<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO .
Commission File Number 01-14115
RESORTQUEST INTERNATIONAL, INC.
(Exact name of registrant in its charter)
Delaware I.R.S. No. 62-1750352
(State of Incorporation) (I.R.S. Employer Identification No.)
530 Oak Court Drive, Suite 360
Memphis, Tennessee 38117
(Address of principal executive offices)(Zip Code)
(901) 762-0600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) 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.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes
of Common Stock, as of March 31, 2000.
Common Stock . . . . . . . . . . . . . . 18,930,085 shares
1
<PAGE>
PART I - FINANCIAL INFORMATION
- -------------------------------
Company or group of companies for which report is filed:
RESORTQUEST INTERNATIONAL, INC. AND SUBSIDIARIES
Item 1. FINANCIAL STATEMENTS
- --------------------------------
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands, except share amounts)
<TABLE>
<CAPTION>
(Unaudited) December 31, March 31,
1999 2000
------------ ---------
<S> <C> <C>
ASSETS
Current assets
Cash and cash equivalents $ 40,239 $ 33,294
Trade and other receivables, net 4,394 5,546
Receivables from stockholders 1,956 2,037
Deferred income taxes 1,237 1,237
Other current assets 5,720 3,614
-------- --------
Total current assets 53,546 45,728
Goodwill, net 175,167 178,012
Property and equipment, net 20,885 21,494
Note receivables from stockholder 4,470 4,470
Other assets 3,607 2,946
-------- --------
Total assets $257,675 $252,650
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 832 $ 484
Customer deposits, deferred revenue and payable
to property owners 43,392 47,989
Accounts payable and accrued liabilities 15,149 14,168
Payables to stockholders 197 150
Other current liabilities 1,271 2,352
-------- --------
Total current liabilities 60,841 65,143
Long-term debt, net of current maturities 68,090 53,736
Deferred income taxes 734 734
Other long-term obligations 2,187 3,402
-------- --------
Total liabilities 131,852 123,015
-------- --------
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 shares authorized,
18,715,447 and 18,930,085 shares outstanding, respectively 187 189
Additional paid-in capital 150,974 151,937
Accumulated other comprehensive income (33) (37)
Excess distributions (29,500) (29,500)
Retained earnings 4,195 7,046
-------- --------
Total stockholders' equity 125,823 129,635
-------- --------
Total liabilities and stockholders' equity $257,675 $252,650
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
balance sheets.
2
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1999 2000
------- --------
<S> <C> <C>
Revenues
Property management fees $18,412 $22,223
Service fees 7,716 10,368
Other 5,528 5,956
------- -------
Total revenues 31,656 38,547
------- -------
Operating expenses
Direct operating 14,469 19,521
General and administrative 9,437 10,501
Depreciation and amortization 1,558 2,013
------- -------
Total operating expenses 25,464 32,035
------- -------
Operating income 6,192 6,512
Interest and other expense, net 647 1,330
------- -------
Income before income taxes 5,545 5,182
Provision for income taxes 2,505 2,331
------- -------
Net income $ 3,040 $ 2,851
======= =======
Earnings per share
Basic $ 0.18 $ 0.15
======= =======
Diluted $ 0.17 $ 0.15
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In thousands, except share amounts)
(Unaudited)
<TABLE>
<CAPTION>
Additional Other
Common Stock Paid-in Comprehensive Excess Retained
Shares Amount Capital Income Distributions Earnings Total
---------- ------ ---------- ------------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1999 18,715,447 $187 $150,974 $(33) $(29,500) $4,195 $125,823
Net income - - - - - 2,851 2,851
Foreign currency translation loss - - - (4) - - (4)
Stock issued in connection
with acquisitions 214,638 2 963 - - - 965
---------- ---- -------- ------------- -------- ------- ---------
Balance, March 31, 2000 18,930,085 $189 $151,937 $(37) $(29,500) $7,046 $129,635
========== ==== ======== ============= ======== ======= ==========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1999 2000
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,040 $ 2,851
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,558 2,013
Changes in assets and liabilities:
Trade and other receivables (2,139) (1,152)
Accounts payable and accrued liabilities 3,455 (981)
Customer deposits, deferred revenues and
payable to property owners 1,098 4,597
Other (2,315) 2,802
------- -------
Net cash provided by operating activities 4,697 10,130
------- -------
Cash flows from investing activities:
Cash portion of acquisitions, net (9,330) (927)
Purchases of property and equipment (817) (1,429)
------- -------
Net cash used in investing activities (10,147) (2,356)
------- -------
Cash flows from financing activities:
Net credit facility borrowings (repayments) 10,143 (14,702)
Distribution to stockholders (392) -
Other (31) (17)
------- -------
Net cash provided by (used in) financing activities 9,720 (14,719)
------- -------
Net increase (decrease) in cash and cash equivalents 4,270 (6,945)
Cash and cash equivalents, beginning of period 26,247 40,239
------- -------
Cash and cash equivalents, end of period $30,517 $33,294
======= =======
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE>
RESORTQUEST INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 2000
(Unaudited)
In these footnotes, the words "Company," "ResortQuest," "we," "our" and "us"
refer to ResortQuest International, Inc., a Delaware corporation, and its
wholly-owned subsidiaries, unless otherwise stated or the context requires
otherwise.
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
Formation
---------
ResortQuest is the first company to offer vacation condominium and home
rentals, sales and management under a national brand name and is a leading
provider of vacation rentals in premier destination resorts located in the
continental United States, Hawaii and Canada. Since our initial public offering
on May 26, 1998, we have consummated 18 acquisitions, three of which were
accounted for under the pooling-of-interests method of accounting.
Costs incurred in the course of our evaluation of acquisition candidates
and the ultimate consummation of acquisitions consist primarily of attorneys'
fees, accounting fees and other costs incurred by us in identifying and closing
transactions. All costs incurred are deferred on the balance sheet until the
related transaction is either consummated or terminated. Similar treatment is
followed in recording costs incurred by us in the course of generating
additional debt or equity financing. During 1999 we incurred $864,000 in
transaction costs related to the acquisitions accounted for under the
pooling-of-interests method. Of this amount, $286,000 was recorded in General
and Administrative expenses for the three-month period ended March 31, 1999. For
the acquisitions accounted for under the purchase method of accounting, all
transaction costs and the excess of the purchase price over the fair value of
identified net assets acquired represents goodwill. Goodwill is amortized over a
life up to 40 years and is calculated off of a preliminary estimate that is
adjusted to its final balance within one year of the close of the acquisition.
These adjustments increased goodwill by $2.8 million, or 1.6%, during the
three-month period ended March 31, 2000.
Pro Forma Financial Information
-------------------------------
The total cost of the 1999 acquisitions was $39.3 million, with 48.9% of
the consideration paid in the form of common stock with an aggregate value of
$19.2 million and $20.1 million of cash consideration. The aggregate impact of
these acquisitions is material to our financial statements and we noted the
following pro forma results for the three months ended March 31, 1999 assuming
these transactions occurred on January 1, 1999:
<TABLE>
<CAPTION>
Pro forma Pro forma
Actual Impact Combined
(in thousands) ------- --------- ---------
<S> <C> <C> <C>
Revenues $31,656 $4,599 $36,255
======= ========= =========
Net Income (loss) $ 3,040 $ (325) $ 2,715
======= ========= =========
</TABLE>
6
<PAGE>
NOTE 2 - NOTE RECEIVABLE FROM STOCKHOLDER
- -----------------------------------------
In connection with the initial public offering, we formalized a $4.0
million promissory note resulting from cash advances to a primary stockholder of
a predecessor company. On February 16, 2000, this promissory note along with
approximately $940,000 in accrued interest, management fees and other advances
were restructured into two notes, one for $4.0 million and one for $940,000,
(the "Notes"). The Notes are collateralized by real estate held by the
stockholder and bear interest at 1/2% below the prime rate of interest, but not
less than 6% and not more than 10%. The $940,000 note, plus accrued interest, is
due in two equal installments on December 31, 2000 and July 31, 2001. Interest
payments under the $4.0 million note are due and payable every January and July
1st with the principal being due on May 25, 2008.
NOTE 3 - EARNINGS PER SHARE
- ---------------------------
Basic earnings per share is computed by dividing net income available to
common stockholders by the weighted average number of common shares outstanding
for the period. Diluted earnings per share reflects the potential dilution that
could occur if outstanding options to purchase our securities are exercised. The
following table reflects our weighted average common shares outstanding and the
impact of outstanding dilutive stock options:
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1999 2000
---------- ----------
<S> <C> <C>
Basic weighted average common shares outstanding 17,353,989 18,831,328
Effect of dilutive securities - stock options 432,222 19,627
---------- ----------
Diluted weighted average common shares outstanding 17,786,211 18,850,955
========== ==========
</TABLE>
NOTE 4 - SEGMENT REPORTING
- --------------------------
Under Statement of Financial Accounting Standards No. 131, "Disclosures
about Segments of an Enterprise and Related Information," we have one operating
segment, property management, which is managed as one business unit. The All
other caption includes First Resort Software and corporate. Approximately 73% of
the All other segment assets represents goodwill recorded for First Resort
Software and corporate. The following table presents the revenues, operating
income and assets of our reportable segment.
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
(in thousands) 1999 2000
-------- --------
<S> <C> <C>
Revenues
Property Management $ 30,789 $ 37,680
All other 867 867
-------- --------
$ 31,656 $ 38,547
======== ========
Operating Income
Property Management $ 8,470 $ 9,239
All other (2,278) (2,727)
-------- --------
$ 6,192 $ 6,512
======== ========
Assets
Property Management $178,953 $212,000
All other 37,286 40,650
-------- --------
$216,239 $252,650
======== ========
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
OVERVIEW
- --------
ResortQuest is the leading provider of vacation condominium and home rental
property management services in premier destination resorts located in the
United States and Canada. We have developed the first and only branded
nationwide network of vacation rental properties, and currently offer more than
17,000 rental properties. Our operations are in 40 premier resort locations in
the Hawaiian Islands, Beach, Mountain, and Desert geographical regions.
Our rental properties are generally second homes or investment properties
owned by individuals who assign us the responsibility of managing, marketing and
renting their properties. We earn management fees as a percentage of the rental
income from each property, but have no ownership interest in the properties. In
addition to the vacation property management business, we offer real estate
brokerage services and other rental and property owner services. We also have
developed a proprietary vacation rental software package that is utilized by us
and over 600 other vacation property management companies.
We provide value-added services to both vacationers and property owners.
For vacationers, we offer the value, convenience and features of a condominium
or home while providing many of the amenities and services of a hotel. For
property owners, we offer a comprehensive package of marketing, management and
rental services designed to enhance rental income and profitability while
providing services to maintain the property. To increase customer satisfaction,
we have developed and implemented a five-tier rating system that segments our
property portfolio into one of five categories: Bronze, Silver, Gold, Platinum,
and Quest Home.
During 1999 we increased properties under management by approximately 28%
and further enhanced our unique national platform by expanding our presence into
twelve new resort markets in six new states through the acquisition of 13
vacation rental and property management companies. Two of the acquisitions
completed in March 1999 were accounted for under the pooling-of-interests method
of accounting and all historical financial information includes their results
for the entire period presented. The remaining acquisitions were accounted for
under the purchase method of accounting and their financial results are included
in the historical financial statements since their respective effective dates of
acquisition.
RESULTS OF OPERATIONS
- ---------------------
Our operating results are highly seasonal due to the geographical
dispersion of the resort locations in which we operate. The results of
operations are subject to quarterly fluctuations caused primarily by the
seasonal variations in the vacation rental and property management industry,
with peak seasons dependent on whether the resort is primarily a summer or
winter destination. Due to the seasonal nature of our operations our financial
results will be discussed by geographical region with Other representing the
corporate and First Resort Software operations.
8
<PAGE>
HAWAIIAN ISLANDS
----------------
The following table sets forth the consolidated condensed results of
operations for the three-month periods ended March 31, 1999 and 2000 for our
Hawaiian operations on the islands of Hawaii, Kauai, Maui and Oahu.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(dollars in thousands) 1999 2000
-------------- --------------
<S> <C> <C> <C> <C>
Revenues $6,425 100.0% $7,005 100.0%
Direct operating and
General and administrative expenses 3,677 57.3 4,035 57.6
-------------- --------------
Operating income before depreciation and amortization 2,748 42.7 2,970 42.4
Depreciation and amortization 143 2.2 140 2.0
-------------- --------------
Operating income $2,605 40.5% $2,830 40.4%
============== ===============
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
- - Hawaiian Islands
Revenues. Revenues increased $580,000, or 9.0%, from $6.4 million in 1999
to $7.0 million in 2000, primarily due to a 15.1% increase in service fees
related to additional services being provided to managed properties and a 5.9%
increase in ADR. Occupancy remained strong at 82.3% despite a slight decrease
over prior year attributable to a lack of January 2000 travel resulting from
millennium- related issues.
Operating expenses. Operating expenses increased $355,000, or 9.3%, from
$3.8 million in 1999 to $4.2 million in 2000. As a percentage of revenues,
operating expenses remained relatively flat.
BEACH
-----
The following table sets forth the consolidated condensed results of
operations for the three-month periods ended March 31, 1999 and 2000 for our
Beach operations in the Beaches of South Walton County, Bonita Springs,
Captiva Island, Destin, Fort Myers, Fort Myers Beach, Marco Island, Okaloosa
Island, Fort Walton Beach, Orlando, Navarre Beach, Naples and Sanibel Island,
Florida; Nantucket, Massachusetts; Hilton Head Island, South Carolina;
Bethany Beach, Delaware; Outer Banks, North Carolina; St. Simons Island,
Georgia; Gulf Shores, Alabama; and Lake Erie Islands, Ohio.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(dollars in thousands) 1999 2000
--------------- ----------------
<S> <C> <C> <C> <C>
Revenues $10,661 100.0 % $14,043 100.0 %
Direct operating and
General and administrative expenses 10,401 97.6 13,750 97.9
--------------- --------------
Operating income before depreciation and amortization 260 2.4 293 2.1
Depreciation and amortization 799 7.4 1,053 7.5
--------------- ----------------
Operating loss $ (539) (5.0)% $ (760) (5.4)%
=============== ================
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
- - Beach
Revenues. Revenues increased $3.4 million, or 31.7%, from $10.7 million in
1999 to $14.0 million in 2000, primarily due to our 1999 Beach acquisitions.
9
<PAGE>
Operating expenses. Operating expenses increased $3.6 million, or 32.2%,
from $11.2 million in 1999 to $14.8 million in 2000, primarily due to our 1999
Beach acquisitions. As a percentage of revenues, operating expenses remained
relatively flat.
MOUNTAIN
--------
The following table sets forth the consolidated condensed results of
operations for the three-month periods ended March 31, 1999 and 2000 for our
Mountain operations in Aspen, Breckenridge, Crested Butte, Dillon, Snowmass
Village and Telluride, Colorado; Whistler, British Columbia; The Canyons, Deer
Valley and Park City, Utah; Big Sky, Montanna; and Sunriver, Oregon.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(dollars in thousands) 1999 2000
--------------- --------------
<S> <C> <C> <C> <C>
Revenues $12,444 100.0% $14,894 100.0%
Direct operating and
General and administrative expenses 6,485 52.1 8,331 55.9
--------------- --------------
Operating income before depreciation and amortization 5,959 47.9 6,563 44.1
Depreciation and amortization 288 2.3 409 2.8
--------------- --------------
Operating income $ 5,671 45.6% $ 6,154 41.3%
=============== ===============
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
- - Mountain
Revenues. Revenues increased $2.4 million, or 19.7%, from $12.4 million in
1999 to $14.9 million in 2000, primarily due to our June 1999 winter resort
acquisition in Aspen, Colorado. A severe snow drought in Colorado produced an
8.5 point decline in occupancy, but excluding the impact of the acquisition,
revenues remained relatively flat. This was achieved through a 10.9% increase in
ADR that resulted in only a modest decline of 4.8% in gross lodging revenues.
Operating expenses. Operating expenses increased $1.9 million, or 29.0%,
from $6.8 million in 1999 to $8.7 million in 2000, primarily due to our June
1999 acquisition. As a percentage of revenues, operating expenses increased 4.3
points, primarily due to our June 1999 acquisition.
DESERT
------
The following table sets forth the consolidated condensed results of
operations for the three-month periods ended March 31, 1999 and 2000 for our
Desert operations in Palm Desert and Palm Springs, California; and Scottsdale
and Tucson, Arizona.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(dollars in thousands) 1999 2000
-------------- --------------
<S> <C> <C> <C> <C>
Revenues $1,259 100.0% $1,738 100.0%
Direct operating and
General and administrative expenses 503 40.0 666 38.3
-------------- --------------
Operating income before depreciation and amortization 756 60.0 1,072 61.7
Depreciation and amortization 23 1.8 57 3.3
--------------- --------------
Operating income $ 733 58.2% $1,015 58.4%
=============== ==============
</TABLE>
10
<PAGE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
- - Desert
Revenues. Revenues increased $479,000, or 38.0%, from $1.3 million in 1999
to $1.7 million in 2000, primarily due to a 24.2% increase in units and a 1.5
point increase in occupancy.
Operating expenses. Operating expenses increased $197,000, or 37.5%, from
$526,000 in 1999 to $723,000 in 2000, primarily due to increased costs to
service the additional units being managed. As a percentage of revenues,
operating expenses remained relatively flat.
OTHER
-----
The following table sets forth the consolidated condensed results of
operations for the three-month periods ended March 31, 1999 and 2000 for our
Other operations comprised of First Resort Software and corporate.
<TABLE>
<CAPTION>
Three Months Ended March 31,
(dollars in thousands) 1999 2000
--------------- ----------------
<S> <C> <C> <C> <C>
Revenues $ 867 100.0% $ 867 100.0%
Direct operating and
General and administrative expenses 2,840 327.6 3,240 373.7
--------------- ----------------
Operating loss before depreciation and amortization (1,973) n/m (2,373) n/m
Depreciation and amortization 305 35.2 354 40.8
--------------- ----------------
Operating loss $(2,278) n/m $(2,727) n/m
=============== ================
</TABLE>
Three Months Ended March 31, 2000 Compared to Three Months Ended March 31, 1999
- - Other
Revenues were flat compared to prior year.
Operating expenses. Operating expenses increased $444,000, or 14.1%, from
$3.1 million in 1999 to $3.6 million in 2000, primarily due to the incremental
marketing and other costs resulting from the 28% increase in units being
managed.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
ResortQuest is a holding company that conducts all of its operations
through its subsidiaries operating in 40 resort locations. Accordingly, the
primary internal source of our liquidity is through the cash flows realized from
our subsidiaries and our amended $50 million Credit Facility. We generated cash
flows from operating activities of $10.1 million in the three months ended March
31, 2000 primarily due to net income and an increase in customer deposits,
deferred revenues and payable to property owners. Cash used in investing
activities was approximately $2.4 million in the three months ended March 31,
2000, due primarily to $1.4 million in purchases of property and equipment. In
the three months ended March 31, 2000, cash used in financing activities totaled
$14.7 million, primarily related to net repayments under our Credit Facility. At
March 31, 2000, we had approximately $33.3 million in cash and cash equivalents,
of which $27.9 million represents cash held in escrow. The cash held in escrow
is released at varying times in accordance with state regulations, generally
based upon the guest stay, or for real estate sale deposits when the property is
sold. At March 31, 2000, we had a working capital deficit of $19.4 million.
Total capital expenditures for 2000 are anticipated to be between $8.0 million
and $9.5 million, of which approximately $5.0 million will be for web and
software development and systems integration, with the balance being applied to
building improvements, furniture, fixtures and equipment. We anticipate that our
cash flows from operations will provide cash in excess of our normal working
capital levels, debt service requirements and planned capital expenditures for
the foreseeable future. However, future acquisitions and/or other initiatives,
depending on their size and the method of financing, may affect our liquidity
and capital requirements during that time.
11
<PAGE>
LONG-TERM BORROWINGS
- --------------------
As of March 31, 2000, our long-term debt is comprised of the $50 million
9.06% Senior Secured Notes due June 2004, $3.0 million in borrowings under our
$50.0 million Credit Facility, and $1.2 million in borrowings assumed in
connection with certain 1999 acquisitions. As of March 31, 2000, we are in
compliance with all debt covenants and have $47.0 million available under our
Credit Facility, subject to certain restrictive covenants.
SHELF REGISTRATION
- ------------------
We have registered 8.0 million shares of common stock through various shelf
registration statement filings. As of March 31, 2000, we have issued in
connection with acquisitions 3,005,799 shares under these shelf registration
statements, with the remaining 4,994,201 shares available for future
acquisitions.
ACQUISITION STRATEGY
- ---------------------
Although our strategy moving forward is to focus on internal growth, we
intend to continue to pursue selected acquisition opportunities in strategically
important markets. There can be no assurance that we will be able to identify,
acquire or profitably manage additional businesses or successfully integrate
acquired businesses into ResortQuest without substantial costs, delays or other
operational or financial problems. Increased competition for acquisition
candidates may develop, in which event there may be fewer acquisition
opportunities available to us, as well as higher acquisition prices.
Furthermore, acquisitions involve a number of special risks, including the
failure of acquired companies to achieve anticipated results, diversion of
management's attention, failure to retain key personnel, risks associated with
unanticipated events or liabilities and amortization of acquired intangible
assets. Some or all of which could have a material adverse effect on our
business, financial condition and results of operations.
The timing, size or success of any acquisition effort and the associated
potential capital commitments are unpredictable. We expect to fund future
acquisitions primarily through a combination of cash flow from operations,
borrowings under the Credit Facility, other debt fundings, and issuance of
common stock. Our ability to fund future acquisitions under the Credit Facility
may be limited by certain restrictive covenants of the facility, the
satisfaction of which may be dependent upon our ability to raise additional
equity through either offerings for cash or the issuance of stock as
consideration for acquisitions. Our ability to fund acquisitions through
issuance of common stock may not be feasible at the current stock price.
NON-COMPETE AND EMPLOYMENT AGREEMENTS
- -------------------------------------
We have entered into non-compete agreements with many of the former owners
of the companies that now comprise ResortQuest. These non-compete agreements are
generally three to five years in length effective the day the operations are
merged with ResortQuest. Additionally, we have entered into employment
agreements with many of these former owners, all senior corporate officers and
several key employees. Among other things, these agreements allow for severance
payments and some include acceleration of stock option awards upon a change in
control of ResortQuest, as defined under the agreements. At March 31, 2000, the
maximum amount of compensation that would be payable under all agreements if a
change in control occurred without prior written notice would be approximately
$10.1 million.
SEASONALITY AND QUARTERLY FLUCTUATIONs
- --------------------------------------
Our business is highly seasonal. Our results of operations are subject to
quarterly fluctuations caused primarily by the seasonal variations in the
vacation rental and property management industry, with peak seasons dependent on
whether the resort is primarily a summer or winter destination. Our quarterly
results of operations may also be subject to fluctuations as a result of the
timing and cost of acquisitions, the timing of real estate sales, changes in
relationships with travel providers, extreme weather conditions or other factors
affecting leisure travel and the vacation rental and property management
industry.
12
<PAGE>
RISKS ASSOCIATED WITH FORWARD LOOKING STATEMENTS
- ------------------------------------------------
This filing contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act and Section 21E of the Securities Exchange
Act of 1934, as amended, which are intended to be covered by the safe harbors
created thereby. Investors are cautioned that all forward-looking statements
involve risks and uncertainties, including but not limited to the risks
associated with; successful integration of companies acquired, factors affecting
internal growth and management of growth, our acquisition strategy and
availability of financing, the tour and travel industry, seasonality, quarterly
fluctuations and general economic conditions, dependence on technology,
e-commerce and travel providers, and other factors discussed in our previous
filings with the Securities and Exchange Commission. Although we believe that
the assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and, therefore, there
can be no assurance that the forward-looking statements included in this filing
will prove to be accurate. In light of the significant uncertainties inherent in
the forward-looking statements included herein, the inclusion of such
information should not be regarded as a representation by us or any other person
that the objectives and plans will be achieved.
13
<PAGE>
PERFORMANCE STATISTICS
- ----------------------
<TABLE>
<CAPTION>
Three Months Ended
March 31, March 31,
1999 2000 Variance
-------- -------- --------
<S> <C> <C> <C>
Mountain
Lodging Revenues(1) $24,585 $23,416 (4.8)%
Occupancy 64.9% 56.4% (8.5)pts
ADR $189.71 $210.38 10.9 %
RevPAU $123.07 $118.61 (3.6)%
Total Units 2,484 2,435 (2.0)%
Beach
Lodging Revenues(1) $16,477 $18,858 14.5 %
Occupancy 57.1% 63.0% 5.9 pts
ADR $ 76.55 $ 77.08 0.7 %
RevPAU $ 43.71 $ 48.53 11.0 %
Total Units 5,090 5,355 5.2 %
Hawaii
Lodging Revenues(1) $38,749 $39,858 2.9 %
Occupancy 83.7% 82.3% (1.4)pts
ADR $106.97 $113.25 5.9 %
RevPAU $ 89.55 $ 93.20 4.1 %
Total Units 4,966 4,879 (1.8)%
Desert
Lodging Revenues(1) $ 3,807 $ 4,856 27.6 %
Occupancy 71.9% 73.4% 1.5 pts
ADR $136.18 $136.39 0.2 %
RevPAU $ 97.89 $100.27 2.4 %
Total Units 480 596 24.2 %
Total
Lodging Revenues(1) $83,618 $86,988 4.0 %
Occupancy 70.1% 70.0% (0.1)pts
ADR $113.76 $117.01 2.9 %
RevPAU $ 79.77 $ 81.90 2.7 %
Total Units 13,020 13,265 1.9 %
</TABLE>
(1) Lodging revenues are in thousands and represent the total rental charged to
property rental customers. Our revenue represents from 3% to over 40% of
the lodging revenues based on the services provided to us.
For better comparability, the above statistics exclude all non-exclusive
management contracts as well as all properties acquired by us after December 31,
1998. Also excluded from these statistics are owner use nights and renovation
nights which were approximately 12% of gross available nights in the three
months ended March 31, 2000 and 1999.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------------------------------------------------------------------
We are exposed to market risk, primarily through changes in interest rates
impacting borrowing rates on the Company's debt.
14
<PAGE>
PART II - OTHER INFORMATION
- -------------------------------
ITEM 1. LEGAL PROCEEDINGS
- --------------------------
We are involved in various legal actions arising in the ordinary course of
our business. We do not believe that any of these actions will have a material
adverse effect on our business, financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
- --------------------------------------------------
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
- ----------------------------------------
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
- ------------------------------------------------------------
Not applicable.
ITEM 5. OTHER INFORMATION
- --------------------------
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits filed herewith
Exhibit No. Description Page No.
----------- ------------------------------------------ ----------
EX-27 Financial Data Schedule 17
(b) Reports on Form 8-K:
No reports on Form 8-K were filed during the quarter ended March 31, 2000.
15
<PAGE>
SIGNATURE
- ---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf be the
undersigned thereunto duly authorized.
RESORTQUEST INTERNATIONAL, INC.
May 12, 2000 By: /s/ J. Mitchell Collins
---------------------------
J. Mitchell Collins
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer,
Chief Accounting Officer
and Duly Authorized Officer)
16
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001057507
<NAME> RESORTQUEST INTERNATIONAL, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 33,294
<SECURITIES> 0
<RECEIVABLES> 7,583
<ALLOWANCES> 245
<INVENTORY> 0
<CURRENT-ASSETS> 45,728
<PP&E> 21,494
<DEPRECIATION> 820
<TOTAL-ASSETS> 252,650
<CURRENT-LIABILITIES> 65,143
<BONDS> 0
0
0
<COMMON> 189
<OTHER-SE> 129,446
<TOTAL-LIABILITY-AND-EQUITY> 252,650
<SALES> 0
<TOTAL-REVENUES> 38,547
<CGS> 0
<TOTAL-COSTS> 19,521
<OTHER-EXPENSES> 12,514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,330
<INCOME-PRETAX> 5,182
<INCOME-TAX> 2,331
<INCOME-CONTINUING> 2,851
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,851
<EPS-BASIC> 0.15
<EPS-DILUTED> 0.15
</TABLE>
