,089 26,530 34,611
Other long-term liabilities ................................ -- 1,170 (437) 733
Stockholders' Equity:
Common stock, 15,924,286 shares outstanding (ResortQuest)
and 16,681,326 shares outstanding (pro forma as adjusted) 159 1 7 167
Additional paid-in-capital ................................ 128,662 7 6,617 135,286
Distribution in excess of predecessor basis in net assets . (29,500) -- -- (29,500)
Retained earnings ......................................... (77) 1,170 (1,170) (77)
--------- ------- -------- ---------
Total stockholders' equity ............................... 99,244 1,178 5,454 105,876
--------- ------- -------- ---------
Total liabilities and stockholders' equity ............... $ 124,328 $24,799 $ 31,547 $ 180,674
========= ======= ======== =========
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
PAGE 1 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ABBOTT BRINDLEY &
RESORTQUEST RESORTS BRINDLEY
------------- ----------- ------------
<S> <C> <C> <C>
Revenues .................................................. $19,554 $25,813 $4,021
Operating expenses ........................................ 8,908 14,654 3,028
General and administrative expenses ....................... 5,081 9,235 395
Depreciation and amortization ............................. 394 595 87
------- ------- ------
Income (loss) from operations ............................. 5,171 1,329 511
Interest (expense) and other income, net .................. (86) (167) 42
------- ------- ------
Income (loss) before income taxes ......................... 5,085 1,162 553
Provision for income taxes ................................ -- 465 --
------- ------- ------
Net income (loss) ......................................... $ 5,085 $ 697 $ 553
======= ======= ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $ 5,085 $ 1,162 $ 553
Less: pro forma provision for income taxes ................ 2,034 465 221
------- ------- ------
PRO FORMA NET INCOME (LOSS) ............................... $ 3,051 $ 697 $ 332
======= ======= ======
<CAPTION>
COASTAL
RESORTS CFP FRS H&O MAURY
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues .................................................. $3,615 $4,303 $2,864 $1,596 $1,183
Operating expenses ........................................ 1,788 2,830 1,704 494 211
General and administrative expenses ....................... 559 586 372 274 654
Depreciation and amortization ............................. 85 307 45 48 28
------ ------ ------ ------ ------
Income (loss) from operations ............................. 1,183 580 743 780 290
Interest (expense) and other income, net .................. (47) 133 25 (15) 28
------ ------ ------ ------ ------
Income (loss) before income taxes ......................... 1,136 713 768 765 318
Provision for income taxes ................................ -- -- -- -- --
------ ------ ------ ------ ------
Net income (loss) ......................................... $1,136 $ 713 $ 768 $ 765 $ 318
====== ====== ====== ====== ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $1,136 $ 713 $ 768 $ 765 $ 318
Less: pro forma provision for income taxes ................ 454 285 307 306 127
------ ------ ------ ------ ------
PRO FORMA NET INCOME (LOSS) ............................... $ 682 $ 428 $ 461 $ 459 $ 191
====== ====== ====== ====== ======
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
PAGE 2 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PMR RPM TRA THE MAUI
--------- --------- --------- --------- ------------
<S> <C> <C> <C> <C> <C>
Revenues ........................................ $4,740 $2,295 $4,313 $4,061 $1,422
Operating expenses .............................. 1,184 1,560 3,037 1,838 366
General and administrative expenses ............. 1,663 548 982 1,939 954
Depreciation and amortization ................... 203 79 48 85 25
------ ------ ------ ------ ------
Income (loss) from operations ................... 1,690 108 246 199 77
Interest (expense) and other income, net ........ (182) 217 31 47 (1)
------ ------ ------ ------ ------
Income (loss) before income taxes ............... 1,508 325 277 246 76
Provision for income taxes ...................... -- 75 -- 60 21
------ ------ ------ ------ ------
Net income (loss) ............................... $1,508 $ 250 $ 277 $ 186 $ 55
====== ====== ====== ====== ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $1,508 $ 325 $ 277 $ 246 $ 76
Less: pro forma provision for income taxes ...... 603 130 111 98 31
------ ------ ------ ------ ------
PRO FORMA NET INCOME (LOSS) ..................... $ 905 $ 195 $ 166 $ 148 $ 45
====== ====== ====== ====== ======
Basic and diluted pro forma net income per
share ..........................................
Shares used in computing pro forma net income
per share (Note 4) .............................
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO
WHISTLER COMBINED (NOTE 3) FORMA
------------ ---------- ---------------------- --------------
<S> <C> <C> <C> <C>
Revenues ........................................ $2,060 $81,840 $ 1,327 (a) $ 83,167
Operating expenses .............................. 1,147 42,749 (671)(b) 42,078
General and administrative expenses ............. 729 23,971 (3,635)(b) 20,336
Depreciation and amortization ................... 85 2,114 3,152 (b)(c) 5,266
------ ------- ------------ ------------
Income (loss) from operations ................... 99 13,006 2,481 15,487
Interest (expense) and other income, net ........ (8) 17 (1,807)(b)(e) (1,790)
------ ------- ------------ ------------
Income (loss) before income taxes ............... 91 13,023 674 13,697
Provision for income taxes ...................... (18) 603 6,137 (d) 6,740
------ ------- ------------ ------------
Net income (loss) ............................... $ 109 $12,420 $ (5,463) $ 6,957
====== ======= ============ ============
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $ 91 $13,023 $ 674 $ 13,697
Less: pro forma provision for income taxes ...... 37 5,209 1,531 6,740
------ ------- ------------ ------------
PRO FORMA NET INCOME (LOSS) ..................... $ 54 $ 7,814 $ (857) $ 6,957
====== ======= ============ ============
Basic and diluted pro forma net income per
share .......................................... $ 0.42
============
Shares used in computing pro forma net income
per share (Note 4) ............................. 16,681,326
============
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
PAGE 1 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
ABBOTT BRINDLEY &
RESORTQUEST RESORTS BRINDLEY
------------- ----------- ------------
<S> <C> <C> <C>
Revenues ...................................................... $13,936 $13,909 $ 635
Operating expenses ............................................ 7,167 7,579 1,327
General and administrative expenses ........................... 3,593 6,019 225
Depreciation and amortization ................................. 568 321 37
------- ------- ------
Income (loss) from operations ................................. 2,608 (10) (954)
Interest (expense) and other income, net ...................... (30) (157) 27
------- ------- ------
Income (loss) before income tax expense ....................... 2,578 (167) (927)
Provision (benefit) for income taxes .......................... 304 (67) --
------- ------- ------
Net income (loss) ............................................. $ 2,274 (100) $ (927)
======= ======= ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ................................................. $ 2,578 $ (167) $ (927)
Less: pro forma provision (benefit) for income taxes .......... 1,031 (67) (371)
------- ------- ------
PRO FORMA NET INCOME (LOSS) ................................... $ 1,547 $ (100) $ (556)
======= ======= ======
<CAPTION>
COASTAL
RESORTS CFP FRS H&O MAURY
--------- --------- --------- ---------- ------
<S> <C> <C> <C> <C> <C>
Revenues ...................................................... $1,168 $2,929 $1,401 $648 $439
Operating expenses ............................................ 718 1,397 679 224 89
General and administrative expenses ........................... 243 203 293 98 239
Depreciation and amortization ................................. 35 128 20 20 12
------ ------ ------ ---- ----
Income (loss) from operations ................................. 172 1,201 409 306 99
Interest (expense) and other income, net ...................... 8 58 12 (4) 5
------ ------ ------ ---- ----
Income (loss) before income tax expense ....................... 180 1,259 421 302 104
Provision (benefit) for income taxes .......................... -- -- - - --
------ ------ ------ ---- ----
Net income (loss) ............................................. $ 180 $1,259 $ 421 $302 $104
====== ====== ====== ==== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ................................................. $ 180 $1,259 $ 421 $302 $104
Less: pro forma provision (benefit) for income taxes .......... 72 504 168 121 42
------ ------ ------ ---- ----
PRO FORMA NET INCOME (LOSS) ................................... $ 108 $ 755 $ 253 $181 $ 62
====== ====== ====== ==== ====
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
PAGE 2 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PMR RPM TRA THE MAUI
--------- --------- --------- ------------ ------
<S> <C> <C> <C> <C> <C>
Revenues ......................................... $3,148 $1,552 $2,749 $1,969 $905
Operating expenses ............................... 482 659 1,575 901 132
General and administrative expenses .............. 864 270 438 1,034 323
Depreciation and amortization .................... 85 75 20 37 3
------ ------ ------ ------ ----
Income (loss) from operations .................... 1,717 548 716 (3) 447
Interest (expense) and other income, net ......... (17) 21 35 1 17
------ ------ ------ ------ ----
Income (loss) before income taxes ................ 1,700 569 751 (2) 464
Provision (benefit) for income taxes ............. -- 28 -- -- 32
------ ------ ------ ------ ----
Net income (loss) ................................ $1,700 $ 541 $ 751 $ (2) $432
====== ====== ====== ====== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ...................... $1,700 $ 569 $ 751 $ (2) $464
Less: pro forma provision (benefit) for income
taxes ........................................... 680 227 300 (1) 187
------ ------ ------ ------ ----
PRO FORMA NET INCOME (loss): $1,020 $ 342 $ 451 $ (1) $277
====== ====== ====== ====== ====
Basic pro forma net income per share .............
Shares used in computing basic pro forma net
income per share (Note 4) .......................
Diluted pro forma net income per share ...........
Shares used in computing diluted pro forma net
income per share (Note 4) .......................
<CAPTION>
PRO FORMA
ADJUSTMENTS PRO
WHISTLER COMBINED (NOTE 3) FORMA
---------- ---------- ---------------------- --------------
<S> <C> <C> <C> <C>
Revenues ......................................... $1,297 $46,685 $ 1,346 (a) $ 48,031
Operating expenses ............................... 664 23,593 (571)(b) 23,022
General and administrative expenses .............. 140 13,982 (2,697)(b) 11,285
Depreciation and amortization .................... 33 1,394 1,363 (b)(c) 2,757
------ ------- ----------- ------------
Income (loss) from operations .................... 460 7,716 3,251 10,967
Interest (expense) and other income, net ......... 26 2 (816)(b)(e) (814)
------ ------- ----------- ------------
Income (loss) before income taxes ................ 486 7,718 2,435 10,153
Provision (benefit) for income taxes ............. (20) 277 4,451 (d) 4,728
------ ------- ----------- ------------
Net income (loss) ................................ $ 506 $ 7,441 $ (2,016) $ 5,425
====== ======= =========== ============
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ...................... $ 486 $ 7,718 $ 2,435 $ 10,153
Less: pro forma provision (benefit) for income
taxes ........................................... 192 3,085 1,643 4,728
------ ------- ----------- ------------
PRO FORMA NET INCOME (loss): $ 294 $ 4,633 $ 792 $ 5,425
====== ======= =========== ============
Basic pro forma net income per share ............. $ 0.33
============
Shares used in computing basic pro forma net
income per share (Note 4) ....................... 16,681,326
============
Diluted pro forma net income per share ........... $ 0.32
============
Shares used in computing diluted pro forma net
income per share (Note 4) ....................... 16,738,504
============
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
PAGE 1 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
ABBOTT BRINDLEY &
RESORTQUEST RESORTS BRINDLEY
------------- ----------- ------------
<S> <C> <C> <C>
Revenues .................................................. $10,078 $12,191 $ 1,425
Operating expenses ........................................ 5,247 6,852 1,193
General and administrative expenses ....................... 2,263 4,402 204
Depreciation and amortization ............................. 176 312 44
------- ------- -------
Income (loss) from operations ............................. 2,392 625 (16)
Interest (expense) and other income, net .................. (333) (114) (2)
------- ------- -------
Income (loss) before income taxes ......................... 2,059 511 (18)
Provision for income taxes ................................ -- 204 --
------- ------- -------
Net income (loss) ......................................... $ 2,059 $ 307 $ (18)
======= ======= =======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $ 2,059 $ 511 $ (18)
Less: pro forma provision for income taxes ................ 824 204 (7)
------- ------- -------
PRO FORMA NET INCOME (LOSS) ............................... $ 1,235 $ 307 $ (11)
======= ======= =======
<CAPTION>
COASTAL
RESORTS CFP FRS H&O MAURY
--------- --------- --------- ------------ ------
<S> <C> <C> <C> <C> <C>
Revenues .................................................. $1,220 $3,071 $1,342 $1,180 $661
Operating expenses ........................................ 604 1,538 791 125 115
General and administrative expenses ....................... 235 279 176 216 276
Depreciation and amortization ............................. 42 153 24 24 14
------ ------ ------ ------ ----
Income (loss) from operations ............................. 339 1,101 351 815 256
Interest (expense) and other income, net .................. -- 53 12 (9) 7
------ ------ ------ ------ ----
Income (loss) before income taxes ......................... 339 1,154 363 806 263
Provision for income taxes ................................ -- -- -- -- --
------ ------ ------ ------ ----
Net income (loss) ......................................... $ 339 $1,154 $ 363 $ 806 $263
====== ====== ====== ====== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $ 339 $1,154 $ 363 $ 806 $263
Less: pro forma provision for income taxes ................ 136 462 145 322 105
------ ------ ------ ------ ----
PRO FORMA NET INCOME (LOSS) ............................... $ 203 $ 692 $ 218 $ 484 $158
====== ====== ====== ====== ====
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
PAGE 2 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
PMR RPM TRA THE MAUI
--------- --------- --------- --------- ------
<S> <C> <C> <C> <C> <C>
Revenues ........................................ $3,019 $1,733 $2,738 $1,915 $759
Operating expenses .............................. 545 978 1,611 831 158
General and administrative expenses ............. 808 243 477 955 393
Depreciation and amortization ................... 102 53 24 44 12
------ ------ ------ ------ ----
Income (loss) from operations ................... 1,564 459 626 85 196
Interest (expense) and other income, net ........ (29) 18 25 40 15
------ ------ ------ ------ ----
Income (loss) before income taxes ............... 1,535 477 651 125 211
Provision for income taxes ...................... -- 38 -- 23 48
------ ------ ------ ------ ----
Net income (loss) ............................... $1,535 $ 439 $ 651 $ 102 $163
====== ====== ====== ====== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $1,535 $ 477 $ 651 $ 125 $211
Less: pro forma provision for income taxes ...... 614 191 260 50 84
------ ------ ------ ------ ----
PRO FORMA NET INCOME (LOSS): .................... $ 921 $ 286 $ 391 $ 75 $127
====== ====== ====== ====== ====
Basic and diluted pro forma net income per
share ..........................................
Shares used in computing pro forma net income
per share (Note 4) .............................
<CAPTION>
PRO FORMA
ADJUSTMENTS
WHISTLER COMBINED (NOTE 3) PRO FORMA
---------- ---------- ---------------------- --------------
<S> <C> <C> <C> <C>
Revenues ........................................ $1,378 $42,710 $ 707 (a) $ 43,417
Operating expenses .............................. 833 21,421 (224)(b) 21,197
General and administrative expenses ............. 214 11,141 (1,756)(b) 9,385
Depreciation and amortization ................... 44 1,068 1,667 (b)(c) 2,735
------ ------- ----------- ------------
Income (loss) from operations ................... 287 9,080 1,020 10,100
Interest (expense) and other income, net ........ 27 (290) (888)(b)(e) (1,178)
------ ------- ----------- ------------
Income (loss) before income taxes ............... 314 8,790 132 8,922
Provision for income taxes ...................... (18) 295 3,941 (d) 4,236
------ ------- ----------- ------------
Net income (loss) ............................... $ 332 $ 8,495 $ (3,809) $ 4,686
====== ======= =========== ============
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $ 314 $ 8,790 $ 132 $ 8,922
Less: pro forma provision for income taxes ...... 126 3,516 720 4,236
------ ------- ----------- ------------
PRO FORMA NET INCOME (LOSS): .................... $ 188 $ 5,274 $ (588) $ 4,686
====== ======= =========== ============
Basic and diluted pro forma net income per
share .......................................... $ 0.28
============
Shares used in computing pro forma net income
per share (Note 4) ............................. 16,681,326
============
</TABLE>
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
1. GENERAL:
On May 26, 1998, ResortQuest consummated the IPO and completed the
Combinations of the Founding Companies. The consideration for the Combinations
consisted of cash and common stock. The Combinations were accounted for under
the purchase method of accounting. Aston Hotels & Resorts has been designated as
the accounting acquiror for financial statement presentation purposes in
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
97, which states that the combining company which receives the largest portion
of voting rights in the combined corporation is presumed to be the acquiror for
accounting purposes. On September 30, 1998, ResortQuest completed the
acquisition of Abbot Resorts. Accordingly, the historical financial statements
of ResortQuest reflect the financial position and results of operations of the
parent company of ResortQuest ("RQI"), the Founding Companies and Abbott Resorts
as of June 30, 1998, and for the year ended December 31, 1997, and the six
months ended June 30, 1997 and 1998, and were derived from the respective
financial statements where indicated. The historical financial statements of
ResortQuest represent the results of Aston Hotels & Resorts prior to the
Combinations and the IPO, and only include balances and transactions of the
Founding Companies since May 27, 1998. Additionally, the unaudited pro forma
combined balance sheets and statements of operations do not include the effects
of the Company's acquisitions of Plantation Resort and Whistler Exclusive, as
such acquisitions are immaterial to ResortQuest for presentation purposes.
The unaudited pro forma statement of operations of ResortQuest for the six
months ended June 30, 1998 does not include the compensation expense and
management recruitment expense, relating to the non-recurring charge of $6.1
million, in conjunction with the issuances of common stock to management and
founders of RQI and other costs, prior to the Offering.
2. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):
DESCRIPTION AMOUNT
---------------------------------------------- ------------------
Goodwill ..................................... $ 31,547 (a)
Long-term debt, net of current maturities .... (26,530)(b)
Other long-term liabilities .................. 437 (c)
Common stock ................................. (7)(d)
Additional paid-in-capital ................... (6,617)(e)
Retained earnings ............................ 1,170 (f)
----------
$ --
==========
- ----------
The above table reflects the adjustments related to the acquisition of
Abbott Resorts including:
(a) The goodwill related to the issuance of Common Stock and the cash paid
to satisfy the purchase price.
(b) The increase in ResortQuest's line of credit to fund the cash portion
of the purchase price.
(c) The elimination of minority interest liability.
(d) Issuance of 757,040 shares of Common Stock to satisfy the purchase
price at a par value of $.01 per share, net of the elimination of the
Abbott Resorts' common stock.
(e) The increase in additional paid-in-capital for the issuance of 757,040
shares of Common Stock at fair value, net of the elimination of Abbott
Resorts' additional paid-in-capital.
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS - (CONTINUED )
(f) The elimination of Abbott Resorts' retained earnings.
3. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
(a) Reflects additional revenue that ResortQuest would have realized
related to certain property management contracts with affiliates of
the Founding Companies and Abbott Resorts. These management contracts
were reflective of below market rates and have been renegotiated in
conjunction with the acquisitions.
(b) Reflects (i) a reduction in salaries, bonuses and benefits derived
from contractual agreements which establish the compensation of the
owners and certain key employees of the Founding Companies and Abbott
Resorts and (ii) the effect of the exclusion of certain non-operating
assets and the assumption of or retirement of certain liabilities
(including interest expense) that will be retained by certain
stockholders of the Founding Companies.
The reduction in salaries, bonuses and benefits reflects the
difference between historical combined management compensation of
approximately $2.5 million, $1.3 million and $5.5 million as compared
to the contractual compensation of $771,000, $771,000 and $1.9
million, respectively, for the six months ended June 30, 1998 and
1997, and the year ended December 31, 1997, respectively.
(c) Reflects amortization of goodwill (which is not deductible for income
tax purposes) recorded as a result of the Combinations and the
acquisition of Abbott Resorts over a 40-year period, except for the
goodwill related to First Resort, which will be amortized
straight-line over a 15-year period.
(d) Reflects the provision for federal and state income taxes relating to
converting certain operations to C Corporation status and including
the tax impact of pro forma adjustments.
(e) Reflects the estimated interest expense related to the debt assumed in
conjunction with ResortQuest funding the cash portion of the purchase
price related to the acquisition of Abbott Resorts.
While ResortQuest could pay a maximum bonus of 50% (except for two
executives at 100%) of a key employee's base pay, bonuses are not factored into
the prospective compensation as ResortQuest does not anticipate paying bonuses
in fiscal 1998. The maximum amount that could be paid would be $700,000. These
bonuses, if paid in future periods, would increase expenses and unfavorably
impact net earnings, accordingly.
4. NET INCOME PER SHARE
The shares used in computing net income per share include: (i) 3,134,630
shares issued to management of and founders of RQI; (ii) 6,119,656 shares issued
to the stockholders of the Founding Companies in connection with the
Combinations; and (iii) 6,670,000 shares issued in connection with the Offering
necessary to pay the $54.9 million cash portion of the consideration for the
Combinations and (iv) 757,040 shares issued to pay for a portion of the purchase
price related to the acquisition of Abbott Resorts. Related to the six month
period ended June 30, 1998, diluted net income per share includes the effect of
1,807,000 shares of Common Stock reserved for issuance pursuant to the Company's
1998 Long-Term Incentive Plan, of which options to purchase 1,697,000 shares
granted by the Company concurrently with the Offering at an exercise price equal
to the initial public offering price.
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS - (CONTINUED )
5. ABBOTT RESORTS INFORMATION
The 1998 unaudited pro forma results of Abbott Resorts are as of and for
the six months ended June 30, 1998. The audited financial statements for Abbott
Resorts as of and for the year ended July 31, 1998 are included within this
Prospectus. Due to the seasonal nature of Abbott Resorts' operations, operating
income may vary significantly. For the twelve months ended July 31, 1998, the
following operating income and unaudited pro forma adjustments were noted:
DESCRIPTION AMOUNT
--------------------------------------------------------------- -------------
Operating income, including interest income of $333,962........ $1,383,717
Pro forma adjustments:
Add stockholder salaries and benefits to be reduced or
terminated ................................................. 2,203,000
Add increase in rental commissions related to contracts at
favorable terms with affiliates ............................ 546,000
----------
$4,132,717
==========
Additionally, the above adjustments do not reflect an additional revenue
source related to a reservation fee surcharge implemented in June, 1998, which
if annualized, would approximate $780,000.
