Exhibit 3
RESORTQUEST INTERNATIONAL, INC.,
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
On May 26, 1998, ResortQuest International, Inc. ("ResortQuest" or the
"Company") consummated its initial public offering (the "IPO") and the
combination (the "Combinations") of 12 vacation rental and property management
companies and one leading vacation rental and property management software
company. Additionally, on September 30, 1998, ResortQuest completed the
acquisition of Abbott Realty Services, Inc. ("Abbott Resorts"). The following
unaudited pro forma combined financial statements give effect to the
acquisition of Abbott Resorts and the acquisitions by ResortQuest, of the
outstanding capital stock of Hotel Corporation of the Pacific, Inc. ("Aston
Hotels & Resorts"), Brindley & Brindley Realty, Inc. and B&B On The Beach, Inc.
(collectively "Brindley and Brindley"), Coastal Resorts Management, Inc. and
Coastal Resorts Realty, L.L.C. (collectively "Coastal Resorts"), Collection of
Fine Properties, Inc. ("CFP"), First Resort Software, Inc. ("FRS"), Houston and
O'Leary Company ("H&O"), Maui Condo & Home Realty, Inc. ("Maui"), The Maury
People, Inc. ("Maury"), Howey Acquisition, Inc. and Priscilla Murphy Realty,
Inc. (collectively "PMR"), Resort Property Management, Inc. ("RPM"), Telluride
Resort Accommodations, Inc. ("TRA"), Trupp-Hodnett Enterprises, Inc. and THE
Management Company (collectively "THE"), and Whistler Chalets Limited
("Whistler"), (collectively the "Founding Companies"). The acquisitions of
Abbott Resorts and the Combinations are accounted for using the purchase method
of accounting. Aston Hotels & Resorts, one of the Founding Companies, has been
designated as the accounting acquiror (for financial statement presentation
purposes) in the Combinations in accordance with Securities and Exchange
Commission Staff Accounting Bulletin No. 97 ("SAB 97"), which states that the
combining company which receives the largest portion of voting rights in the
combined corporation is presumed to be the acquiror for accounting purposes
unless other evidence clearly indicates that another company is the acquiror.
Management has analyzed the factors as set forth in SAB 97 that may indicate
Aston Hotels & Resorts should not be deemed to be accounting acquiror,
including (1) the existing conversion rights of the Restricted Common Stock,
(2) Aston Hotels & Resorts' level of representation on the Board and in the
holding company management team and (3) the market value of the shares held by
Aston Hotels & Resorts and the existing shareholder group. Management has
concluded that none of these factors, either individually, or in the aggregate,
is sufficient to rebut the presumption that the shareholders of Aston Hotels &
Resorts should be deemed the accounting acquiror.
The unaudited pro forma combined balance sheets give effect to i) the
recorded balances of ResortQuest at June 30, 1998, and ii) the acquisition of
Abbott Resorts by ResortQuest as if such transaction had occurred on June 30,
1998. The unaudited pro forma combined statements of operations give effect to
the Combinations, the IPO and the acquisition of Abbott Resorts as if such
transactions had occurred on January 1, 1997.
The unaudited pro forma combined statement of operations of ResortQuest for
the six months ended June 30, 1998 does not include the compensation expense and
management recruitment expense, relating to the non-recurring charge of $6.1
million, in conjunction with the issuance of common stock to management and
founders of ResortQuest and other costs, prior to the Offering. Additionally,
the unaudited pro forma combined balance sheets and statements of operations do
not include the effects of the Company's acquisitions of Plantation Resort and
Whistler Exclusive, as such acquisitions are immaterial to ResortQuest for
presentation purposes.
In conjunction with the consummation of the above transactions, the Company
expects to realize certain savings as a result of (i) volume purchasing and
national contracts for telecommunications, credit fees, advertising, printing,
housekeeping supplies and other operating expenses and (ii) consolidation of
insurance, employee benefits and other general and administrative expenses. The
Company cannot quantify these savings accurately at this time. It is anticipated
that these savings will be partially offset by the costs of being a publicly
traded company and the incremental costs related to the Company's new management
team. However, these costs, like the savings that they offset,
cannot be quantified accurately. Neither these anticipated savings nor these
anticipated costs have been included in the pro forma combined financial
information of the Company. To the extent the owners and certain key employees
of the Combinations and Abbott Resorts have agreed prospectively to reductions
in salary, bonuses and benefits, these reductions have been reflected in the
unaudited pro forma combined statements of operations.
The pro forma adjustments are based on preliminary estimates, available
information and certain assumptions and may be revised as additional information
becomes available. In management's opinion, the pro forma information presented
herein should not materially change from the preliminary estimates. The
unaudited pro forma financial data do not purport to represent what the
Company's financial position or results of operations would actually have been
if such transactions in fact had occurred on those dates and are not necessarily
representative of the Company's financial position or results of operations for
any future period. Since the Founding Companies and Abbott Resorts were not
under common control or management, historical combined results may not be
comparable to, or indicative of, future performance. The unaudited pro forma
combined financial statements should be read in conjunction with the other
financial statement and notes thereto included elsewhere in the Prospectus. See
"Risk Factors" included elsewhere herein.
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET - JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE DATA)
PRO FORMA
ABBOTT ADJUSTMENTS
RESORTQUEST RESORTS (NOTE 2) AS ADJUSTED
------------- --------- ------------ ------------
Current Assets:
Cash and cash equivalents ................................. $ 6,037 $11,409 $ -- $ 17,446
Cash held in trust ........................................ 6,064 604 -- 6,668
Trade and other receivables, net of allowance ............. 3,627 851 -- 4,478
Other current assets ...................................... 5,890 1,098 -- 6,988
--------- ------- -------- ---------
Total current assets ..................................... 21,618 13,962 -- 35,580
Property and equipment, net ................................ 4,075 9,376 -- 13,451
Goodwill ................................................... 95,429 -- 31,547 126,976
Other assets ............................................... 3,206 1,461 -- 4,667
--------- ------- -------- ---------
Total assets ............................................. $ 124,328 $24,799 $ 31,547 $ 180,674
========= ======= ======== =========
Current Liabilities:
Current maturities of long-term debt ...................... $ 1,396 $ 827 $ -- $ 2,223
Customer deposits, deferred revenue and payable to
homeowners ............................................... 11,357 11,820 -- 23,177
Accounts payable and accrued liabilities .................. 9,712 3,400 -- 13,112
Other current liabilities ................................. 627 315 -- 942
--------- ------- -------- ---------
Total current liabilities ................................ 23,092 16,362 -- 39,454
Long-term debt, net of current maturities .................. 1,992 6,089 26,530 34,611
Other long-term liabilities ................................ -- 1,170 (437) 733
Stockholders' Equity:
Common stock, 15,924,286 shares outstanding (ResortQuest)
and 16,681,326 shares outstanding (pro forma as adjusted) 159 1 7 167
Additional paid-in-capital ................................ 128,662 7 6,617 135,286
Distribution in excess of predecessor basis in net assets . (29,500) -- -- (29,500)
Retained earnings ......................................... (77) 1,170 (1,170) (77)
--------- ------- -------- ---------
Total stockholders' equity ............................... 99,244 1,178 5,454 105,876
--------- ------- -------- ---------
Total liabilities and stockholders' equity ............... $ 124,328 $24,799 $ 31,547 $ 180,674
========= ======= ======== =========
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
PAGE 1 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
ABBOTT BRINDLEY &
RESORTQUEST RESORTS BRINDLEY
------------- ----------- ------------
Revenues .................................................. $19,554 $25,813 $4,021
Operating expenses ........................................ 8,908 14,654 3,028
General and administrative expenses ....................... 5,081 9,235 395
Depreciation and amortization ............................. 394 595 87
------- ------- ------
Income (loss) from operations ............................. 5,171 1,329 511
Interest (expense) and other income, net .................. (86) (167) 42
------- ------- ------
Income (loss) before income taxes ......................... 5,085 1,162 553
Provision for income taxes ................................ -- 465 --
------- ------- ------
Net income (loss) ......................................... $ 5,085 $ 697 $ 553
======= ======= ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $ 5,085 $ 1,162 $ 553
Less: pro forma provision for income taxes ................ 2,034 465 221
------- ------- ------
PRO FORMA NET INCOME (LOSS) ............................... $ 3,051 $ 697 $ 332
======= ======= ======
COASTAL
RESORTS CFP FRS H&O MAURY
--------- --------- --------- --------- ---------
Revenues .................................................. $3,615 $4,303 $2,864 $1,596 $1,183
Operating expenses ........................................ 1,788 2,830 1,704 494 211
General and administrative expenses ....................... 559 586 372 274 654
Depreciation and amortization ............................. 85 307 45 48 28
------ ------ ------ ------ ------
Income (loss) from operations ............................. 1,183 580 743 780 290
Interest (expense) and other income, net .................. (47) 133 25 (15) 28
------ ------ ------ ------ ------
Income (loss) before income taxes ......................... 1,136 713 768 765 318
Provision for income taxes ................................ -- -- -- -- --
------ ------ ------ ------ ------
Net income (loss) ......................................... $1,136 $ 713 $ 768 $ 765 $ 318
====== ====== ====== ====== ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $1,136 $ 713 $ 768 $ 765 $ 318
Less: pro forma provision for income taxes ................ 454 285 307 306 127
------ ------ ------ ------ ------
PRO FORMA NET INCOME (LOSS) ............................... $ 682 $ 428 $ 461 $ 459 $ 191
====== ====== ====== ====== ======
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
PAGE 2 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PMR RPM TRA THE MAUI
--------- --------- --------- --------- ------------
Revenues ........................................ $4,740 $2,295 $4,313 $4,061 $1,422
Operating expenses .............................. 1,184 1,560 3,037 1,838 366
General and administrative expenses ............. 1,663 548 982 1,939 954
Depreciation and amortization ................... 203 79 48 85 25
------ ------ ------ ------ ------
Income (loss) from operations ................... 1,690 108 246 199 77
Interest (expense) and other income, net ........ (182) 217 31 47 (1)
------ ------ ------ ------ ------
Income (loss) before income taxes ............... 1,508 325 277 246 76
Provision for income taxes ...................... -- 75 -- 60 21
------ ------ ------ ------ ------
Net income (loss) ............................... $1,508 $ 250 $ 277 $ 186 $ 55
====== ====== ====== ====== ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $1,508 $ 325 $ 277 $ 246 $ 76
Less: pro forma provision for income taxes ...... 603 130 111 98 31
------ ------ ------ ------ ------
PRO FORMA NET INCOME (LOSS) ..................... $ 905 $ 195 $ 166 $ 148 $ 45
====== ====== ====== ====== ======
Basic and diluted pro forma net income per
share ..........................................
Shares used in computing pro forma net income
per share (Note 4) .............................
PRO FORMA
ADJUSTMENTS PRO
WHISTLER COMBINED (NOTE 3) FORMA
------------ ---------- ---------------------- --------------
Revenues ........................................ $2,060 $81,840 $ 1,327 (a) $ 83,167
Operating expenses .............................. 1,147 42,749 (671)(b) 42,078
General and administrative expenses ............. 729 23,971 (3,635)(b) 20,336
Depreciation and amortization ................... 85 2,114 3,152 (b)(c) 5,266
------ ------- ------------ ------------
Income (loss) from operations ................... 99 13,006 2,481 15,487
Interest (expense) and other income, net ........ (8) 17 (1,807)(b)(e) (1,790)
------ ------- ------------ ------------
Income (loss) before income taxes ............... 91 13,023 674 13,697
Provision for income taxes ...................... (18) 603 6,137 (d) 6,740
------ ------- ------------ ------------
Net income (loss) ............................... $ 109 $12,420 $ (5,463) $ 6,957
====== ======= ============ ============
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $ 91 $13,023 $ 674 $ 13,697
Less: pro forma provision for income taxes ...... 37 5,209 1,531 6,740
------ ------- ------------ ------------
PRO FORMA NET INCOME (LOSS) ..................... $ 54 $ 7,814 $ (857) $ 6,957
====== ======= ============ ============
Basic and diluted pro forma net income per
share .......................................... $ 0.42
============
Shares used in computing pro forma net income
per share (Note 4) ............................. 16,681,326
============
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
PAGE 1 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(IN THOUSANDS)
ABBOTT BRINDLEY &
RESORTQUEST RESORTS BRINDLEY
------------- ----------- ------------
Revenues ...................................................... $13,936 $13,909 $ 635
Operating expenses ............................................ 7,167 7,579 1,327
General and administrative expenses ........................... 3,593 6,019 225
Depreciation and amortization ................................. 568 321 37
------- ------- ------
Income (loss) from operations ................................. 2,608 (10) (954)
Interest (expense) and other income, net ...................... (30) (157) 27
------- ------- ------
Income (loss) before income tax expense ....................... 2,578 (167) (927)
Provision (benefit) for income taxes .......................... 304 (67) --
------- ------- ------
Net income (loss) ............................................. $ 2,274 (100) $ (927)
======= ======= ======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ................................................. $ 2,578 $ (167) $ (927)
Less: pro forma provision (benefit) for income taxes .......... 1,031 (67) (371)
------- ------- ------
PRO FORMA NET INCOME (LOSS) ................................... $ 1,547 $ (100) $ (556)
======= ======= ======
COASTAL
RESORTS CFP FRS H&O MAURY
--------- --------- --------- ---------- ------
Revenues ...................................................... $1,168 $2,929 $1,401 $648 $439
Operating expenses ............................................ 718 1,397 679 224 89
General and administrative expenses ........................... 243 203 293 98 239
Depreciation and amortization ................................. 35 128 20 20 12
------ ------ ------ ---- ----
Income (loss) from operations ................................. 172 1,201 409 306 99
Interest (expense) and other income, net ...................... 8 58 12 (4) 5
------ ------ ------ ---- ----
Income (loss) before income tax expense ....................... 180 1,259 421 302 104
Provision (benefit) for income taxes .......................... -- -- - - --
------ ------ ------ ---- ----
Net income (loss) ............................................. $ 180 $1,259 $ 421 $302 $104
====== ====== ====== ==== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ................................................. $ 180 $1,259 $ 421 $302 $104
Less: pro forma provision (benefit) for income taxes .......... 72 504 168 121 42
------ ------ ------ ---- ----
PRO FORMA NET INCOME (LOSS) ................................... $ 108 $ 755 $ 253 $181 $ 62
====== ====== ====== ==== ====
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
PAGE 2 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PMR RPM TRA THE MAUI
--------- --------- --------- ------------ ------
Revenues ......................................... $3,148 $1,552 $2,749 $1,969 $905
Operating expenses ............................... 482 659 1,575 901 132
General and administrative expenses .............. 864 270 438 1,034 323
Depreciation and amortization .................... 85 75 20 37 3
------ ------ ------ ------ ----
Income (loss) from operations .................... 1,717 548 716 (3) 447
Interest (expense) and other income, net ......... (17) 21 35 1 17
------ ------ ------ ------ ----
Income (loss) before income taxes ................ 1,700 569 751 (2) 464
Provision (benefit) for income taxes ............. -- 28 -- -- 32
------ ------ ------ ------ ----
Net income (loss) ................................ $1,700 $ 541 $ 751 $ (2) $432
====== ====== ====== ====== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ...................... $1,700 $ 569 $ 751 $ (2) $464
Less: pro forma provision (benefit) for income
taxes ........................................... 680 227 300 (1) 187
------ ------ ------ ------ ----
PRO FORMA NET INCOME (loss): $1,020 $ 342 $ 451 $ (1) $277
====== ====== ====== ====== ====
Basic pro forma net income per share .............
Shares used in computing basic pro forma net
income per share (Note 4) .......................
Diluted pro forma net income per share ...........
Shares used in computing diluted pro forma net
income per share (Note 4) .......................
PRO FORMA
ADJUSTMENTS PRO
WHISTLER COMBINED (NOTE 3) FORMA
---------- ---------- ---------------------- --------------
Revenues ......................................... $1,297 $46,685 $ 1,346 (a) $ 48,031
Operating expenses ............................... 664 23,593 (571)(b) 23,022
General and administrative expenses .............. 140 13,982 (2,697)(b) 11,285
Depreciation and amortization .................... 33 1,394 1,363 (b)(c) 2,757
------ ------- ----------- ------------
Income (loss) from operations .................... 460 7,716 3,251 10,967
Interest (expense) and other income, net ......... 26 2 (816)(b)(e) (814)
------ ------- ----------- ------------
Income (loss) before income taxes ................ 486 7,718 2,435 10,153
Provision (benefit) for income taxes ............. (20) 277 4,451 (d) 4,728
------ ------- ----------- ------------
Net income (loss) ................................ $ 506 $ 7,441 $ (2,016) $ 5,425
====== ======= =========== ============
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ...................... $ 486 $ 7,718 $ 2,435 $ 10,153
Less: pro forma provision (benefit) for income
taxes ........................................... 192 3,085 1,643 4,728
------ ------- ----------- ------------
PRO FORMA NET INCOME (loss): $ 294 $ 4,633 $ 792 $ 5,425
====== ======= =========== ============
Basic pro forma net income per share ............. $ 0.33
============
Shares used in computing basic pro forma net
income per share (Note 4) ....................... 16,681,326
============
Diluted pro forma net income per share ........... $ 0.32
============
Shares used in computing diluted pro forma net
income per share (Note 4) ....................... 16,738,504
============
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
PAGE 1 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
(IN THOUSANDS)
ABBOTT BRINDLEY &
RESORTQUEST RESORTS BRINDLEY
------------- ----------- ------------
Revenues .................................................. $10,078 $12,191 $ 1,425
Operating expenses ........................................ 5,247 6,852 1,193
General and administrative expenses ....................... 2,263 4,402 204
Depreciation and amortization ............................. 176 312 44
------- ------- -------
Income (loss) from operations ............................. 2,392 625 (16)
Interest (expense) and other income, net .................. (333) (114) (2)
------- ------- -------
Income (loss) before income taxes ......................... 2,059 511 (18)
Provision for income taxes ................................ -- 204 --
------- ------- -------
Net income (loss) ......................................... $ 2,059 $ 307 $ (18)
======= ======= =======
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $ 2,059 $ 511 $ (18)
Less: pro forma provision for income taxes ................ 824 204 (7)
------- ------- -------
PRO FORMA NET INCOME (LOSS) ............................... $ 1,235 $ 307 $ (11)
======= ======= =======
COASTAL
RESORTS CFP FRS H&O MAURY
--------- --------- --------- ------------ ------
Revenues .................................................. $1,220 $3,071 $1,342 $1,180 $661
Operating expenses ........................................ 604 1,538 791 125 115
General and administrative expenses ....................... 235 279 176 216 276
Depreciation and amortization ............................. 42 153 24 24 14
------ ------ ------ ------ ----
Income (loss) from operations ............................. 339 1,101 351 815 256
Interest (expense) and other income, net .................. -- 53 12 (9) 7
------ ------ ------ ------ ----
Income (loss) before income taxes ......................... 339 1,154 363 806 263
Provision for income taxes ................................ -- -- -- -- --
------ ------ ------ ------ ----
Net income (loss) ......................................... $ 339 $1,154 $ 363 $ 806 $263
====== ====== ====== ====== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma provision for
income taxes ............................................. $ 339 $1,154 $ 363 $ 806 $263
Less: pro forma provision for income taxes ................ 136 462 145 322 105
------ ------ ------ ------ ----
PRO FORMA NET INCOME (LOSS) ............................... $ 203 $ 692 $ 218 $ 484 $158
====== ====== ====== ====== ====
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
PAGE 2 OF 2
RESORTQUEST INTERNATIONAL, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1997
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
PMR RPM TRA THE MAUI
--------- --------- --------- --------- ------
Revenues ........................................ $3,019 $1,733 $2,738 $1,915 $759
Operating expenses .............................. 545 978 1,611 831 158
General and administrative expenses ............. 808 243 477 955 393
Depreciation and amortization ................... 102 53 24 44 12
------ ------ ------ ------ ----
Income (loss) from operations ................... 1,564 459 626 85 196
Interest (expense) and other income, net ........ (29) 18 25 40 15
------ ------ ------ ------ ----
Income (loss) before income taxes ............... 1,535 477 651 125 211
Provision for income taxes ...................... -- 38 -- 23 48
------ ------ ------ ------ ----
Net income (loss) ............................... $1,535 $ 439 $ 651 $ 102 $163
====== ====== ====== ====== ====
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $1,535 $ 477 $ 651 $ 125 $211
Less: pro forma provision for income taxes ...... 614 191 260 50 84
------ ------ ------ ------ ----
PRO FORMA NET INCOME (LOSS): .................... $ 921 $ 286 $ 391 $ 75 $127
====== ====== ====== ====== ====
Basic and diluted pro forma net income per
share ..........................................
Shares used in computing pro forma net income
per share (Note 4) .............................
PRO FORMA
ADJUSTMENTS
WHISTLER COMBINED (NOTE 3) PRO FORMA
---------- ---------- ---------------------- --------------
Revenues ........................................ $1,378 $42,710 $ 707 (a) $ 43,417
Operating expenses .............................. 833 21,421 (224)(b) 21,197
General and administrative expenses ............. 214 11,141 (1,756)(b) 9,385
Depreciation and amortization ................... 44 1,068 1,667 (b)(c) 2,735
------ ------- ----------- ------------
Income (loss) from operations ................... 287 9,080 1,020 10,100
Interest (expense) and other income, net ........ 27 (290) (888)(b)(e) (1,178)
------ ------- ----------- ------------
Income (loss) before income taxes ............... 314 8,790 132 8,922
Provision for income taxes ...................... (18) 295 3,941 (d) 4,236
------ ------- ----------- ------------
Net income (loss) ............................... $ 332 $ 8,495 $ (3,809) $ 4,686
====== ======= =========== ============
PRO FORMA DATA (unaudited):
Historical net income (loss) before pro forma
provision for income taxes ..................... $ 314 $ 8,790 $ 132 $ 8,922
Less: pro forma provision for income taxes ...... 126 3,516 720 4,236
------ ------- ----------- ------------
PRO FORMA NET INCOME (LOSS): .................... $ 188 $ 5,274 $ (588) $ 4,686
====== ======= =========== ============
Basic and diluted pro forma net income per
share .......................................... $ 0.28
============
Shares used in computing pro forma net income
per share (Note 4) ............................. 16,681,326
============
The accompanying notes are an integral part of these unaudited
pro forma combined financial statements.
RESORTQUEST INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
1. GENERAL:
On May 26, 1998, ResortQuest consummated the IPO and completed the
Combinations of the Founding Companies. The consideration for the Combinations
consisted of cash and common stock. The Combinations were accounted for under
the purchase method of accounting. Aston Hotels & Resorts has been designated as
the accounting acquiror for financial statement presentation purposes in
accordance with Securities and Exchange Commission Staff Accounting Bulletin No.
97, which states that the combining company which receives the largest portion
of voting rights in the combined corporation is presumed to be the acquiror for
accounting purposes. On September 30, 1998, ResortQuest completed the
acquisition of Abbot Resorts. Accordingly, the historical financial statements
of ResortQuest reflect the financial position and results of operations of the
parent company of ResortQuest ("RQI"), the Founding Companies and Abbott Resorts
as of June 30, 1998, and for the year ended December 31, 1997, and the six
months ended June 30, 1997 and 1998, and were derived from the respective
financial statements where indicated. The historical financial statements of
ResortQuest represent the results of Aston Hotels & Resorts prior to the
Combinations and the IPO, and only include balances and transactions of the
Founding Companies since May 27, 1998. Additionally, the unaudited pro forma
combined balance sheets and statements of operations do not include the effects
of the Company's acquisitions of Plantation Resort and Whistler Exclusive, as
such acquisitions are immaterial to ResortQuest for presentation purposes.
The unaudited pro forma statement of operations of ResortQuest for the six
months ended June 30, 1998 does not include the compensation expense and
management recruitment expense, relating to the non-recurring charge of $6.1
million, in conjunction with the issuances of common stock to management and
founders of RQI and other costs, prior to the Offering.
2. UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS:
The following table summarizes unaudited pro forma combined balance sheet
adjustments (in thousands):
DESCRIPTION AMOUNT
---------------------------------------------- ------------------
Goodwill ..................................... $ 31,547 (a)
Long-term debt, net of current maturities .... (26,530)(b)
Other long-term liabilities .................. 437 (c)
Common stock ................................. (7)(d)
Additional paid-in-capital ................... (6,617)(e)
Retained earnings ............................ 1,170 (f)
----------
$ --
==========
- ----------
The above table reflects the adjustments related to the acquisition of
Abbott Resorts including:
(a) The goodwill related to the issuance of Common Stock and the cash paid
to satisfy the purchase price.
(b) The increase in ResortQuest's line of credit to fund the cash portion
of the purchase price.
(c) The elimination of minority interest liability.
(d) Issuance of 757,040 shares of Common Stock to satisfy the purchase
price at a par value of $.01 per share, net of the elimination of the
Abbott Resorts' common stock.
(e) The increase in additional paid-in-capital for the issuance of 757,040
shares of Common Stock at fair value, net of the elimination of Abbott
Resorts' additional paid-in-capital.
RESORTQUEST INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS - (CONTINUED )
(f) The elimination of Abbott Resorts' retained earnings.
3. UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS ADJUSTMENTS:
(a) Reflects additional revenue that ResortQuest would have realized
related to certain property management contracts with affiliates of
the Founding Companies and Abbott Resorts. These management contracts
were reflective of below market rates and have been renegotiated in
conjunction with the acquisitions.
(b) Reflects (i) a reduction in salaries, bonuses and benefits derived
from contractual agreements which establish the compensation of the
owners and certain key employees of the Founding Companies and Abbott
Resorts and (ii) the effect of the exclusion of certain non-operating
assets and the assumption of or retirement of certain liabilities
(including interest expense) that will be retained by certain
stockholders of the Founding Companies.
The reduction in salaries, bonuses and benefits reflects the
difference between historical combined management compensation of
approximately $2.5 million, $1.3 million and $5.5 million as compared
to the contractual compensation of $771,000, $771,000 and $1.9
million, respectively, for the six months ended June 30, 1998 and
1997, and the year ended December 31, 1997, respectively.
(c) Reflects amortization of goodwill (which is not deductible for income
tax purposes) recorded as a result of the Combinations and the
acquisition of Abbott Resorts over a 40-year period, except for the
goodwill related to First Resort, which will be amortized
straight-line over a 15-year period.
(d) Reflects the provision for federal and state income taxes relating to
converting certain operations to C Corporation status and including
the tax impact of pro forma adjustments.
(e) Reflects the estimated interest expense related to the debt assumed in
conjunction with ResortQuest funding the cash portion of the purchase
price related to the acquisition of Abbott Resorts.
While ResortQuest could pay a maximum bonus of 50% (except for two
executives at 100%) of a key employee's base pay, bonuses are not factored into
the prospective compensation as ResortQuest does not anticipate paying bonuses
in fiscal 1998. The maximum amount that could be paid would be $700,000. These
bonuses, if paid in future periods, would increase expenses and unfavorably
impact net earnings, accordingly.
4. NET INCOME PER SHARE
The shares used in computing net income per share include: (i) 3,134,630
shares issued to management of and founders of RQI; (ii) 6,119,656 shares issued
to the stockholders of the Founding Companies in connection with the
Combinations; and (iii) 6,670,000 shares issued in connection with the Offering
necessary to pay the $54.9 million cash portion of the consideration for the
Combinations and (iv) 757,040 shares issued to pay for a portion of the purchase
price related to the acquisition of Abbott Resorts. Related to the six month
period ended June 30, 1998, diluted net income per share includes the effect of
1,807,000 shares of Common Stock reserved for issuance pursuant to the Company's
1998 Long-Term Incentive Plan, of which options to purchase 1,697,000 shares
granted by the Company concurrently with the Offering at an exercise price equal
to the initial public offering price.
RESORTQUEST INTERNATIONAL, INC.
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS - (CONTINUED )
5. ABBOTT RESORTS INFORMATION
The 1998 unaudited pro forma results of Abbott Resorts are as of and for
the six months ended June 30, 1998. The audited financial statements for Abbott
Resorts as of and for the year ended July 31, 1998 are included within this
Prospectus. Due to the seasonal nature of Abbott Resorts' operations, operating
income may vary significantly. For the twelve months ended July 31, 1998, the
following operating income and unaudited pro forma adjustments were noted:
DESCRIPTION AMOUNT
--------------------------------------------------------------- -------------
Operating income, including interest income of $333,962........ $1,383,717
Pro forma adjustments:
Add stockholder salaries and benefits to be reduced or
terminated ................................................. 2,203,000
Add increase in rental commissions related to contracts at
favorable terms with affiliates ............................ 546,000
----------
$4,132,717
==========
Additionally, the above adjustments do not reflect an additional revenue
source related to a reservation fee surcharge implemented in June, 1998, which
if annualized, would approximate $780,000.