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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 SEPTEMBER 30, 1999.
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 September 30, 1999.
Common Stock . . . . . . . . . . . 18,519,234 shares
Page 1 of 26
Exhibit Index Page 26
1
PART I - FINANCIAL INFORMATION
------------------------------
Item 1. Financial Statements
---------------------------
On May 26, 1998, ResortQuest International, Inc. 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 (collectively the "Founding
Companies"). Since the IPO, we have completed 18 acquisitions, five in 1998 and
13 in 1999 (the "Post-IPO acquisitions").
Aston Hotels & Resorts ("Aston"), one of the Founding Companies, was
designated as the accounting acquiror (for financial statement presentation
purposes) in the Combinations in accordance with Securities and Exchange
Commission (the "SEC") 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. We have analyzed the factors as set forth in SAB 97 that may indicate
Aston should not be deemed to be accounting acquiror, including
- - the existing conversion rights of the Restricted Common Stock,
- - Aston's level of representation on the Board and in the holding company
management team, and
- - voting percentage of the shares held by Aston and the existing shareholder
group.
We have concluded that none of these factors, either individually, or in the
aggregate, is sufficient to rebut the presumption that the shareholders of Aston
should be deemed the accounting acquiror.
Our accompanying unaudited consolidated condensed financial statements have
been prepared in accordance with the instructions to Form 10-Q, and therefore do
not include all information and notes necessary for complete financial
statements in conformity with generally accepted accounting principles. Our
results for the periods indicated are unaudited, but reflect all adjustments
(consisting only of normal recurring adjustments) which we consider necessary
for a fair presentation of operating results. Operating results for interim
periods are not necessarily indicative of the results for full years. Our
unaudited consolidated condensed financial statements should be read in
conjunction with our consolidated financial statements and notes thereto
included in our 1998 Annual Report to Stockholders and our Post-Effective
Amendment No. 2 to Registration Statement on Form S-1 (No. 333-10623), as
amended, filed with the SEC.
2
RESORTQUEST INTERNATIONAL,INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
December 31, Sept 30,
(in thousands, except share amounts) 1998 1999
----------- -----------
(Restated) (Unaudited)
ASSETS
Current assets
Cash and cash equivalents $ 26,247 $ 26,268
Trade and other receivables, net 3,929 5,136
Receivables from stockholders 5,209 2,435
Deferred income taxes 1,297 1,297
Other current assets 2,276 2,758
-------- --------
Total current assets 38,958 37,894
Goodwill, net 130,214 170,513
Property and equipment, net 16,649 18,909
Deferred income taxes 211 211
Other assets 2,187 9,448
-------- --------
Total assets $188,219 $236,975
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Current maturities of long-term debt $ 1,234 $ 849
Customer deposits, deferred revenues and payable
to property owners 24,639 24,959
Accounts payable and accrued liabilities 13,210 14,559
Payables to stockholders 1,632 192
Other current liabilities 323 928
-------- --------
Total current liabilities 41,038 41,487
Long-term debt, net of current maturities 38,098 63,159
Other long-term obligations 2,228 1,989
-------- --------
Total liabilities 81,364 106,635
-------- --------
Commitments and contingencies
Stockholders' equity
Common stock, $0.01 par value, 50,000,000 shares authorized,
17,092,768 and 18,519,234 shares outstanding, respectively 171 185
Additional paid-in capital 136,026 149,494
Excess distributions (29,500) (29,500)
Retained earnings 158 10,161
-------- --------
Total stockholders' equity 106,855 130,340
-------- --------
Total liabilities and stockholders' equity $188,219 $236,975
======== ========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
3
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(in thousands, except share amounts) 1998 1999 1998 1999
------- ------- ------- -------
(Restated) (Restated)
Revenues
Property management fees $10,024 $22,923 $19,156 $ 56,498
Service fees 3,883 12,524 10,537 30,213
Other 3,647 6,612 6,248 17,994
------- ------- ------- --------
Total revenues 17,554 42,059 35,941 104,705
------- ------- ------- --------
Operating expenses
Direct operating expenses 9,119 18,947 19,373 49,203
General and administrative
expenses 4,440 9,507 8,638 28,455
Depreciation and amortization 1,036 1,856 1,626 5,086
------- ------- ------- --------
Total operating expenses 14,595 30,310 29,637 82,744
------- ------- ------- --------
Operating income 2,959 11,749 6,304 21,961
Interest and other income (expense) 163 (1,262) 31 (2,796)
------- ------- ------- --------
Income before income taxes 3,122 10,487 6,335 19,165
Provision for income taxes 1,576 4,824 1,936 8,770
------- ------- ------- --------
Income from continuing operations 1,546 5,663 4,399 10,395
Income from discontinued
operations (Note 2) - - 1,347 -
------- ------- ------- --------
Net income $ 1,546 $ 5,663 $ 5,746 $ 10,395
======= ======= ======= ========
Earnings per share (Note 6)
Basic
Continuing operations $ 0.10 $ 0.31 $ 0.51 $ 0.58
Discontinued operations - - 0.16 -
------- ------- ------- --------
Net income $ 0.10 $ 0.31 $ 0.67 $ 0.58
======= ======= ======= ========
Diluted
Continuing operations $ 0.09 $ 0.31 $ 0.49 $ 0.58
Discontinued operations - - 0.15 -
------ ------ ------- -------
Net income $ 0.09 $ 0.31 $ 0.64 $ 0.58
====== ======= ======= =======
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
Additional
Common Stock Paid-in Excess Retained
(in thousands, except share amounts) Shares Amount Capital Distributions Earnings Total
---------- ------ ---------- ------------- -------- --------
Balance, December 31,
1998 (Restated) 17,092,768 $171 $136,026 $(29,500) $ 158 $106,855
Net income - - - - 10,395 10,395
Distributions of pooled
companies prior to acquisition - - - - (392) (392)
Stock issued in connection with
1999 purchase acquisitions 1,426,466 14 13,468 - - 13,482
---------- ---- -------- -------- ------- --------
Balance, September 30, 1999 18,519,234 $185 $149,494 $(29,500) $10,161 $130,340
========== ==== ======== ======== ======= ========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
RESORTQUEST INTERNATIONAL, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Nine Months Ended
Sept 30, Sept 30,
(in thousands) 1998 1999
-------- --------
(Restated)
Cash flows from operating activities
Net income $ 5,746 $10,395
Income from discontinued operations (1,347) -
------- -------
Income from continuing operations 4,399 10,395
Adjustments to reconcile income from continuing operations
to net cash provided by operating activities
Depreciation and amortization 1,626 5,086
Changes in operating assets and liabilities
Trade and other receivables 2,435 (475)
Accounts payable and accrued liabilities (5,281) (623)
Customer deposits, deferred revenues and
payable to property owners (3,091) (12,190)
Other 907 (1,846)
------- -------
Net cash provided by operating activities 995 347
------- -------
Cash flows from investing activities
Cash portion of acquisitions, net (36,471) (18,237)
Purchase of property and equipment (586) (3,197)
Other - (709)
------- -------
Net cash used in investing activities (37,057) (22,143)
------- -------
Cash flows from financing activities
Net credit facility borrowings (repayments) 28,403 (31,544)
Net proceeds from issuance of senior notes - 48,986
Proceeds from issuance of secured mortgage notes - 5,734
Net proceeds from public stock issuance 60,889 -
Distributions to stockholders (33,353) (392)
Payment of other long-term obligations (6,097) (541)
Other (1,444) (426)
------- -------
Net cash provided by financing activities 48,398 21,817
------- -------
Net increase in cash and cash equivalents 12,336 21
Cash and cash equivalents, beginning of period 4,638 26,247
------- -------
Cash and cash equivalents, end of period $16,974 $26,268
======= =======
The accompanying notes are an integral part of these consolidated condensed
financial statements.
6
RESORTQUEST INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 1999
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
- ------------------------------
Formation
---------
ResortQuest International, Inc. (a Delaware corporation) ("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. Effective with the closing of our initial public offering on
May 26, 1998 (the "IPO"), we acquired 12 vacation rental and property management
companies and one leading vacation rental and property management software
company (collectively the "Founding Companies") (the "Combinations"). However,
for accounting and reporting purposes, Hotel Corporation of the Pacific, Inc.
("Aston") was identified as the accounting acquiror and the remaining Founding
Companies along with ResortQuest were accounted for under the purchase method of
accounting.
Subsequent to the IPO, we executed five acquisitions through the end of
1998, one of which was accounted for under the pooling-of-interests method of
accounting. During the nine months ended September 30, 1999, we executed an
additional twelve acquisitions, two of which were accounted for under the
pooling-of-interests method of accounting. The remaining 1999 acquisitions were
accounted for under the purchase 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.
Pooling Restatements
--------------------
We have retroactively restated our historical financial statements for the
pooling-of-interest acquisitions. Our results of operations for the separate
companies and the restated combined results presented in the accompanying
consolidated condensed financial statements are as follows:
Three Months Ended Nine Months Ended
(in thousands) Sept 30, 1998 Sept 30, 1998
------------------ -----------------
Revenues
ResortQuest, as previously reported $16,949 $30,885
Pooled companies 605 5,056
------- -------
Combined Revenues, as restated $17,554 $35,941
======= =======
Net Income
ResortQuest, as previously reported $ 1,715 $ 5,336
Pooled companies (169) 410
------- -------
Combined Net income, as restated $ 1,546 $ 5,746
======= =======
7
In connection with the 1999 pooling-of-interests transactions, we recorded
total expense of $148,000 and $864,000 in the three- and nine-month periods
ended September 30, 1999 related to transaction costs of the acquisitions.
Accordingly, the restated historical consolidated financial statements
include the financial results of Aston and the three poolings for all periods
presented, ResortQuest and the Founding Companies only since May 26, 1998, and
the remaining Post-IPO acquisitions from their respective effective dates of
acquisition.
Pro Forma Financial Information
-------------------------------
Subsequent to the IPO, we executed five acquisitions through the end of
1998 for a total cost of $37.6 million with 26.6% of the consideration paid in
the form of Common Stock with an aggregate value of $10.0 million and $27.6
million of cash consideration. During the nine months ended September 30, 1999,
we executed an additional twelve acquisitions for a total cost of $44.4 million,
with 38.5% of the consideration paid in the form of Common Stock with an
aggregate value of $17.1 million and $27.3 million of cash consideration, two of
which were accounted for under the pooling-of-interests method of accounting;
the remaining ten 1999 acquisitions were accounted for under the purchase method
of accounting. The aggregate impact of these acquisitions is material to our
financial statements and we noted the following pro forma results assuming these
combinations occurred on January 1, 1998:
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(in thousands) 1998 1999 1998 1999
------- ------- ------- -------
Revenues
ResortQuest, as restated $17,554 $42,059 $35,941 $104,704
Combinations 9,208 2,156 22,653 11,710
------- ------- ------ --------
Pro forma combined revenues $26,762 $44,215 $58,594 $116,414
======= ======= ======= ========
Net Income
ResortQuest, as restated $ 1,546 $ 5,663 $ 5,746 $ 10,395
Combinations 2,311 801 4,355 2,450
------- ------- ------ --------
Pro forma combined net income $ 3,857 $ 6,464 $10,101 $ 12,845
======= ======= ======= ========
Reclassifications
-----------------
Certain prior year amounts have been reclassified to conform with current
year presentation.
NOTE 2 - DISCONTINUED OPERATIONS
- --------------------------------
In 1998, we decided that we would no longer enter into leasing arrangements
for lodging facilities. Accordingly, for all periods presented in the
accompanying financial statements, the financial position, results of operations
and cash flows of the leased assets are reflected as discontinued operations.
Concurrent with the Combinations, Aston assigned such leases to AST Holdings,
Inc., a corporation owned by Aston's principal stockholder. On May 27, 1998, we
entered
8
into a contract with AST Holdings to manage these facilities for a fee.
Summarized financial information of our discontinued operations for the nine
months ended September 30 1998, is provided in the following table.
Nine
Months Ended
Sept 30,
(in thousands) 1998
-------
Revenues $14,304
Operating expenses 10,120
General and administrative expenses 2,839
-------
Operating income 1,345
Other income 2
-------
Income from discontinued operations $ 1,347
=======
NOTE 3 - NOTE RECEIVABLE FROM STOCKHOLDER
- -----------------------------------------
In connection with the Combinations, Aston formalized their receivable
resulting from cash advances to its primary stockholder with a $4.0 million
promissory note (the "Note"). The Note bears interest at one-half of one percent
below prime rate of interest, but not less than six percent and not more than 10
percent. Payments under the Note are interest only, due and payable every
January and July 1st. The Note was due on demand with 180 days notice for any
time through May 26, 1999. If payment is not requested within the notice
periods, the Note becomes due and payable on May 25, 2008. The Note is due and
payable on May 25, 2008. Accordingly, the note receivable is now classified as a
long-term asset.
NOTE 4 - LONG-TERM DEBT
- -----------------------
On June 16, 1999, we issued $50 million of 9.06% senior secured notes, due
June 2004, in connection with a note purchase agreement. The senior notes are
secured pari passu to the credit agreement. The senior note purchase agreement
contains loan covenants similar to the credit agreement and has prepayment
restrictions in the form of make-whole provisions. Interest is payable
semiannually.
On June 1, 1999, we executed amendment no. 4 to the credit agreement to
allow for the sharing of credit with the senior notes and reduce the
availability under the credit agreement to $50 million. On April 16, 1999, we
executed amendment no. 3 to the credit agreement to allow for the refinancing of
existing loans of a subsidiary. The Credit Facility may be used for letters of
credit not to exceed $2.5 million, acquisitions, capital expenditures, and for
general corporate purposes. The Credit Agreement requires ResortQuest to comply
with various loan covenants, which include maintenance of certain financial
ratios, restrictions on additional indebtedness and restrictions on liens,
guarantees, advances, capital expenditures, sale of assets and dividends.
Interest on outstanding balances of the Credit Facility is computed at our
election, on the basis of either the Prime Rate or the Eurodollar Rate plus a
margin ranging from 1.25% to 2.00%, depending on certain financial ratios.
Availability fees range from 0.25% to 0.50% per annum depending on certain
financial ratios and are payable on the unused portion of the Credit Facility.
At September 30, 1999, there were $7 million of outstanding borrowings under the
Credit Facility. The Credit Facility has a three-year term expiring May, 2001,
and is secured pari passu
9
to the senior notes, by substantially all of our assets, including the stock in
the Founding Companies and any future material subsidiaries, as defined. At
September 30, 1999, we were in compliance with applicable credit agreement and
senior note purchase agreement loan covenants.
NOTE 5 - COMMITMENTS AND CONTINGENCIES
- ---------------------------------------
Guarantees
----------
Certain of Aston's management agreements contain provisions for guaranteed
levels of returns to owners. These agreements also contain force majeure clauses
to protect us from forces or occurrences beyond the control of management.
Acquisition Indemnification
---------------------------
Subject to certain limitations, pursuant to the Agreement and Plan Of
Organization entered into by and between each of the Founding Companies and
ResortQuest (each an "Agreement"), the stockholders of the Founding Companies
have indemnified ResortQuest against losses, claims, damages, actions, suits,
proceedings, demands, assessments, adjustments, costs and expenses as a result
of or arising from
(i) any breach of the representations and warranties in the Agreement and its
schedules and certificates by the stockholders of the Founding Companies,
(ii) any breach of any agreement on the part of the stockholders set forth in
the Agreement,
(iii) any liability under the Securities Act of 1933, the Securities Exchange
Act of 1934 or other federal or state law or regulation arising out of or
based upon any untrue statement of a material fact relating solely to the
Founding Company or the stockholders, and
(iv) certain other identified claims or litigation.
In addition, pursuant to each Agreement and subject to certain limitations,
we agreed to indemnify the stockholders against losses, claims, damages,
actions, suits, proceedings, demands, assessments, adjustments, costs and
expenses incurred by the stockholders as a result of or arising from
(i) any breach by us or of its representations and warranties in the
Agreement and its schedules and certificates,
(ii) any breach of any agreement on the part of us under this Agreement,
(iii) any liability under the Securities Act of 1933, the Securities Exchange
Act of 1934 or other federal or state law or regulation, at common law or
otherwise, arising out of or based upon any untrue statement or alleged
untrue statement of a material fact relating to us or any of the other
Founding Companies contained in certain filings with the SEC, or
(iv) the matters described in the schedules to the Agreement relating to
guarantees.
We are not aware of any events that have or could have caused any such
indemnification under any of the Agreements during the periods presented in the
accompanying consolidated condensed financial statements.
Litigation
----------
We are involved in various legal actions arising in the ordinary course of
business. We do not believe that the outcome of such legal actions will have a
material adverse effect on our financial position or results of operations.
Insurance
---------
We carry a broad range of insurance coverage, including general and
business auto liability, commercial property, workers' compensation and a
general umbrella policy. We have not incurred
10
significant claims or losses on any of its insurance policies during the periods
presented in the accompanying financial statements.
Benefit Plans
-------------
As of September 30, 1999, we had 11 401(k) profit sharing plans, which
existed prior to the IPO and the acquisition of the Founding Companies or the
Post-IPO Acquisitions. On April 1, 1999, we established a new 401(k) profit
sharing plan, which will cover all domestic employees. Under the plans currently
in place, employees may defer from 1% to 20% of eligible earnings, company
matching contributions range from 0% to 50% of the first 4% to 16% of employee
contributions, and employee vesting in company matching contributions varies
from immediate vesting in some plans to seven or more years in other plans. We
are in the process of merging existing plans into the new 401(k) profit sharing
plan.
Employment Agreements
---------------------
Effective with the Combinations and certain Post-IPO acquisitions, we
entered into employment agreements with all senior corporate officers and
several subsidiary level key employees. Among other things, these agreements
allow for severance payments and acceleration of stock option awards upon a
change in control, as defined under the agreements. If a change in control
occurred without prior written notice on September 30, 1999, As of September 30,
1999, the maximum amount of severance payments that could potentially have been
payable under all agreements, excluding any applicable gross-up for excise
taxes, was approximately $12.6 million.
NOTE 6 - Earnings Per Share
- ---------------------------
Earnings per share included in the consolidated condensed statements of
income for the periods ended September 30, 1998, include Aston's results of
operations under its historical capital and income tax structure, the results of
operations of the three post-IPO acquisitions accounted for under the
pooling-of-interests method of accounting, and the remaining Founding Companies
since the IPO. Accordingly, the 1,708,333 shares of Common Stock issued to the
former stockholders of Aston in connection with the Combinations, the 392,780
shares issued in connection with the three pooling acquisitions, the 757,040
shares of Common Stock issued in connection with the acquisition of Abbott
Resorts, and the 14,215,953 shares issued in connection with the IPO are
utilized to calculate weighted average common shares for the three and nine
months ended September 30, 1998. The following table reflects our weighted
average common shares outstanding and the impact of its primary common share
equivalents:
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
1998 1999 1998 1999
---------- ---------- --------- ----------
Basic weighted average common
shares outstanding 16,193,858 18,462,402 8,676,801 17,775,855
Effect of dilutive
securities - stock options 188,361 16,808 220,621 293,629
---------- ---------- --------- ----------
Diluted weighted average common
shares outstanding 16,382,219 18,479,210 8,897,422 18,069,484
========== ========== ========= ==========
11
NOTE 7 - SEGMENT REPORTING
- --------------------------
On January 1, 1998, we adopted the provisions of SFAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information." Under SFAS No. 131, 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 78% 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.
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
(in thousands) 1998 1999 1998 1999
------- ------- ------- --------
Revenues
Property Management $16,775 $41,154 $34,884 $101,985
All other 779 905 1,057 2,720
------- ------- ------- --------
$17,554 $42,059 $35,941 $104,705
======= ======= ======= ========
Operating Income
Property Management $ 3,555 $13,364 $ 7,312 $ 27,714
All other (596) (1,615) (1,008) (5,753)
------- ------- ------- --------
$ 2,959 $11,749 $ 6,304 $ 21,961
======= ======= ======= ========
December 31, Sept 30,
1998 1999
----------- --------
Assets
Property Management $154,038 $199,095
All other 34,181 37,880
-------- --------
$188,219 $236,975
======== ========
12
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
continental United States, Hawaii 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 in 39 premier beach, island, mountain
and desert destination locations.
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 and have
developed a proprietary vacation rental software package which we utilize
internally and offer to over 600 vacation property management companies together
with related services.
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.
We completed our initial public offering on May 26, 1998 and simultaneously
acquired 12 vacation rental and property management companies and one vacation
property management software company, First Resort Software ("FRS") (together
the "Founding Companies") (the "Combinations"). Since our initial public
offering, we have acquired an additional 18 vacation rental and property
management companies, increasing properties under management by approximately
65%, expanding our presence into twelve new resort markets and further enhancing
our unique national platform.
Results of Operations
- ---------------------
For accounting and reporting purposes, Aston Hotels & Resorts ("Aston"),
one of our Founding Companies, was identified as the accounting acquiror and the
remaining Founding Companies along with ResortQuest were accounted for under the
purchase method of accounting. Since the IPO and the Combinations, we made three
acquisitions that have been accounted for under the pooling-of-interests method
of accounting and for which our historical financial statements have been
restated. Accordingly, our actual consolidated financial information for the
three- and nine-month periods ended September 30, 1998 and 1999 includes the
results of Aston and the pooling acquisitions for the entire periods presented,
includes ResortQuest and the founding companies only since May 26, 1998, and
includes the remaining Post-IPO acquisitions since their respective effective
dates of acquisition.
Beach
-----
The beach resorts' consolidated condensed results of operations for the
third quarter reflect the peak summer season, which can impact margins on a
quarterly basis. The following table sets
13
forth the beach resorts (excluding Hawaii) combined results of operations for
the three- and nine-month periods ended September 30, 1999 and 1998, which
includes: Bethany Beach, Delaware; Gulf Shores, Alabama; Nantucket,
Massachusetts; Outer Banks, North Carolina; Sanibel and Captiva Islands,
Orlando, and Destin, Florida; St. Simons Island, Georgia; Port Clinton, Ohio;
and Hilton Head Island, South Carolina.
Three Months Ended Sept 30, Nine Months Ended Sept 30,
(dollars in thousands) 1998 1999 1998 1999
-------------- --------------- --------------- --------------
Revenues $9,076 100.0% $28,660 100.0% $13,838 100.0% $60,119 100.0%
Operating expenses 6,075 66.9% 16,807 58.6% 9,531 68.9% 42,370 70.5%
Operating income $3,001 33.1% $11,853 41.4% $ 4,307 31.1% $17,749 29.5%
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998 - Beach
Revenues. Revenues increased $19.6 million, or 215.8%, from $9.1 million
in 1998 to $28.7 million in 1999 primarily due to $4.1 million in revenues from
current year acquisitions, $14.3 million in revenues from Abbott Resorts and a
higher number of units under management contract.
Operating expenses. Operating expenses increased $10.7 million, or 176.7%,
from $6.1 million in 1998 to $16.8 million in 1999. This increase was primarily
attributable to $2.0 million in operating expenses related to the current year
acquisitions, $8.6 million in operating expenses related to Abbott Resorts and
the increased expense related to the increased occupancy.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September
30, 1998 - Beach
Revenues. Revenues increased $46.3 million, or 334.4%, from $13.8
million in 1998 to $60.1 million in 1999, due to acquisitions that took place
as part of the Combinations on May 26, 1998, the acquisition of Abbott
Resorts, and $5.6 million in revenues from current year acquisitions.
Operating expenses. Operating expenses increased $32.8 million, or
344.6%, from $9.5 million in 1998 to $42.4 million in 1999. This increase was
primarily attributable to acquisitions that took place as part of the
Combinations on May 26, 1998, the acquisition on Abbott Resorts, and $2.7
million in operating expenses related to the current year acquisitions.
Hawaiian Islands
----------------
The following table sets forth the Hawaiian resorts' consolidated condensed
results of operations for the three- and nine-month periods ended September 30,
1999 and 1998.
Three Months Ended Sept 30, Nine Months Ended Sept 30,
(dollars in thousands) 1998 1999 1998 1999
-------------- --------------- --------------- --------------
Revenues $5,041 100.0% $ 6,247 100.0% $15,574 100.0% $17,594 100.0%
Operating expenses 3,605 71.5% 3,945 63.2% 11,852 76.1% 11,679 66.4%
Operating income $1,436 28.5% $ 2,302 36.8% $ 3,722 23.9% $ 5,915 33.6%
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998 - Hawaii
Revenues. Revenues increased $1,206 or 23.9%, from $5.0 million in 1998 to
14
$6.2 Million in 1999, primarily due to a 4.7 percent increase in revenue per
available unit ("RevPAU") and a 6.3 point increase in occupancy. Units under
management contract decreased by 4.4% in 1999 due to normal turnover in
properties under management contract driven by real estate changing hands in the
market. Average daily rate in Hawaii was down 3.8% but was offset by a 6.3 point
increase in occupancy.
Operating expenses. Operating expenses increased $340,000, or 9.4%, from
$3.6 million in 1998 to $3.9 million in 1999. As a percentage of revenues,
operating expenses decreased from 71.5% in 1998 to 63.2% in 1999. This decrease
primarily resulted from prudent cost control measures.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998 - Hawaii
Revenues. Revenues increased $2.0 million, or 13.0%, from $15.6 million
in 1998 to $17.6 million in 1999, primarily due to the strong third quarter
results and the acquisitions that took place as part of the Combinations on
May 26, 1998. Average daily rate in Hawaii was down 3.9% due to the continued
pressures from the Asian economic crisis, but occupancy was up 4.4 points.
Operating expenses. Operating expenses decreased $173,000, or 1.5%, from
$11.9 million in 1998 to $11.7 million in 1999. As a percentage of revenues,
operating expenses were relatively flat over the prior year.
Mountain
--------
The mountain resorts' consolidated condensed results of operations for the
third quarter reflect the off-peak season, which can impact margins on a
quarterly basis. The following table sets forth the mountain resorts combined
results of operations for the three- and nine-month periods ended September 30,
1999 and 1998, which includes: Aspen, Breckenridge, Crested Butte, Dillon,
Snowmass and Telluride, Colorado; Big Sky, Montana; Sunriver, Oregon; Park City,
Utah; and Whistler, British Columbia.
Three Months Ended Sept 30, Nine Months Ended Sept 30,
(dollars in thousands) 1998 1999 1998 1999
-------------- --------------- -------------- --------------
Revenues $ 2,658 100.0% $ 5,960 100.0% $5,307 100.0% $22,100 100.0%
Operating expenses 3,540 133.2% 6,500 109.1% 6,189 116.6% 18,580 84.1%
Operating (loss) income $ (882) nm $ (540) nm $ (882) nm $ 3,520 15.9%
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998 - Mountain
Revenues. Revenues increased $3.3 million, or 124.2%, from $2.7 million
in 1998 to $6.0 million in 1999, primarily due to $2.7 million in revenues
from current year acquisitions.
Operating expenses. Operating expenses increased $3.0 million, or 83.6%,
from $3.5 million in 1998 to $6.5 million in 1999, primarily due to $2.2
million in operating expenses related to the current year acquisitions. The
remaining increase is attributable to the cost of managing additional units
and the expense impact of acquisitions in the current year.
15
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998 - Mountain
Revenues. Revenues increased $16.8 million, or 316.4%, from $5.3 million
in 1998 to $22.1 million in 1999, primarily due to $4.5 million in revenues
from current year acquisitions and the full-year impact from the acquisitions
that took place as part of the Combinations on May 26, 1998. Also favorably
impacting revenues was an increase in units under management in Whistler,
B.C. and a strong ski season in Whistler and in Park City, Utah, which offset
the snow drought in Colorado. The mountain resorts also experienced an
increase in lodging revenues of 7.6%, primarily due to an increase in
occupancy of 1.2 points and increased ADR of 6.5%.
Operating expenses. Operating expenses increased $12.4 million, or
200.2%, from $6.2 million in 1998 to $18.6 million in 1999, primarily due to
$3.8 million in operating expenses related to the current year acquisitions
and the full-year impact from the acquisitions that took place as part of the
Combinations on May 26, 1998. The remaining increase is attributable to
expense related to the increase in occupancy.
Desert
------
The desert resort segment represents a new addition to our geographic
diversity and portfolio of vacation opportunities in 1999. With the addition of
Sunrise Vacation Rentals in Palm Desert, California, Scottsdale Resort
Accommodations in Scottsdale, Arizona and Fischer Villas in Tucson, Arizona, we
added another winter vacation segment. The combined condensed results of
operations of the three desert properties are included in the current year but
are not reflected in the prior year.
Three Months Nine Months
Ended Sept 30, Ended Sept 30,
(dollars in thousands) 1999 1999
--------------- --------------
Revenues $ 287 100.0% $ 2,172 100.0%
Operating expenses 538 n/m 1,643 75.6%
Operating (loss) income $(251) n/m $ 529 24.4%
Other Operations
----------------
The following table sets forth the other combined condensed results of
operations for the three- and nine-month periods ended September 30, 1999 and
1998, which includes: First Resort Software and corporate.
Three Months Ended Sept 30, Nine Months Ended Sept 30,
(dollars in thousands) 1998 1999 1998 1999
--------------- --------------- --------------- --------------
Revenues $ 779 100.0% $ 905 100.0% $ 1,222 100.0% $ 2,720 100.0%
Operating expenses 1,375 nm 2,520 nm 2,065 nm 8,472 nm
Operating loss $ (596) nm $(1,615) nm $ (843) nm $(5,752) nm
Three Months Ended September 30, 1999 Compared to Three Months Ended September
30, 1998 - Other
Revenues were relatively flat as compared to prior year. Operating expenses
increased $1.1 million or 83.3% due to increased corporate expense and
approximately $148,000 of pooling expense in 1999.
Nine Months Ended September 30, 1999 Compared to Nine Months Ended September 30,
1998 - Other
16
Revenues increased $1.5 million or 122.6% primarily due to acquisitions
that took place as part of the combinations on May 26, 1998. Operating expenses
increased $6.4 million due to acquisitions that took place as part of the
combinations on May 26, 1998, a full year of corporate expenses, and expenses
related to pooling transactions and secondary offering costs.
Liquidity and Capital Resources
-------------------------------
We conduct all of our operations through our operating companies.
Accordingly, the primary sources of our liquidity are the cash flows realized
from our subsidiaries, borrowings under our amended $50 million Credit Facility
and our $50 million senior secured notes, and the issuance of common stock.
We generated cash flows from operating activities of $347,000 in the nine
months ended September 30, 1999 primarily due to income from continuing
operations offset by a decrease of $12.2 million in reservation and escrow
deposits. Cash used in investing activities was approximately $22.1 million in
the nine months ended September 30, 1999, due primarily to the cash portions of
the 1999 Acquisitions. In the nine months ended September 30, 1999, cash
provided by financing activities totaled $21.8 million, which included $49.0
million in net proceeds from the senior secured notes, and $31.5 million in net
repayments under the Credit Facility.
At September 30, 1999, we had approximately $ 26.3 million in cash and cash
equivalents, of which $ 19.8 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, in the case of real estate
sales deposits, when the property is sold. At September 30, 1999, we had a
working capital deficit of $ 3.6 million and $ 43.0 million available under our
Credit Facility. We anticipate that our cash flow from operations will provide
cash in excess of our normal working capital needs, debt service requirements
and planned capital expenditures for the foreseeable future.
Total capital expenditures for 1999 are anticipated to be between $3.5
million and $4.0 million, of which approximately $600,000 will be for software
development, with the balance going to furniture, fixtures and equipment.
In connection with the IPO, common stock held by the Founding Companies'
previous owners, the sponsor group partners and senior management became subject
to certain transfer restrictions. These restrictions expired between May 20 and
May 27, 1999. On May 24, 1999, we announced an anticipated earnings shortfall to
street analysts' expectations for the second quarter and we withdrew a planned
common stock offering. Had this offering been completed, the transfer
restrictions would have been extended. In the proposed offering, we would have
offered for sale shares of common stock held by the founding stockholders, as
well as additional shares offered for sale by us. The withdrawn offering and the
expiration of the transfer restrictions resulted in a significant increase in
the number of shares of common stock now publicly tradable and has limited our
ability to sell shares of our common stock through a public offering. Although
this offering was withdrawn, we continue to consider various financial
alternatives that we may pursue to generate additional equity.
Note Receivable
---------------
In connection with the Combinations, Aston formalized their receivable
resulting from cash advances to its primary stockholder with a $4.0 million
promissory note (the "Note"). The Note bears interest at one-half of one percent
below prime rate of interest, but not less than six percent and not more than 10
percent. Payments under the Note are interest only, due and payable every
January and July 1st. The Note was due on demand with 180 days notice for any
time through
17
May 26, 1999. If payment was not requested within the notice periods, the Note
becomes due and payable on May 25, 2008. The demand feature of the Note was not
exercised, and the Note is now due and payable on May 25, 2008. Accordingly, the
note receivable is now classified as a long-term asset.
Post-IPO Acquisitions
---------------------
Since the IPO, we have completed eighteen Post-IPO Acquisitions: Plantation
Resort Management, Inc., ("Plantation Resort") located in Gulf Shores, Alabama,
effective August 31, 1998; Goldpoint Lodging ("Goldpoint"), located in
Breckenridge, Colorado, effective July 15, 1998; Whistler Exclusive Properties,
Ltd. ("Whistler Exclusive") located in Whistler, British Columbia, Canada,
effective September 3, 1998; Abbott Realty Services, Inc. ("Abbott Resorts")
located in Destin, Florida, effective September 30, 1998; Columbine Management,
Inc. ("Columbine") located in Dillon, Colorado, effective December 1, 1998;
Ridgepine Vacation Rentals, Inc. ("Ridgepine") in Sunriver Oregon, effective
January 1, 1999; Cove Realty Management Services, Inc. ("Cove") in Palm Desert,
California, effective January 1, 1999; Ryan's Golden Eagle Management Services,
Inc. ("Golden Eagle") in Big Sky, Montana, effective January 5, 1999; Scottsdale
Resort Accommodations Inc. ("Scottsdale") in Scottsdale, Arizona, effective
February 1, 1999; Worthy Rentals, Inc. ("Worthy") in Hilton Head Island, South
Carolina, effective February 1, 1999; High Country Management, Inc. ("High
Country") in Crested Butte, Colorado, effective March 31, 1999; Mountain High
Management ("Mountain High") in Whistler, British Columbia, Canada, effective
March 31, 1999; Fischer Villa Management ("Fischer Villa") in Tucson, Arizona,
effective June 20, 1999; Shoreline Properties, Inc. ("Shoreline Properties") in
Port Clinton, Ohio, effective June 15, 1999; Coates, Reid & Waldron, ("Coates
Reid") in Aspen, Colorado, effective June 29, 1999; Shoreline Rentals, Inc.
("Shoreline Rentals") in Hilton Head, South Carolina, effective July 18, 1999;
Advantage Vacation Homes by Styles, Inc. and Styles Estates, Ltd. ("Styles") in
Orlando, Florida, effective August 6, 1999; and Bluebill Vacation Properties,
Inc. ("Bluebill") in Bonita Beach, Florida, effective October 1, 1999. The
acquisitions of Plantation Resort, Mountain High, and High Country were
accounted for under the pooling of interests method of accounting; the remaining
Post-IPO acquisitions were accounted for under the purchase method of
accounting.
We intend to continue to pursue attractive acquisition opportunities. There
can be no assurance that we will be able to identify, acquire or profitably
manage additional businesses or successfully integrate acquired businesses into
our operations 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. Further, 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 these 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 the issuance of
common stock.
Shelf Registration
------------------
On June 25, 1998, we registered 3.0 million shares of Common Stock with the
SEC pursuant to a shelf registration statement. On July 16, 1999, we registered
an additional 5.0 million shares of Common Stock with the SEC pursuant to a
shelf registration statement. As with our initial shelf registration statement,
the shares covered by this statement are available to be used in future
18
acquisitions. As of September 30, 1999, 2,594,948 of the shares covered by these
shelf registration statements have been issued in connection with Post-IPO
Acquisitions.
Credit Facilities and Loan Guarantees
-------------------------------------
On June 16, 1999, we issued $50 million of 9.06% senior secured notes, due
June 2004, in connection with a note purchase agreement. The senior notes are
secured pari passu to the credit facility. The senior note purchase agreement
contains loan covenants substantially similar to those of the credit agreement
under the credit facility and has prepayment restrictions in the form of
make-whole provisions. Interest is payable semiannually.
On June 1, 1999, we executed amendment no. 4 to the credit agreement to
allow for the sharing of credit with the senior notes and reduce the
availability under the credit facility to $50 million. On April 16, 1999, we
executed amendment no. 3 to the credit agreement to allow for the refinancing of
existing loans of a subsidiary. The credit facility may be used for letters of
credit not to exceed $2.5 million, acquisitions, capital expenditures, and for
general corporate purposes. The credit agreement requires us to comply with
various loan covenants, which include maintenance of certain financial ratios,
restrictions on additional indebtedness and restrictions on liens, guarantees,
advances, capital expenditures, sale of assets and dividends. Interest on
outstanding balances of the credit facility is computed at our election, on the
basis of either the Prime Rate or the Eurodollar Rate plus a margin ranging from
1.25% to 2.00%, depending on certain financial ratios. Availability fees range
from 0.25% to 0.50% per annum depending on certain financial ratios and are
payable on the unused portion of the credit facility. At September 30, 1999,
there were $7 million of outstanding borrowings under the credit facility. The
credit facility has a three-year term and is secured pari passu to the senior
notes, by substantially all of our assets, including the stock in the Founding
Companies and any future material subsidiaries, as defined. At September 30,
1999, we were in compliance with applicable credit agreement and senior note
purchase agreement loan covenants.
Certain of Aston's management agreements contain provisions for guaranteed
levels of returns to owners. These agreements also contain force majeure clauses
to protect us from forces or occurrences beyond the control of management.
Year 2000 Compliance
--------------------
The vacation property management industry uses a complex suite of
software and relies heavily on information technology ("IT") systems. Many
systems internally record dates using a two-digit field (for example, the
year 1999 would be recorded simply as "99"). When these systems attempt to
record dates after December 31, 1999, the potential exists for systems and
programs to malfunction or cease to operate altogether. The areas of some
risk of software failure due to the Year 2000 problem are: IT systems such as
Property Management systems (guest services and back-office accounting);
Reservation/Inventory Management systems; Hardware BIOS (software encoded
into hardware components that runs "beneath" the operating system); Analysis
and/or management reporting tools; and various non-IT components Embedded
Control Systems (HVAC, elevator controls, etc.). In addition to the potential
impact to our business from our IT and non-IT systems' potential failure due
to Year 2000 issues, we may be impacted by the lack of preparedness of third
parties ("Business Partners"), such as vendors, financial institutions,
communications and utility providers, and third party technology suppliers.
State of Readiness
Our activities to ensure our Year 2000 readiness have been focused on the
following: evaluating the various IT components of our operating environment
(personal computer workstations
19
and related equipment, network servers, telephone and data communication
equipment, point of sale devices, internally developed software, and non-IT
embedded technology such as microcontrollers. In addition we have obtained
from our key Business Partners their status of Year 2000 readiness. We expect
to complete the analysis and implementation of any necessary corrective
measures for our current operations by the end of the fourth quarter
1999-However, as we continue to acquire additional operating companies over
the remainder of 1999 the potential exists for us to reach the turn of the
century without addressing all potential non-Year 2000-compliant components
of the operating environments of newly-acquired companies. Consequently, we
have structured our Year 2000 project plan to prioritize Year 2000 activities
based on the potential impact of a particular component's lack of compliance.
Our Year 2000-readiness project has not delayed or superceded other planned
technology projects.
Our Year 2000 project is structured in several phases, namely
Identification (the development of our Year 2000 project plan), Assessment
(inventory of IT and non-IT system components and identification of areas of
potential exposure, prioritization, and development of routines necessary to
address problems), Remediation (implementation of corrective measures,
developing contingency plans), Testing, and Certification. These steps must be
undertaken at both the operating company level and at our corporate
headquarters.
As of September 30, 1999, we had completed the Identification, and
Assessment phases of the project for our operating companies and our
corporate offices and we had made considerable headway in the Remediation,
Testing, and Certification phases of the project, again with our efforts
focused on the areas of greatest potential impact. As of September 30, 1999,
approximately 90% of our total inventory of IT and non-IT systems had either
been deemed compliant or had been corrected.
Estimated Costs
We estimate the upper range of the cost of the Year 2000 project is
approximately $600,000, and approximately $450,000 has been spent to date. A
significant portion of the total potential expense estimate relates to the
cost of replacement of personal computer hardware, servers, and
telecommunications equipment, and approximately $250,000 of this amount was
planned prior to the advent of the Year 2000 project. Funding of Year 2000
costs is being provided by cash flow from operations.
Risks
The impact upon our business by Year 2000 issues is primarily in the areas
of property management systems, telecommunications, and financial
accounting/reporting. We believe that the consequences of Year 2000 issues with
respect to the adverse impact upon our results of operations will not be
material, however we will have contingency plans in place designed to mitigate
the impact of Year 2000 issues.
Contingency Plans
Our contingency plans include items such as offsite and/or manual
reservations/inventory management, property management (guest services,
back-office functions, work order administration), financial accounting and
reporting, and management reporting. The remaining contingency plans not yet
finalized will be developed, tested and functional by the end of 1999.
Seasonality and Quarterly Fluctuations
--------------------------------------
Our business is highly seasonal. The pro forma results of operations are
subject to quarterly fluctuations caused primarily by the seasonal variations in
the vacation rental and
20
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.
MARKETS
-------
We currently manage condominiums and homes in 39 premier Hawaiian,
mountain, beach and desert resorts throughout the United States and in Canada.
The table below sets forth the resort locations at which we manage vacation
condominium and home properties and the aggregate number of properties managed
in each of the following states at October 1, 1999.
HAWAIIAN RESORTS
Hawaii: Hawaii, Kauai, Maui and Oahu 4,880
MOUNTAIN RESORTS
Colorado: Aspen, Breckenridge, Crested Butte, Dillon,
Snowmass Village and Telluride 1,423
British Columbia: Whistler 709
Utah: The Canyons, Deer Valley and Park City 339
Montana: Big Sky 199
Oregon: Sunriver 142
BEACH RESORTS
Florida: Beaches of South Walton, Bonita Springs, Captiva Island,
Destin, Fort Myers, Fort Myers Beach, Marco Island,
Okaloosa Island/Fort Walton Beach, Orlando, Navarre Beach,
Naples, and Sanibel Island 4,991
Massachusetts: Nantucket 1,200
South Carolina: Hilton Head Island 703
Delaware: Bethany Beach 648
North Carolina: The Outer Banks 511
Georgia: St. Simons Island 443
Alabama: Gulf Shores 374
Ohio: Lake Erie Islands 202
DESERT RESORTS
California: Palm Desert and Palm Springs 285
Arizona: Scottsdale/Phoenix and Tucson 252
------
TOTAL 17,301
======
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 the Founding Companies and additional
acquired companies, factors affecting internal growth and management of growth,
our acquisition strategy
21
and availability of financing, the travel and tourism industry, seasonality,
quarterly fluctuations and general economic conditions, dependence on technology
and travel providers, and other factors discussed in the Registration Statement.
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.
22
Performance Statistics
- ----------------------
Three Months Ended
Sept 30, Sept 30,
1999 1998 Variance
------- ------- --------
Mountain
Lodging Revenues(1) 4,143 $4,540 (8.7)%
Occupancy 30.2% 35.6% (5.4)pts
ADR $ 94.74 $ 84.24 12.5 %
RevPAU $28.65 $30.03 (4.6)%
Total Units 1,964 2,016 (2.6)%
Beach
Lodging Revenues(1) $28,901 $24,575 17.6 %
Occupancy 64.6% 65.3% (0.7)pts
ADR $203.66 $180.51 12.8 %
RevPAU $131.47 $117.93 11.5 %
Total Units 2,783 2,673 4.1 %
Hawaii
Lodging Revenues(1) $35,540 $35,863 (0.9)%
Occupancy 77.5% 71.2% 6.3 pts
ADR $102.72 $106.79 (3.8)%
RevPAU $79.61 $76.07 4.7 %
Total Units 4,880 5,104 (4.4)%
Total
Lodging Revenues(1) $68,584 $64,978 5.5 %
Occupancy 65.6% 63.3% 2.3 pts
ADR $129.01 $123.56 4.4 %
RevPAU $84.58 $78.19 8.2 %
Total Units 9,627 9,793 (1.7)%
(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 Houston & O'Leary,
The Maury People, Abbott Resorts, Columbine, Ridgepine, Ryan's Golden Eagle,
Cove Management Services, Worthy Rentals, Scottsdale Resorts Accommodations,
Shoreline Properties, and Coates Reid & Waldron. Also excluded from these
statistics are owner use nights and renovation nights which were approximately
10.3% of gross available nights in the three months ended September 30, 1999 and
11.1% of gross available nights in the three months ended September 30, 1998.
For the nine months ended September 30, 1999 and 1998, owner use nights and
renovation nights were 11.2% and 11.8% of gross available nights, respectively.
23
Nine Months Ended
Sept 30, Sept 30,
1999 1998 Variance
-------- ------- --------
Mountain
Lodging Revenues(1) $30,051 $27,921 7.6 %
Occupancy 40.9% 39.7% 1.2 pts
ADR $157.91 $148.32 6.5 %
RevPAU $64.51 $58.88 9.6 %
Total Units 1,964 2,016 (2.6)%
Beach
Lodging Revenues(1) $52,025 $46,631 11.6 %
Occupancy 55.0% 60.1% (5.1)pts
ADR $158.17 $147.69 7.1 %
RevPAU $86.98 $88.71 (2.0)%
Total Units 2,783 2,673 4.1 %
Hawaii
Lodging Revenues(1) $104,866 $107,381 (2.3)%
Occupancy 77.1% 72.7% 4.4 pts
ADR $102.48 $106.61 (3.9)%
RevPAU $79.05 $77.54 2.0 %
Total Units 4,880 5,104 (4.4)%
Total
Lodging Revenues(1) $186,942 $181,933 2.8 %
Occupancy 64.5% 63.3% 1.2 pts
ADR $121.19 $120.47 0.6 %
RevPAU $78.20 $76.29 2.5 %
Total Units 9,627 9,793 (1.7)%
(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 Houston & O'Leary,
The Maury People, Abbott Resorts, Columbine, Ridgepine, Ryan's Golden Eagle,
Cove Management Services, Worthy Rentals, Scottsdale Resorts Accommodations,
Shoreline Properties, and Coates Reid & Waldron. Also excluded from these
statistics are owner use nights and renovation nights which were approximately
10.3% of gross available nights in the three months ended September 30, 1999 and
11.1% of gross available nights in the three months ended September 30, 1998.
For the nine months ended September 30, 1999 and 1998, owner use nights and
renovation nights were 11.2% and 11.8% of gross available nights, respectively.
24
PART 2 - OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports on Form 8-K
-----------------------------------------
(a) Exhibits
EX-27 Financial Data Schedule
(b) Reports on Form 8-K:
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.
November 15, 1999 By: /s/ JEFFERY M. JARVIS
----------------------------
Jeffery M. Jarvis
Senior Vice President and
Chief Financial Officer
(Principal Financial Officer,
Chief Accounting Officer
and Duly Authorized Officer)
25
EXHIBIT INDEX
-------------
Sequential
Exhibit No. Description Page No.
- ----------- ---------------------------------------------- ----------
EX-27 Financial Data Schedule 30
26