ResortQuest International Announces Fourth Quarter and Full Year 2002 Financial Results
Company Meets Earnings Per Share and EBITDA Guidance- -Hawaii Continues Strong Rebound
MEMPHIS, Tenn.--ResortQuest International, Inc.
Fourth Quarter Highlights
- Total gross lodging revenues increased 10.5% in Q4 2002 versus Q4 2001
- Revenues at $34.4 million, up $3.6 million or 11.6% from Q4 2001
- Mountain Resorts' gross lodging revenues increased 5.6% versus Q4 2001
- Hawaii gross lodging revenues up 23.9% versus Q4 2001
- Announced partnership with Arizona's Mirage Homes, located in Scottsdale's exclusive Troon North golf community, to market luxury vacation rentals
- Launched "Ski Now - Tan Later - FREE!" promotion
- Signed new $60 million developer deal with Sunrise Beach Associates LLC in Panama City, Florida
- Opened first phase of Bahama Bay Resort in Orlando, Florida
- Announced relocation of corporate headquarters to Destin, Florida
Fourth Quarter 2002 Results
ResortQuest reported revenues of $34.4 million for the fourth quarter of 2002, which represents an 11.6% improvement over revenues of $30.8 million for the prior year fourth quarter. Included in both periods 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, EBITDA(1), or earnings per share. The Company reported a net loss for the fourth quarter of 2002 of ($17.5) million, compared to a net loss of ($6.2) million in 2001. This translates to diluted loss per share of ($0.91) in the fourth quarter of 2002, as compared to a diluted loss per share of ($0.32) in the fourth quarter of 2001. Excluding unusual items and other charges, the Company reported net loss for the fourth quarter of ($7.2) million, compared to a loss of ($5.8) million in the prior year. The unusual items and other charges include $13.9 million for the fourth quarter of 2002 and $0.8 million for the fourth quarter of 2001. This translated to diluted loss per share of ($0.37) in the fourth quarter of 2002, as compared to loss per share of ($0.30) in the fourth quarter of 2001. Excluding the effect of unusual items and other charges, diluted cash loss per share, which excludes the effect of prior year goodwill amortization, was ($0.37) in the fourth quarter of 2002 compared to a loss per share of ($0.23) in the same period last year.
The Company reported EBITDA, excluding unusual items and other charges, of a loss of ($8.0) million in the fourth quarter compared to a loss of ($8.3) million in fourth quarter of 2001, a 2.9% improvement. EBITDA per diluted share excluding unusual items and other charges was ($0.42) in the fourth quarter of 2002, up slightly from ($0.43) in the comparable 2001 period. ResortQuest diluted shares outstanding for the fourth quarter of 2001 and 2002 was 19.3 million. The unusual items and other charges recorded during the quarter primarily relate to a non-cash write-down of $10.6 million of certain capitalized software development costs and intangibles related to the Company's vacation rental management software, First Resort Software, severance and employee-related charges of approximately $2.6 million and approximately $760,000 of other charges related to property and office closings and consolidations. The $10.6 million write-down relates to the Company's change in strategy that included a redefinition of its target market for First Resort Software. This change necessitated a write-down of certain capitalized development costs and intangibles related to the software as recorded on the Company's balance sheet. First Resort is the leading property management software for the industry with over 20% market share and the Company will continue to market the software to small and medium-sized property management companies, which make up the majority of the industry. The severance and employee-related charges relate to the fourth quarter senior management changes that were discussed in last quarter's earnings release and the majority of these costs will be paid out over the next several years. The property and office closings include the closing of Shoreline Properties in Ohio and the consolidation and closings of offices in Dillon, Lafayette, and Basalt, Colorado; Memphis, Tennessee; and Hilton Head, South Carolina. The Company will realize significant payroll and lease expense savings through these consolidations.
For the year ended December 31, 2002, total revenues declined slightly to $190.2 million from $193.0 million. The Company reported net loss for the year of ($13.5) million, compared to net income of $1.6 million in the prior year. This translates to a diluted loss per share of ($0.70) for the year 2002, as compared to diluted earnings per share of $0.08 for the year 2001. Excluding unusual items and other charges and the cumulative effect of a change in accounting principle recorded during the first quarter, net income for 2002 was $3.8 million and diluted earnings per share was $0.19. This compares to net income, excluding unusual items, of $6.5 million and diluted earnings per share of $0.34 for the year 2001. Excluding unusual items and other charges, EBITDA declined 22.5% to $18.7 million in 2002, compared to $24.1 million in 2001. EBITDA per diluted share, excluding unusual items, was $0.97 in 2002 versus $1.25 in 2001. The change in accounting principle relates to the Company's adoption of SFAS No. 142 as discussed in the Company's 2002 Form 10-Q's.
"Despite the expected seasonal loss in the fourth quarter, the Company made progress on a number of fronts," said Jim Olin, President and Chief Executive Officer. "First, we managed to increase year-over-year fourth quarter revenues and EBITDA in an environment that continues to be challenging for our industry. Second, we began to implement our plans to consolidate our corporate structure and operations. By relocating our corporate office to Destin, Florida, along with the consolidation of our accounting shared service center in Colorado into Destin, we expect to realize over $1 million in annual savings. Third, through a series of recent planning sessions with the new management team, we have completed the strategic framework that will streamline and enhance our services, increase cross-selling amongst our customers, and expand our distribution channels. These initiatives are designed to solidify ResortQuest's position as the leading identifiable brand in the vacation rental management industry."
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 full year ended December 31, 2001 and December 31, 2002.
Three Months Ended December 31, 2002
Impact from Unusual Items and Change in Accounting Principle
(in 000's,
except EPS) Actual Unusual Change in Acctg Results Excluding
Results Items Principle Unusual Items
-------- -------- ---------------
General and
administrative
exp. $27,521 $(13,939) - $13,582
EBITDA (21,956) 13,939 - (8,017)
Net income/(loss) (17,464) 10,258 - (7,206)
Diluted EPS ($0.91) $0.54 - ($0.37)
Full Year Ended December 31, 2002 Impact
from Unusual Items and Change in Accounting Principle
(in 000's,
except EPS) Actual Unusual Change in Acctg Results Excluding
Results Items Principle Unusual Items
-------- ------- ---------------
General and
administrative
exp. $66,484 $(15,066) $ - $51,418
EBITDA 3,646 15,066 - 18,712
Net income/(loss) (13,484) 10,963 6,280 3,759
Diluted EPS ($0.70) $0.56 $0.33 $0.19
Three Months Ended December 31, 2001
Impact from Unusual Items
(in 000's,
except EPS) Actual Unusual Results Excluding
Results Items Unusual Items
-------- --------
General and
administrative
exp. $15,110 $(833) $14,277
EBITDA (9,093) 833 (8,260)
Net income/(loss) (6,215) 384 (5,831)
Diluted EPS ($0.32) $0.02 ($0.30)
Full Year Ended December 31, 2001
Impact from Unusual Items
(in 000's,
except EPS) Actual Unusual Results Excluding
Results Items Unusual Items
---------- ---------
General and
administrative
exp. $57,663 $(4,682) $52,981
EBITDA 19,455 4,682 24,137
Net income/(loss) 1,601 4,891 6,492
Diluted EPS $0.08 $0.26 $0.34
At December 31, 2002, the Company had $16.3 million in total cash and total debt of $75.1 million, which generates a debt to total capitalization of 37.3%. The Company also recorded deferred revenues and customer deposits of $46.6 million, an 11% decline over the comparable period in 2001.
"During 2002, the Company generated $14.7 million in operating cash flow, which allowed the Company to reduce its debt balance from $79.0 million to $75.1 million. Even considering the current economic climate, we were able to maintain positive cash flow results and we anticipate even a further reduction of long-term debt in 2003," said Mitch Collins, Chief Financial Officer. "During 2002, we spent approximately $10.3 million on capital expenditures and acquisition costs, which was significantly down from a total of $41.8 million in 2001 and $19.3 million in 2000. In 2003, we expect to further reduce capital expenditures to approximately $6.0 million.
Fourth Quarter Operating Results & Highlights
Total gross lodging revenues were $58.5 million for the fourth quarter of 2002, compared to $52.9 million in the fourth quarter of 2001, representing a 10.5% increase. During the fourth quarter of 2002, the Beach resorts' same-store gross lodging revenues declined 7.0% to $14.4 million as compared to $15.5 million in the fourth quarter of 2001, primarily due to the performance of our Southwest Florida properties which have been severely impacted by the weak economy. The Hawaii resorts' same-store gross lodging revenues increased 23.9% from $26.7 million in the fourth quarter of 2001 to $33.1 million in the fourth quarter of 2002. The Hawaii resorts benefited from higher occupancy rates and revenue per available unit. The Mountain resorts' same-store gross lodging revenues increased 5.6% to $9.9 million primarily due to an 8.9% increase in ADR.
"We are encouraged by the quarter's sharp increase in total gross lodging revenues over the prior year," said Park Brady, Chief Operating Officer. "Most notably, same-store sales in Hawaii, while still not up to historical levels, are continuing their strong rebound. In addition, the Mountain region showed solid improvement in ADR, with an increase of almost 9% versus the fourth quarter of 2001."
Outlook
The following information is based on current information as of February 10, 2003. 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 first quarter of 2003, the Company estimates that diluted earnings per share will be in the $0.05 to $0.08 range, and EBITDA will be in the range of $5.0 to $6.0 million. Total revenues, excluding other revenue from managed properties, should be between $38.0 to $40.0 million. For the full year 2003, the Company estimates that revenues, excluding other revenue from managed properties, will be $152.0 to $157.0 million and EBITDA will be in the range of $18.0 to $19.0 million. Excluded from these amounts are any expenses related to the move of the Company headquarters to Destin, Florida, which should approximate $800,000.
Olin continued, "Although we are prepared for continuing weakness in the travel and leisure market, we believe that ResortQuest fee-based business model is increasingly well positioned to realize growth and profitability. 2003 is a year that we expect to leverage our leadership position to increase our market share, control costs and execute our strategic framework."
CONFERENCE CALL
ResortQuest International will hold a national conference call today, February 11, 2003 at 11:00 a.m. (EST). To participate on the call, please dial (973) 582-2703 and request the ResortQuest conference call. A recording of the call will be available for 7 days by dialing (973) 341-3080 and entering access code 3734056. The call will be simultaneously broadcast over the Internet and will be available thereafter at
About ResortQuest International
ResortQuest International, the first brand name and "real-time" online booking service (
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 Twelve Months Ended
Dec 31, Dec 31, Dec 31, Dec 31,
(in thousands, except 2001 2002 2001 2002
share data) -------- -------- -------
Revenues
Property management
fees $ 9,780 $10,807 $ 88,732 $ 83,668
Service fees 7,987 8,620 47,889 44,685
Real estate and other 5,669 5,525 24,335 25,384
-------- -------- --------
23,436 24,952 160,956 153,737
Other revenue from
managed entities(1) 7,367 9,431 31,999 36,504
-------- -------- --------
Total revenues 30,803 34,383 192,955 190,241
-------- -------- --------
Cash Operating Expenses
Direct operating 17,419 19,387 83,838 83,607
General and
administrative 15,110 27,521 57,663 66,484
-------- -------- --------
32,529 46,908 141,501 150,091
Other expenses from
managed entities(1) 7,367 9,431 31,999 36,504
-------- -------- --------
Total operating
expenses 39,896 56,339 173,500 186,595
-------- -------- --------
EBITDA(2) (9,093) (21,956) 19,455 3,646
Depreciation 1,354 1,733 5,209 6,465
Goodwill
amortization(3) 1,443 - 5,670
-------- -------- --------
Total depreciation
and goodwill
amortization 2,797 1,733 10,879 6,465
-------- -------- --------
Operating income (11,890) (23,689) 8,576 (2,819)
Interest and other
expense, net 1,580 1,779 4,647 6,233
-------- -------- --------
Income before income
taxes (13,470) (25,468) 3,929 (9,052)
(Provision)/benefit
for income taxes 7,255 8,004 (2,328) 1,848
-------- -------- --------
Income before the
cumulative effect
of a change in
accounting principle (6,215) (17,464) 1,601 (7,204)
Cumulative effect of a
change in accounting
principle(3) - - - (6,280)
-------- -------- --------
Net income $ (6,215) $(17,464) $ 1,601 $(13,484)
======== ======= ======== ========
Earnings per share
Basic and Diluted
Before cumulative
effect of a change
in accounting
principle $ (0.32) $ (0.91) $ 0.08 $ (0.37)
Cumulative effect
of a change in
accounting principle - - - (0.33)
-------- -------- -------
$ (0.32) $ (0.91) $ 0.08 $ (0.70)
======== ======== ======= =======
Diluted cash earnings
per share(4)
Before cumulative
effect of a change
in accounting
principle $ (0.25) $ (0.91) $ 0.38 $ (0.37)
Cumulative effect
of a change in
accounting principle - - - (0.33)
-------- -------- -------
$ (0.25) $ (0.91) $ 0.38 $ (0.70)
======== ======== ======= =======
EBITDA per diluted
share(2) $ (0.47) $ (1.14) $ 1.01 $ (0.19)
======== ======== ======= =======
(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 an after tax 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 $1.4 million and $5.7 million of goodwill
amortization in the three months and twelve months ended
December 31, 2001, respectively.
ResortQuest International, Inc.
Performance Statistics
Total System (2)
Three Months Ended
Dec 31, Dec 31,
2001 2002 VAR
-------- --------
Beach
Gross Lodging Revenues(1) $15,490 $14,399 (7.0)%
Occupancy 24.1% 23.8% (0.3)pts
ADR $87.61 $89.39 2.0 %
RevPAU $21.10 $21.25 0.7 %
Total Units 9,460 9,435 (0.3)%
Hawaii
Gross Lodging Revenues(1) $26,711 $33,090 23.9 %
Occupancy 61.9% 69.7% 7.8 pts
ADR $104.73 $102.65 (2.0)%
RevPAU $64.85 $71.56 10.3 %
Total Units 5,553 5,468 (1.5)%
Mountain
Gross Lodging Revenues(1) $9,383 $9,904 5.6 %
Occupancy 19.5% 18.7% (0.8)pts
ADR $186.01 $202.49 8.9 %
RevPAU $36.29 $37.77 4.1 %
Total Units 3,283 3,311 0.9 %
Desert
Gross Lodging Revenues(1) $1,340 $1,085 (19.0)%
Occupancy 38.4% 33.0% (5.4)pts
ADR $84.49 $97.63 15.6 %
RevPAU $32.45 $32.25 (0.6)%
Total Units 522 425 (18.6)%
Total
Gross Lodging Revenues(1) $52,924 $58,478 10.5 %
Occupancy 34.5% 37.9% 3.4 pts
ADR $106.24 $107.60 1.3 %
RevPAU $36.61 $40.73 11.3 %
Total Units 18,818 18,639 (1.0)%
Twelve Months Ended
Dec 31, Dec 31,
2001 2002 VAR
------- -------
Beach
Gross Lodging Revenues(1) $210,788 $195,095 (7.4)%
Occupancy 46.2% 45.8% (0.4)pts
ADR $155.77 $154.67 (0.7)%
RevPAU $72.00 $70.81 (1.7)%
Total Units 9,460 9,435 (0.3)%
Hawaii
Gross Lodging Revenues(1) $143,384 $141,104 (1.6)%
Occupancy 71.7% 71.8% 0.1
ADR $115.20 $107.00 (7.1)%
RevPAU $82.57 $76.79 (7.0)%
Total Units 5,553 5,468 (1.5)%
Mountain
Gross Lodging Revenues(1) $58,792 $57,151 (2.8)%
Occupancy 33.2% 31.1% (2.1)% pts
ADR $175.61 $181.92 3.6 %
RevPAU $58.29 $56.52 (3.0)%
Total Units 3,283 3,311 0.9 %
Desert
Gross Lodging Revenues(1) $8,092 $6,322 (21.9)%
Occupancy 42.4% 39.8% (2.6)pts
ADR $105.12 $108.89 3.6 %
RevPAU $44.54 $43.35 (2.7)%
Total Units 522 425 (18.6)%
Total
Gross Lodging Revenues(1) $421,057 $399,672 (5.1)%
Occupancy 51.4% 51.3% (0.1)pts
ADR $139.90 $135.37 (3.2)%
RevPAU $71.92 $69.51 (3.4)%
Total Units 18,818 18,639 (1.0)%
(1) Lodging revenues are in thousands and represent the total rental
charged to property rental customers.
(2) Total system statistics include all non-exclusive management
contracts from the period under management through December 31,
2001 and December 31, 2002. Excluded from these statistics are
non-exclusive management contracts which approximated 1,400 units
as of December 31, 2001 and 1,500 as of December 31, 2002. Also
excluded from these statistics are owner use nights and renovation
nights which were approximately 17.6% of gross available nights in
the three months ended December 31, 2001, and 15.6% of gross
available nights in the three months ended December 31, 2002,
14.3% of gross available nights in the twelve months ended
December 31, 2001, and 14.0% of gross available nights in the
twelve months ended December 31, 2002.
ResortQuest International, Inc.
Performance Statistics
Same-Store (2)
Three Months Ended
Dec 31, Dec 31,
2001 2002 VAR
------- -------
Beach
Gross Lodging Revenues(1) $15,490 $14,399 (7.0)%
Occupancy 24.1% 23.8% (0.3)pts
ADR $87.61 $89.39 2.0 %
RevPAU $21.10 $21.25 0.7 %
Total Units 9,460 9,435 (0.3)%
Hawaii
Gross Lodging Revenues(1) $26,711 $33,090 23.9 %
Occupancy 61.9% 69.7% 7.8 pts
ADR $104.73 $102.65 (2.0)%
RevPAU $64.85 $71.56 10.3 %
Total Units 5,553 5,468 (1.5)%
Mountain
Gross Lodging Revenues(1) $9,383 $9,904 5.6 %
Occupancy 19.5% 18.7% (0.8)pts
ADR $186.01 $202.49 8.9 %
RevPAU $36.29 $37.77 4.1 %
Total Units 3,283 3,311 0.9 %
Desert
Gross Lodging Revenues(1) $1,340 $1,085 (19.0)%
Occupancy 38.4% 33.0% (5.4)pts
ADR $84.49 $97.63 15.6 %
RevPAU $32.45 $32.25 (0.6)%
Total Units 522 425 (18.6)%
Total
Gross Lodging Revenues(1) $52,924 $58,478 10.5 %
Occupancy 34.5% 37.9% 3.4 pts
ADR $106.24 $107.60 1.3 %
RevPAU $36.61 $40.73 11.3 %
Total Units 18,818 18,639 (1.0)%
Twelve Months Ended
Dec 31, Dec 31,
2001 2002 VAR
------- -------
Beach
Gross Lodging Revenues(1) $160,388 $153,288 (4.4)%
Occupancy 46.9% 46.5% (0.4)pts
ADR $134.93 $134.65 (0.2)%
RevPAU $63.31 $62.64 (1.1)%
Total Units 8,087 8,279 2.4 %
Hawaii
Gross Lodging Revenues(1) $143,384 $141,104 (1.6)%
Occupancy 71.7% 71.8% 0.1 pts
ADR $115.20 $107.00 (7.1)%
RevPAU $82.57 $76.79 (7.0)%
Total Units 5,553 5,468 (1.5)%
Mountain
Gross Lodging Revenues(1) $54,642 $52,979 (3.0)%
Occupancy 31.9% 30.2% (1.7)pts
ADR $178.53 $185.25 3.8 %
RevPAU $56.96 $55.87 (1.9)%
Total Units 3,102 3,131 0.9 %
Desert
Gross Lodging Revenues(1) $8,092 $6,322 (21.9)%
Occupancy 42.4% 39.8% (2.6)pts
ADR $105.12 $108.89 3.6%
RevPAU $44.54 $43.35 (2.7)%
Total Units 522 425 (18.6)%
Total
Gross Lodging Revenues(1) $366,506 $353,693 (3.5)%
Occupancy 52.1% 52.1% 0.0 pts
ADR $130.13 $126.26 (3.0)%
RevPAU $67.74 $65.76 (2.9)%
Total Units 17,264 17,303 0.2%
(1) Lodging revenues are in thousands and represent the total rental
charged to property rental customers.
(2) For better comparability, the three months ended December 31
statistics exclude all non-exclusive management contracts, which
approximated 1,500 units as of December 31, 2002. The twelve
months ended December 31 excluded all non-exclusive management
contracts as well as properties that were not acquired by
ResortQuest prior to the fourth quarter of 2001, which
approximated 1,400 units as of December 31, 2001 and 1,500 units
as of December 31, 2002. Also excluded from these statistics are
owner use nights and renovation nights which were approximately
17.6% of gross available nights in the three months ended December
31, 2001, and 15.6% of gross available nights in the three months
ended December 31, 2002, 13.6% of gross available nights in the
twelve months ended December 31, 2001, and 13.3% of gross
available nights in the twelve months ended December 31, 2002.