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Press Release Source: ResortQuest International
October 30, 2002
MEMPHIS, TN -- ResortQuest International, Inc. (NYSE: RZT), one of the world's leading vacation rental property
management companies, yesterday announced financial results for the third quarter ended September 30, 2002.
Third Quarter Highlights
Third Quarter 2002 Results
ResortQuest reported revenues of $58.0 million for the third quarter of 2002, which represents a slight improvement
over revenues of $57.6 million for the prior year third quarter. Included in these amounts is other revenue from
managed properties that primarily relates to reimbursed payroll expense and related benefits. The Company adopted
this presentation format in 2002 in response to a FASB staff announcement; however, this financial statement presentation
change has no effect on the Company's operating cash flows, earnings before interest, taxes, depreciation and amortization
("EBITDA"), or earnings per share. The Company reported net income, excluding unusual items and other
charges, for the third quarter of $5.8 million, compared to $5.0 million in the prior year. The unusual items and
other charges include $625,000 for third quarter of 2002 and $3.8 million for third quarter of 2001. This translated
to diluted earnings per share of $0.30 in the third quarter of 2002, as compared to $0.26 in the third quarter
of 2001. Diluted cash earnings per share, which excludes the effect of prior year goodwill amortization and unusual
items and other charges, were $0.30 in the third quarter of 2002 compared to $0.33 in the same period last year.
The Company reported EBITDA, excluding unusual items and other charges, of $12.7 million in the third quarter compared
to $12.4 million in third quarter of 2001, a 2.4 percent increase. EBITDA per diluted share was $0.66 in the third
quarter of 2002 compared to $0.64 in the comparable 2001 period. ResortQuest diluted shares outstanding for the
third quarter of 2002 were 19.3 million. The unusual items and other charges recorded during the quarter relate
to professional fees and expenses in conjunction with an offer to acquire the Company that was determined by the
Board, after appropriate review, not to be in the best interests of the Company and its shareholders.
For the nine months ended September 30, 2002, total revenues declined 3.9 percent to $155.9 million. Excluding
unusual items and other charges and the cumulative effect of a change in accounting principle recorded during the
first quarter, net income for the nine-month period was $11.0 million and diluted earnings per share was $0.57.
EBITDA, excluding unusual items and other charges, declined 17.5 percent to $26.7 million, compared to $32.4 million
in the first nine months of 2001. EBITDA per diluted share, excluding unusual items, was $1.38 versus $1.68 in
the prior year's period. The change in accounting principle relates to the Company's adoption of SFAS No. 142 as
discussed in its second quarter 2002 Form 10-Q.
"Notwithstanding the macroeconomic pressures that led to lower operating revenues for the third quarter, ResortQuest
benefited from the operational efficiencies realized through disciplined cost controls and technological enhancements
that were implemented over the course of the year," said Jim Olin, president and chief executive officer.
"As a result, we were able to deliver higher EBITDA levels despite lower top-line numbers. Our ability to
improve and control our cost structure will enable us to weather this historic downturn with a strengthened business
model that should increase shareholder value in the long run."
The condensed table below describes the impact of the unusual items and other charges and the cumulative effect
of a change in accounting principle on our actual results for the three months and nine months ended September
30, 2002.
Three Months Ended September 30, 2002
Impact from Unusual Items and Change in
Accounting Principle
(in 000's,
except EPS)
Actual Unusual Change in Results Excluding
Results Items Acctg Unusual Items
Principle
General
and administrative
exp. $13,304 $(625) - $12,679
EBITDA 12,096 625 - 12,721
Net income 5,440 391 - 5,831
Diluted EPS $0.28 $0.02 - $0.30
Nine Months Ended September 30, 2002
Impact from Unusual Items and Change in
Accounting Principle
(in 000's,
except EPS) Actual Unusual Change in Results Excluding
Results Items Acctg Unusual Items
Principle
General
and administrative
exp. $38,963 $(1,127) $ - $37,836
EBITDA 25,602 1,127 - 26,729
Net income 3,981 704 6,280 10,965
Diluted EPS $0.21 $0.04 $0.32 $0.57
At September 30, 2002, the Company had $15.5 million in total cash and total debt of $81 million, which generates
a debt to total capitalization of 36 percent. The Company also recorded deferred revenues and customer deposits
of $29 million, a 12 percent decline over the comparable period in 2001.
Third Quarter Operating Results & Highlights
Total gross lodging revenues were $135.3 million for the third quarter of 2002, compared to $141.3 in the third
quarter of 2001, representing a 4.2 percent decline, which is the lowest quarterly decline this year. During the
third quarter of 2002, the Beach resorts' same-store gross lodging revenues declined 5.8 percent to $87.3 million
as compared to $92.7 million in the third quarter of 2001. The Hawaii resorts' same-store gross lodging revenues
increased slightly from $37.5 million in the third quarter of 2001 to $38.0 million in the third quarter of 2002,
representing the first time this year that a region surpassed prior year results. The Hawaii resorts benefited
from a 4.1 percent increase in rental units during the quarter compared to prior year. The Mountain resorts' same-store
gross lodging revenues declined 8.1 percent to $9.5 million; however, this region realized a 1.8 percent increase
in rental units during the quarter.
"Overall, our gross lodging revenues held up relatively well as compared to the hospitality industry as a
whole," said Park Brady, chief operating officer. "July was softer than anticipated, but results improved
at our properties in August and September as we realized a pick up in the overall travel market. Our Hawaii resorts
continue to improve as evidenced by a 1.1 percent increase over the same period last year, versus the first and
second quarters trailing prior year results."
Management Changes
As previously announced, ResortQuest has undergone a series of senior management changes. Joe Vittoria has been
appointed chairman and will maintain an active role in providing a long-term growth strategy for the Company. Jim
Olin has been promoted to chief executive officer and will continue to manage the day-to-day operations along with
working with Mr. Vittoria on strategic initiatives. Park Brady has been promoted to chief operating officer and
will assist Jim Olin in managing the Company's day-to-day operations. Steve Caron has been promoted to chief information
officer, and Bob Adams has been promoted to chief marketing officer. Mitch Collins, chief financial officer, has
been promoted to executive vice president and will also direct the Company's development opportunities.
"The long-term success of ResortQuest will be determined by using the technology and infrastructure we have
in place to focus on the fundamental operations of running a vacation rental property management business,"
commented Vittoria. "Through my experience in the hospitality industry at Avis, Travel Services International
and other companies, I recognize the potential for ResortQuest to increase the value of its brand and its industry
leadership position, as well as provide increasing value for its shareholders and homeowners by relying on the
operational strength of this new management team."
"The ResortQuest model will be to build through organic growth and not acquisition, and to strengthen our
positions in three key areas: marketing, distribution channels and infrastructure," said Olin. "We will
also continue to explore management contract deals that present growth opportunities to ResortQuest with minimal
expenditure or risk involved."
Outlook
The following information is based on current information as of October 29, 2002. The Company does not expect to
update guidance until next quarter's earnings release; however, the Company may update the full business outlook
or any portion thereof at any time for any reason.
For the fourth quarter of 2002, the Company estimates that diluted earnings (loss) per share will be in the $(0.39)
to $(0.36) range, and EBITDA will be in the range of a loss of $(8.5) to $(7.5) million. Total revenues, excluding
other revenue from managed properties, should be between $22 to $24 million. For the full year 2002, EBITDA will
be in the range of $18.2 to $19.2 million, and diluted earnings per share will be in the $0.18 to $0.21 range.
Excluded from these amounts are anticipated unusual items and other charges which include severance and benefits
in conjunction with the fourth quarter management changes discussed above. The severance and benefits costs, which
will be paid out over several years, are expected to be approximately $2.5 million. Additional charges could be
possible based on new management's assessment of current operations and future business plans.
Olin continued, "The fourth quarter is and always will be a loss quarter for us as consumers primarily travel
only during the last two weeks of December. The current economic environment will make this quarter even more challenging.
However, we will continue to focus on streamlining our operations to enhance profitability. I firmly believe in
the long-term prospects of the Company and our operational strengths and marketing focus will help validate that
opinion as the market returns and we re-establish rental management operations as our primary focus."
CONFERENCE CALL
ResortQuest International held a national conference call yesterday, October 29, 2002 at 11:00 a.m. (EST). A recording
of the call will be available for 7 days by dialing (719) 457-0820 and entering access code 462309. The call was
simultaneously broadcast over the Internet and will be available thereafter at www.resortquest.com
About ResortQuest International
ResortQuest International, the first brand name and "real-time" online booking service (www.resortquest.com
/ AOL Keyword: ResortQuest) in vacation condominium and home rentals and sales, provides a one-stop resource in
over 50 premier resort destinations in the U.S. and Canada. ResortQuest is the world's leading vacation rental
property management company, based on a portfolio of approximately 20,000 vacation rental properties with a combined
real estate value estimated in excess of $7.0 billion.
This news release 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. These forward-looking statements involve risks and uncertainties, as well as assumptions
that, if they never materialize or prove incorrect, could cause the results of ResortQuest and its consolidated
subsidiaries to differ materially from those expressed or implied by such forward looking statements. In addition
to the factors discussed above, other factors that could cause actual results to differ materially include the
risks associated with successful integration of additional acquired companies factors affecting internal growth
and management of growth, ResortQuest's acquisition strategy and the availability of financing, the tour and travel
industry, seasonality, quarterly fluctuations and general economic conditions, dependence on technology and travel
providers, and other factors discussed from time to time in ResortQuest's Securities and Exchange Commission reports,
including its annual report on Form 10-K for the year ended December 31, 2001.
Although the Company believes 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 ResortQuest or any other person that the objectives and plans of the Company will be achieved.
The company undertakes no obligation to publicly update or revise any forward-looking statements whether as a result
of new information, future events or any other reason.
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, 2001 2002 2001 2002
except share data) ------- ------- ------- --------
Revenues
Property management fees $28,821 $27,609 $ 78,952 $ 72,862
Service fees 13,850 13,367 39,902 36,065
Real estate and other 6,011 7,420 18,667 19,858
------- ------- ------- --------
48,682 48,396 137,521 128,785
Other revenue from
managed entities(1) 8,914 9,589 24,632 27,072
------- ------- -------- -------
Total revenues 57,596 57,985 162,153 155,857
------- ------- -------- --------
Cash Operating Expenses
Direct operating 24,015 22,996 66,419 64,220
General and
administrative 16,078 13,304 42,555 38,963
------- ------- -------- --------
40,093 36,300 108,974 103,183
Other expenses from
managed entities(1) 8,914 9,589 24,632 27,072
------- ------- -------- --------
Total cash
operating expenses 49,007 45,889 133,606 130,255
------- ------- -------- -------
EBITDA(2) 8,589 12,096 28,547 25,602
Depreciation 1,376 1,770 3,855 4,732
Goodwill amortization(3) 1,443 - 4,227 -
------- ------- -------- --------
Total non-cash
operating expenses 2,819 1,770 8,082 4,732
------- ------- -------- --------
Operating income 5,770 10,326 20,465 20,870
Interest and other
expense, net 1,044 1,622 3,067 4,453
------- ------- -------- --------
Income before income taxes 4,726 8,704 17,398 16,417
Provision for income taxes (4,260) (3,264) (9,582) (6,156)
------- ------- -------- --------
Income before the cumulative
effect of a change in
accounting principle 466 5,440 7,816 10,261
Cumulative effect of a change
in accounting principle(3) - - - (6,280)
------- ------- -------- --------
Net income $ 466 $ 5,440 $ 7,816 $ 3,981
======= ======= ======== ========
Earnings per share
Basic and Diluted
Before cumulative effect
of a change in accounting
principle $0.02 $ 0.28 $ 0.41 $ 0.53
Cumulative effect of a
change in accounting
principle - - - (0.32)
------- ------- ------- -------
$ 0.02 $ 0.28 $ 0.41 $ 0.21
======= ======= ======= =======
Diluted cash earnings per share(4)
Before cumulative effect
of a change in accounting
principle $0.10 $ 0.28 $ 0.62 $ 0.53
Cumulative effect of a
change in accounting
principle - - - (0.32)
------- ------- ------- -------
$ 0.10 $ 0.28 $ 0.62 $ 0.21
======= ======= ======= =======
EBITDA per diluted
share(2) $ 0.44 $ 0.63 $ 1.48 $ 1.32
======= ======= ======= =======
(1) Revenue and expense from managed entities are included in our
reported results in response to a recent FASB announcement. These
costs relate primarily to reimbursed payroll costs and related
benefits at managed entities where we are the employer. These
costs primarily relate to our Hawaii resorts. The 2001 revenue
and expenses have been reclassified to conform with the 2002
presentation.
(2) EBITDA is defined as earnings before interest, taxes,
depreciation and amortization and excludes the cumulative effect
of a change in accounting principle.
(3) Beginning January 1, 2002, the Company adopted SFAS Nos. 141 and
142 as it relates to the accounting for goodwill and related
amortization. In conjunction with the adoption of these
pronouncements, the Company recorded a non-cash goodwill charge
of $6.3 million related to its Desert resorts. Additionally, the
Company has ceased recording amortization of all existing
goodwill and any goodwill associated with future mergers and
acquisitions.
(4) Excludes the effect of goodwill amortization in 2001.
ResortQuest International, Inc.
Performance Statistics
Total System (2)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2001 2002 VAR 2001 2002 VAR
-------- -------- ----- ------- ------- -----
Beach
Gross Lodging
Revenues(1) $92,650 $87,258 (5.8)% $195,256 $180,696 (7.5)%
Occupancy 55.1% 55.3% 0.2 pts 53.6% 53.0% (0.7)pts
ADR $215.47 $217.27 0.8 % $165.92 $164.22 (1.0)%
RevPAU $118.66 $120.26 1.3 % $89.00 $86.97 (2.3)%
Total Rental
Units 9,452 9,361 (1.0)% 9,452 9,361 (1.0)%
Hawaii
Gross Lodging
Revenues(1) $37,532 $37,952 1.1 % $116,673 $108,013 (7.4)%
Occupancy 70.5% 70.6% 0.1 pts 74.7% 72.5% (2.2)pts
ADR $118.67 $113.57 (4.3)% $117.90 $108.40 (8.1)%
RevPAU $83.64 $80.13 (4.2)% $88.08 $78.55 (10.8)%
Total Rental
Units 5,292 5,508 4.1 % 5,292 5,508 4.1 %
Mountain
Gross Lodging
Revenues(1) $10,361 $9,523 (8.1)% $49,556 $47,247 (4.7)%
Occupancy 37.1% 33.5% (3.6)pts 38.2% 35.4% (2.8)pts
ADR $115.55 $117.30 1.5 % $173.48 $178.13 2.7 %
RevPAU $42.88 $39.24 (8.5)% $66.26 $63.09 (4.8)%
Total Rental
Units 3,173 3,230 1.8 % 3,173 3,230 1.8 %
Desert
Gross Lodging
Revenues(1) $715 $525 (26.6)% $6,752 $5,238 (22.4)%
Occupancy 31.4% 24.7% (6.7)pts 43.5% 41.8% (1.7)pts
ADR $51.68 $57.18 10.6 % $110.48 $111.55 1.0 %
RevPAU $16.22 $14.11 (13.0)% $48.09 $46.68 (2.9)%
Total Rental
Units 526 434 (17.5)% 526 434 (17.5)%
Total
Gross Lodging
Revenues(1) $141,258 $135,258 (4.2)% $368,237 $341,194 (7.3)%
Occupancy 56.1% 55.9% (0.2)pts 57.0% 55.8% (1.1)pts
ADR $166.23 $163.72 (1.5)% $146.52 $141.64 (3.3)%
RevPAU $93.22 $91.45 (1.9)% $83.56 $79.09 (5.3)%
Total Rental
Units 18,443 18,533 0.5 % 18,443 18,533 0.5 %
(1) Lodging revenues are in thousands and represent the total
rental charged to property rental customers. Our revenue
represents from 3 percent to over 40 percent of the lodging
revenues based on the services provided by us.
(2) Total system statistics include all non-exclusive management
contracts from the period under management through September
30, 2001 and September 30, 2002. Excluded from these
statistics are non-exclusive management contracts which
approximated 1,400 units as of September 30, 2001 and 1,500 as
of September 30, 2002. Also excluded from these statistics are
owner use nights and renovation nights which were
approximately 12.6 percent of gross available nights in the
three months ended September 30, 2001, and 12.8 percent of
gross available nights in the three months ended September 30,
2002, 13.2 percent of gross available nights in the nine
months ended September 30, 2001, and 13.5 percent of gross
available nights in the nine months ended September 30, 2002.
ResortQuest International, Inc.
Performance Statistics
Same-Store (2)
Three Months Ended Nine Months Ended
Sept 30, Sept 30, Sept 30, Sept 30,
2001 2002 VAR 2001 2002 VAR
------- ------- ----- ------- ------- -----
Beach
Gross Lodging
Revenues(1) $92,650 $87,258 (5.8)% $147,514 $140,987 (4.4)%
Occupancy 55.1% 55.3% 0.2 pts 53.7% 53.8% 0.1 pts
ADR $215.47 $217.27 0.8 % $142.87 $142.46 (0.3)%
RevPAU $118.66 $120.26 1.3 % $76.76 $76.71 (0.1)%
Total Rental
Units 9,452 9,361 (1.0)% 8,080 8,206 1.6 %
Hawaii
Gross Lodging
Revenues(1) $37,532 $37,952 1.1 % $116,673 $108,013 (7.4)%
Occupancy 70.5% 70.6% 0.1 pts 74.7% 72.5% (2.2)pts
ADR $118.67 $113.57 (4.3)% $117.90 $108.40 (8.1)%
RevPAU $83.64 $80.13 (4.2)% $88.08 $78.55 (10.8)%
Total Rental
Units 5,292 5,508 4.1 % 5,292 5,508 4.1 %
Mountain
Gross Lodging
Revenues(1) $10,361 $9,523 (8.1)% $46,674 $44,233 (5.2)%
Occupancy 37.1% 33.5% (3.6)pts 37.0% 34.9% (2.1)pts
ADR $115.55 $117.30 1.5 % $176.09 $180.82 2.7 %
RevPAU $42.88 $39.24 (8.5)% $65.10 $63.02 (3.2)%
Total Rental
Units 3,173 3,230 1.8 % 2,983 3,057 2.5 %
Desert
Gross Lodging
Revenues(1) $715 $525 (26.6)% $6,752 $5,238 (22.4)%
Occupancy 31.4% 24.7% (6.7)pts 43.5% 41.8% (1.7)pts
ADR $51.68 $57.18 10.6 % $110.48 $111.55 1.0 %
RevPAU $16.22 $14.11 (13.0)% $48.09 $46.68 (2.9)%
Total Rental
Units 526 434 (17.5)% 526 434 (17.5)%
Total
Gross Lodging
Revenues(1) $141,258 $135,258 (4.2)% $317,613 $298,471 (6.0)%
Occupancy 56.1% 55.9% (0.2)pts 57.2% 56.6% (0.7)pts
ADR $166.23 $163.72 (1.5)% $135.25 $131.04 (3.1)%
RevPAU $93.22 $91.45 (1.9)% $77.39 $74.12 (4.2)%
Total Rental
Units 18,443 18,533 0.5 % 16,881 17,205 1.9 %
(1) Lodging revenues are in thousands and represent the total
rental charged to property rental customers. Our revenue
represents from 3 percent to over 40 percent of the lodging
revenues based on the services provided by us.
(2) For better comparability, the three months ended September 30
statistics exclude all non-exclusive management contracts,
which approximated 1,500 units as of September 30, 2002. The
nine months ended September 30 excluded all non-exclusive
management contracts as well as properties that were not
acquired by ResortQuest prior to the third quarter of 2001,
which approximated 1,500 units as of September 30, 2002. Also
excluded from these statistics are owner use nights and
renovation nights which were approximately 12.6 percent of
gross available nights in the three months ended September 30,
2001, and 12.8 percent of gross available nights in the three
months ended September 30, 2002, 12.8 percent of gross
available nights in the nine months ended September 30, 2001,
and 13.0 percent of gross available nights in the nine months
ended September 30, 2002.
-------------------------------------------------------------------------
Contact:
ResortQuest International
Investor Relations: Mitch Collins / David Selberg
901/762-0600
or
Sloane & Company
Investor Relations: Jenny Lee, 212/446-1892
Media: Dan O'Connor, 212/446-1865
Source: ResortQuest International