RESORTQUEST INTERNATIONAL INC - 10-Q Quarterly Report

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 June 30, 2002.

( ) 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 o

Indicate the number of shares outstanding of each of the issuer’s classes of Common Stock, as of June 30, 2002.

Common Stock 19,251,749 shares

Page 1 of 25

TABLE OF CONTENTS


PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
	CONDENSED CONSOLIDATED BALANCE SHEETS
	CONDENSED CONSOLIDATED STATEMENTS OF INCOME
	CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS
	CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
	NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
SECTION 906 CERTIFICATION OF THE CEO
SECTION 906 CERTIFICATION OF THE CFO

PART I — FINANCIAL INFORMATION

Company or group of companies for which report is filed:
RESORTQUEST INTERNATIONAL, INC. AND SUBSIDIARIES

Item 1. Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share amounts)

(Unaudited)


				Dec 31,			June 30,
				2001			2002

ASSETS
Current assets
	Cash and cash equivalents			$	213		$	3,083
	Cash held in escrow				22,648			36,919
	Trade and other receivables, net				10,541			9,314
	Deferred income taxes				1,430			1,647
	Other current assets				6,063			5,316

		Total current assets			40,895			56,279

Goodwill, net					216,534			208,654
Property, equipment and software, net					39,509			41,591
Other assets					7,336			7,241

			Total assets	$	304,274		$	313,765

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
	Current maturities of long-term debt			$	322		$	140
	Deferred revenue and property owner payables				52,457			69,106
	Accounts payable and accrued liabilities				14,298			14,782
	Other current liabilities				3,069			2,500

		Total current liabilities			70,146			86,528

Long-term debt, net of current maturities					78,644			74,779
Deferred income taxes					9,459			8,212
Other long-term obligations					6,111			5,745

			Total liabilities		164,360			175,264

Stockholders’ equity
	Common stock, $0.01 par value, 50,000,000 shares authorized, 19,243,249 and 19,251,749 shares outstanding, respectively				192			193
	Additional paid-in capital				153,884			153,933
	Accumulated other comprehensive loss				(64	)		(67	)
	Excess distributions				(29,500	)		(29,500	)
	Retained earnings				15,402			13,942

		Total stockholders’ equity			139,914			138,501

			Total liabilities and stockholders’ equity	$	304,274		$	313,765

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 2 of 25

RESORTQUEST INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except share amounts)

(Unaudited)


				Three Months Ended				Six Months Ended

				June 30,		June 30,		June 30,		June 30,
				2001		2002		2001		2002

Revenues
		Property management fees		$	22,091	$	19,929	$	50,133	$	45,253
		Service fees			14,294		12,398		26,049		22,698
		Real estate and other			7,013		7,549		12,657		12,437

					43,398		39,876		88,839		80,388
		Other revenue from managed entities			7,811		8,981		15,719		17,484

			Total revenues		51,209		48,857		104,558		97,872
Operating expenses
		Direct operating			21,494		21,082		42,404		41,224
		General and administrative			12,714		12,323		26,476		25,659
		Depreciation			1,310		1,533		2,479		2,963
		Goodwill amortization			1,437		—		2,784		—

					36,955		34,938		74,143		69,846
		Other expenses from managed entities			7,811		8,981		15,719		17,484

			Total operating expenses		44,766		43,919		89,862		87,330

Operating income					6,443		4,938		14,696		10,542
Interest and other expense, net					1,238		1,364		2,023		2,830

Income before income taxes					5,205		3,574		12,673		7,712
Provision for income taxes					2,186		1,340		5,323		2,892

Income before the cumulative effect of a change in accounting principle					3,019		2,234		7,350		4,820
Cumulative effect of a change in accounting principle, net of a $1.9 million income tax benefit					—		—		—		(6,280	)

Net income (loss)				$	3,019	$	2,234	$	7,350	$	(1,460	)

Earnings per share
	Basic
		Before cumulative effect of a change in accounting principle		$	0.16	$	0.12	$	0.38	$	0.25
		Cumulative effect of a change in accounting principle			—		—		—		(0.33	)

			Net income (loss)	$	0.16	$	0.12	$	0.38	$	(0.08	)

	Diluted
		Before cumulative effect of a change in accounting principle		$	0.16	$	0.12	$	0.38	$	0.25
		Cumulative effect of a change in accounting principle			—		—		—		(0.33	)

			Net income (loss)	$	0.16	$	0.12	$	0.38	$	(0.08	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 3 of 25

RESORTQUEST INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY AND COMPREHENSIVE LOSS

(In thousands, except share amounts)

(Unaudited)


								Accumulated
						Additional		Other
		Common Stock				Paid-in		Comprehensive			Excess			Retained						Comprehensive
		Shares		Amount		Capital		Loss			Distributions			Earnings			Total			Loss

Balance, December 31, 2001			19,243,249	$	192	$	153,884	$	(64	)	$	(29,500	)	$	15,402		$	139,914
	Net loss		—		—		—		—			—			(1,460	)		(1,460	)	$	(1,460	)
	Foreign currency translation loss		—		—		—		(3	)		—			—			(3	)		(3	)
	Exercise of employee stock options		8,500		1		49		—			—			—			50			—

Comprehensive loss																				$	(1,463	)

Balance, June 30, 2002			19,251,749	$	193	$	153,933	$	(67	)	$	(29,500	)	$	13,942		$	138,501

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 4 of 25

RESORTQUEST INTERNATIONAL, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)


				Six Months Ended

				June 30,			June 30,
				2001			2002

Cash flows from operating activities:
Net income (loss)				$	7,350		$	(1,460	)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
		Cumulative effect of a change in accounting principle (Note 2)			—			6,280
		Depreciation and goodwill amortization (Note 2)			5,263			2,963
	Changes in operating assets and liabilities:
		Cash held in escrow			(8,306	)		(14,271	)
		Trade and other receivables			312			1,085
		Accounts payable and accrued liabilities			(1,716	)		484
		Deferred revenue and property owner payables			6,813			16,697
		Deferred income taxes			2,943			386
		Other			(377	)		576

			Net cash provided by operating activities		12,282			12,740

Cash flows from investing activities:
	Cash portion of acquisitions, net				(22,865	)		(1,412	)
	Purchases of property, equipment and software				(9,117	)		(4,461	)

			Net cash used in investing activities		(31,982	)		(5,873	)

Cash flows from financing activities:
	Credit facility borrowings				45,600			53,800
	Credit facility repayments				(26,800	)		(57,650	)
	Payments of capital lease and other obligations, net				(1,152	)		(197	)
	Exercise of employee stock options				223			50

			Net cash provided by (used in) financing activities		17,871			(3,997	)

Net change in cash and cash equivalents					(1,829	)		2,870
Cash and cash equivalents, beginning of period					4,283			213

Cash and cash equivalents, end of period				$	2,454		$	3,083

The accompanying notes are an integral part of these condensed consolidated financial statements.

Page 5 of 25

RESORTQUEST INTERNATIONAL, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2002

(Unaudited)

In these footnotes, the words “Company,” “ResortQuest,” “we,” “our” and “us” refer to ResortQuest International, Inc., a Delaware corporation, and its wholly-owned subsidiaries, unless otherwise stated or the context requires otherwise.

NOTE 1 — BASIS OF PRESENTATION

Overview

ResortQuest is one of the world’s leading providers of vacation condominium and home rental property management services in premier destination resorts located in the United States and Canada. We have developed the first and only branded international network of vacation rental properties, and currently offer management services to over 20,000 rental properties. Our operations are in more than 50 premier resort locations in the Beach, Hawaii, Mountain and Desert geographical regions.

The Condensed Consolidated Financial Statements included herein are unaudited and have been prepared by the Company pursuant to the rules and regulations of the United States Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary for a fair presentation of results for the interim periods have been made. The results for the interim periods are not necessarily indicative of results to be expected for the full fiscal year. These Condensed Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and notes thereto included in the Company’s annual report on Form 10-K for the year ended December 31, 2001.

Acquisition Costs

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. These costs incurred are deferred on the balance sheet as Other assets until the related transaction is either consummated or terminated. We had no deferred acquisition costs as of December 31, 2001 and June 30, 2002. Similar treatment and classification is followed in recording costs incurred by us in the course of generating additional debt or equity financing. Deferred financing costs, net of accumulated amortization, were $1.6 million and $1.2 million as of December 31, 2001 and June 30, 2002. Transaction costs and the excess of the purchase price over the fair value of identified net assets acquired represent goodwill (see Note 2). Goodwill is calculated based on a preliminary estimate that is adjusted to its final balance within one year of the close of the acquisition. Additionally, certain of our acquisitions have “earn-up” provisions that require additional consideration to be paid if certain operating results are achieved over periods of up to three years. This additional consideration is recorded as goodwill when the amount is fixed and determinable.

During the six-month period ended June 30, 2002, we made net cash payments approximating $1.4 million for an earn-up payment related to a 2001 acquisition and other purchase accounting adjustments related to certain 2001 acquisitions. The total cost during the same period in 2001 for 2001 acquisitions and earn-up payments related to 1999 acquisitions was $24.6 million, with 6.8% of the net consideration paid in the form of common stock with an aggregate value of $1.7 million, net of retired escrow shares, and the remaining $22.9 million of consideration paid in cash.

NOTE 2 — NEW ACCOUNTING PRONOUNCEMENTS

During the quarter ended March 31, 2002, we changed our method of accounting for reimbursable costs to conform to the Financial Accounting Standards Board's Emerging Issues Task Force Consensus No. 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred,” (“EITF No. 01-14”) issued earlier this year and effective for us on January 1, 2002. As a result, reimbursements received are recorded as revenue and the costs incurred on behalf of managed associations and properties are recorded as expenses. These costs, which relate primarily to payroll costs at managed properties and associations where we are the employer, are reflected in Other revenue and expenses from managed entities in the Condensed Consolidated Statements of Income. Revenue and expenses for the prior periods have been reclassified to conform with the current period presentation. Since the reimbursements are made based upon the costs incurred with no added margin, the expenses and related revenues are identical, and thus the adoption of EITF No. 01-14 did not have any effect on our operating income, total or per share net income, cash flows or financial position.

Page 6 of 25

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 141, “Business Combinations,” and No. 142, “Goodwill and Other Intangible Assets”. Statement No. 141 eliminates the poolings-of-interests method of accounting for business combinations and requires all transactions initiated after June 30, 2001, to be accounted for using the purchase method. Under Statement No. 142, goodwill related to our future acquisitions is not subject to amortization, and goodwill related to our historical acquisitions is no longer amortized as of January 1, 2002. Goodwill is subject to reviews for impairment annually and upon the occurrence of certain events, and if impaired, a write-down will be recorded. Upon our adoption of Statement No. 142, each of our geographical resort regions with assigned goodwill was valued as a reporting unit. If the fair value of the reporting unit was greater than the book value, including assigned goodwill, no further testing was required. However, if the book value, including goodwill, was greater than the fair value of the reporting unit, the assets and liabilities of the reporting unit needed to be valued. The difference between the fair value of the reporting unit and the fair value of the assets is the implied fair value of goodwill. To the extent that the implied fair value of goodwill was less that the book value of goodwill, an impairment charge was recognized as a cumulative effect of a change in accounting principle. Based on this test, we recorded a non-cash $8.1 million write-down of our goodwill related to our Desert resort operations partially off-set by a $1.9 million income tax benefit. The Desert resort operations are expected to continue to experience declining cash flows as a result of the economics of the Desert markets. The following table presents adjusted net income and earnings per share excluding goodwill amortization:


			Three Months Ended June 30,				Six Months Ended June 30,

			2001		2002		2001		2002

Reported income before cumulative effect of a change in accounting principle			$	3,019	$	2,234	$	7,350	$	4,820
Add back goodwill amortization				1,437		—		2,784		—

Adjusted income before cumulative effect of a change in accounting principle				4,456		2,234		10,134		4,820
Cumulative effect of a change in accounting principle				—		—		—		(6,280	)

Adjusted net income (loss)			$	4,456	$	2,234	$	10,134	$	(1,460	)


Earnings per share
	Basic and diluted
		Before cumulative effect of a change in accounting principle	$	0.16	$	0.12	$	0.38	$	0.25
		Add back goodwill amortization		0.07		—		0.15		—

		Adjusted income before cumulative effect of a change in accounting principle		0.23		0.12		0.53		0.25
		Cumulative effect of a change in accounting principle		—		—		—		(0.33	)

		Adjusted net income (loss)	$	0.23	$	0.12	$	0.53	$	(0.08	)

We have completed the process of evaluating the impact of Statement No. 143, “Accounting for Asset Retirement Obligations,” and we do not expect this statement to have a material impact on our financial position or results of operations upon its adoption in 2003. Effective January 1, 2002, we adopted Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets;” the adoption of this statement did not have a material impact on our financial position or results of operations. During the quarter ended June 30, 2002, the Statement No. 145, “Rescission of Statements No. 4, 44, and 64, Amendment of Statement No. 13, and Technical Corrections,” was issued and has been adopted. This adoption had no material impact to our financial position or results of operations. Also during the quarter ended June 30, 2002, Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” was issued and is effective for activities initiated after December 31, 2002. The Company has yet to evaluate the impact of this statement and is therefore unable to disclose the impact that adopting Statement No. 146 will have on its financial position and results of operations when such statement is adopted.

NOTE 3 — NOTE RECEIVABLE

In connection with the initial public offering, we formalized a $4.0 million promissory note resulting from cash advances to a primary stockholder (see Note 6) of a predecessor company. On February 16, 2000, this note was restructured in order to provide for additional collateral representing real estate held by the former stockholder. This note bears interest at 1/2% below the prime rate of interest, but not less than 6% and not more than 10%. Interest payments under this note are due every January and July 1st, with the principal recorded in Other assets in the accompanying Condensed Consolidated Balance Sheets, being due in full on May 25, 2008. To date, all interest payments due under the restructured terms of the note have been received.

Page 7 of 25

NOTE 4 — UNUSUAL ITEMS AND OTHER CHARGES

During the quarter ended March 31, 2002, general and administrative expenses include approximately $500,000 of items that management considers as unusual items and other charges. These items are primarily due to professional fees resulting from employee-related matters and a study to explore financing and strategic growth alternatives.

NOTE 5 — EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution that could occur if outstanding options to purchase our securities are exercised. The following table reflects our weighted average common shares outstanding and the impact of outstanding dilutive stock options:


	Three Months Ended				Six Months Ended

	June 30,		June 30,		June 30,		June 30,
	2001		2002		2001		2002

Basic weighted average common shares outstanding		19,141,845		19,248,218		19,092,993		19,245,814
Effect of dilutive securities — stock options		276,294		139,186		202,853		123,754

Diluted weighted average common shares outstanding		19,418,139		19,387,404		19,295,846		19,369,568

NOTE 6 — LITIGATION

On May 26, 2000, Hotel Corp. of the Pacific, Inc., a subsidiary of ResortQuest International doing business as Aston Hotels & Resorts, instituted legal proceedings in the Circuit Court for the First Circuit of Hawaii against Andre S. Tatibouet, the president of Hotel Corp. This action arose out of a document styled “Cooperation Agreement” that was signed by Andre S. Tatibouet, purporting to act on behalf of Hotel Corp., on the one hand, with Cendant Global Services B.V. and Aston Hotels & Resorts International, Inc., on the other hand. The Cooperation Agreement contains several provisions that are detrimental to Hotel Corp., including provisions purporting to transfer certain intellectual property and limit certain intellectual property rights held by Hotel Corp. Monetary damages for breach of fiduciary duty, fraud, and negligent misrepresentation were sought by Hotel Corp. By order of the Circuit Court, the claims asserted by Hotel Corp. in the lawsuit were consolidated with an arbitration demand, filed with the American Arbitration Association by Mr. Tatibouet, in which he alleged various breaches of his employment agreement with Hotel Corp.

The arbitration hearing took place in September 2001, where Mr. Tatibouet claimed damages of approximately $17.5 million and ResortQuest claimed damages of approximately $4.7 million. On March 14, 2002, the arbitration panel issued its Reasoned Opinion and Final Award. The panel concluded that Mr. Tatibouet had breached his fiduciary duty to Hotel Corp. and awarded Hotel Corp. $55,559 related to the reimbursement of certain legal expenses. The panel denied all of Mr. Tatibouet’s claims and requests for damages as well as declaratory and other relief.

On May 26, 2000, ResortQuest International and Hotel Corp. bought and action in the Circuit Court for the First Circuit of Hawaii against Cendant Corporation, Aston Hotels & Resort International Inc. and Cendant Global Services B.V (“Defendants”) seeking damages for breach of contract against Cendant, and the equitable remedies or rescission and replevin. This action arose out of Mr. Andre S. Tatibouet’s purported negotiation on behalf of Hotel Corp. of the Pacific, Inc., a subsidiary of ResortQuest International, of a document styled Cooperation Agreement in March 2002.

ResortQuest and Cendant entered into an amended Cooperation Agreement on July 15, 2002. As a result of the execution of that agreement, on July 15, 2002 ResortQuest moved to dismiss its court action against Defendants by filing a stipulation for complete dismissal with prejudice as to all claims and parties.

We are also involved in various legal actions arising in the ordinary course of our business. We do not believe that any of the remaining actions will have a material adverse effect on our business, financial condition or results of operations.

Page 8 of 25

NOTE 7 — LONG-TERM DEBT

Included in long-term debt on the accompanying June 30, 2002 Condensed Consolidated Balance Sheet is approximately $24.8 million of borrowings under our Credit Facility. At June 30, 2002 the Company was in violation of a fixed charge coverage ratio as defined in the agreement. Compliance with such covenant was waived by lenders in a limited waiver agreement dated June 28, 2002.

NOTE 8 — SEGMENT REPORTING

We have one operating segment, property management, which is managed as one business unit. The All other segment includes ResortQuest Technologies and corporate. At December 31, 2001 and June 30, 2002, approximately 47% and 48%, respectively, of the All other segment assets represents goodwill recorded for ResortQuest Technologies and corporate. The following table presents the revenues, operating income and assets of our reportable segment:


		Three Months Ended						Six Months Ended

		June 30,			June 30,			June 30,			June 30,
(in thousands)		2001			2002			2001			2002

Revenues
	Property management	$	50,301		$	48,038		$	102,865		$	96,300
	All other		908			819			1,693			1,572

		$	51,209		$	48,857		$	104,558		$	97,872


Operating income
	Property management	$	9,676		$	8,575		$	22,018		$	18,525
	All other		(3,233	)		(3,637	)		(7,322	)		(7,983	)

		$	6,443		$	4,938		$	14,696		$	10,542


		December 31,		June 30,
(in thousands)		2001		2002

Assets
	Property management	$	245,482	$	256,339
	All other		58,792		57,426

		$	304,274	$	313,765

Page 9 of 25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

OVERVIEW

Our rental properties are generally second homes or investment properties owned by individuals who assign us the responsibility of managing, marketing and renting their properties. We earn management fees as a percentage of the rental income from each property, but have no ownership interest in the properties. In addition to the vacation property management business, we offer real estate brokerage services and other rental and property owner services. We also have developed the industry leading proprietary vacation rental management software, First Resort Software, with over 900 licenses sold to vacation property management companies.

We provide value-added services to both vacationers and property owners. For vacationers, we offer the value, convenience and features of a condominium or home while providing many of the amenities and services of a hotel. For property owners, we offer a comprehensive package of marketing, management and rental services designed to enhance rental income and profitability while providing services to maintain the property. Property owners also benefit from our QuestPerks program, which offers benefits such as discounts on lodging, air travel and car rentals. To manage guests’ expectations, we have developed and implemented a five-tier rating system that segments our property portfolio into five categories: Quest Home, Platinum, Gold, Silver and Bronze.

We market our properties through various media channels and have significant Internet distribution through ResortQuest.com, our proprietary website offering “real-time” reservations, and our inventory distribution partnerships including Expedia, AOL, Condosaver and others. We have an alliance with Online Travel Corporation, PLC., to exclusively develop the ResortQuest brand in Europe by using our technology and expertise in this industry. Under the terms of the alliance with Online Travel, we receive a royalty fee based on gross revenues related to units acquired or aggregated under this program, an exclusivity fee and other cross selling fees.

In March 2002, we unveiled our enhanced website that improves the booking experience for e-travelers. In addition to detailed property descriptions, virtual tours, interior and exterior photos and floor plans, and local information, vacationers can search for properties by date, activity, event or location; comparison shop among similar vacation rental units; check for special discounts and promotions; and obtain maps and driving directions. The site also allows foreign travelers to obtain currency conversion rates. The site utilizes AXS Technologies software to provide high speed/high resolution, scroll, pan and zoom imaging.

RESULTS OF OPERATIONS

Our operating results are highly seasonal due to the geographical dispersion of the resort locations in which we operate. The results of operations are subject to quarterly fluctuations caused primarily by the seasonal variations in the vacation rental and property management industry, with peak seasons dependent on whether the resort is primarily a summer or winter destination. Our financial results are discussed on a consolidated basis, but due to the seasonal nature of our operations, our results are also discussed by geographic region with Other representing our corporate and ResortQuest Technologies operations. For better analysis, the six-months ended June 30, 2002 discussion includes “same-store” comparisons. Same-store comparisons exclude the impact of the two acquisitions completed since the first day of the earliest period being discussed. One of these acquisitions is located in our Mountain operations in Gatlinburg, Tennessee effective April 1, 2001, and the other in our Beach operations in the Outer Banks of North Carolina effective April 1, 2001.

Due to the recent challenges facing leisure travel companies presented by the softening economy and the impact of the tragic events of September 11, our revenues are down over prior year as leisure travel demand has softened. In order to maintain slightly positive occupancy over prior year’s second quarter, we charged lower room rates, which resulted in lower overall revenues. Despite these industry-wide challenges, we are proud of how we have been able to reduce costs, maintain occupancy and continue to position ResortQuest to realize significant growth in the future.

Page 10 of 25

Consolidated

The following table sets forth the condensed consolidated results of operations for the three and six months ended June 30, 2001 and 2002.


	Three Months Ended June 30,								Six Months Ended June 30,

(in thousands)	2001				2002				2001				2002

Revenues	$	51,209	100.0	%	$	48,857	100.0	%	$	104,558	100.0	%	$	97,872	100.0	%
Direct operating expenses		21,494	42.0			21,082	43.2			42,404	40.6			41,224	42.1
General and administrative expenses		12,714	24.8			12,323	25.2			26,476	25.3			25,659	26.2
Other expenses from managed entities		7,811	15.3			8,981	18.4			15,719	15.0			17,484	17.9

Operating income before depreciation and goodwill amortization		9,190	17.9			6,471	13.2			19,959	19.1			13,505	13.8
Depreciation		1,310	2.6			1,533	3.1			2,479	2.4			2,963	3.0
Goodwill amortization		1,437	2.7			—	—			2,784	2.6			—	—

Operating income		6,443	12.6			4,938	10.1			14,696	14.1			10,542	10.8
Interest and other expense, net		1,238	2.4			1,364	2.8			2,023	2.0			2,830	2.9
Provision for income taxes		2,186	4.3			1,340	2.7			5,323	5.1			2,892	3.0

Income before the cumulative effect of a change in accounting principle	$	3,019	5.9	%	$	2,234	4.6	%	$	7,350	7.0	%	$	4,820	4.9	%

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 — Consolidated

Revenues. Revenues decreased $2.4 million, or 5%, from $51.2 million in 2001 to $48.9 million in 2002. Excluding Other revenue from managed entities, revenues decreased $3.5 million, or 8%, from $43.4 million in 2001 to $39.9 million in 2002, due to a 8.5% decrease in gross lodging revenues primarily driven by lower “Average Daily Rate” ADR and a slight decline in managed units.

Direct operating expenses. Direct operating expenses decreased $412,000, or 1.9%, from $21.5 million in 2001 to $21.1 million in 2002, primarily due to cost reduction initiatives announced during 2001 that have been focusing on more efficient staffing. As a percentage of revenues, direct operating expenses increased 1.2 points due to the decrease in same-store revenues.

General and administrative expenses. General and administrative expenses decreased $391,000, or 3.1%, from $12.7 million in 2001 to $12.3 million in 2002, primarily due to cost reduction initiatives announced during 2001 that have been focusing on more efficient staffing. As a percentage of revenues, general and administrative expenses increased 0.4 points due to the decrease in same-store revenues.

Other expenses from managed entities. Other expenses from managed entities increased $1.2 million, or 15%, from $7.8 million in 2001 to $9.0 million in 2002, due to an increase in payroll for managed entities. These expenses are reimbursed at our cost by our entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities increased 3.1 points due to acquisitions and the decrease in same-store revenues.

Depreciation. Depreciation increased $223,000, or 17%, from $1.3 million in 2001 to $1.5 million in 2002, primarily due to increased technology capital expenditures. As a percentage of revenues, depreciation increased 0.5 points due to the increase in technology capital expenditures and the decrease in same-store revenues.

Goodwill amortization. Upon the adoption of Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets,” goodwill is no longer being amortized as of January 1, 2002 (see Note 2).

Interest and other expense, net. Interest expense, net of interest income, increased $126,000, or 10%, from $1.2 million in 2001 to $1.4 million in 2002, primarily due to increased debt levels and an increased weighted average borrowing rate. As a percentage of revenues, interest increased 0.4 points due to the increase in borrowing costs and a decrease in same-store revenues.

Provision for income taxes. Provision for income taxes decreased $846,000, or 39%, from $2.2 million in 2001 to $1.3 million in 2002, primarily due to a decline in taxable income.

Page 11 of 25

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 — Consolidated

Revenues. Revenues decreased $6.7 million, or 6%, from $104.6 million in 2001 to $97.9 million in 2002. Excluding Other revenue from managed entities, revenues decreased $8.5 million, or 10%, from $88.8 million in 2001 to $80.4 million in 2002, primarily due to a 9.2% decrease in gross lodging revenues primarily driven by lower ADR and a slight decline in managed units.

Direct operating expenses. Direct operating expenses decreased $1.2 million, or 3%, from $42.4 million in 2001 to $41.2 million in 2002, primarily due to cost reduction initiatives. As a percentage of revenues, general and administrative expenses increased 1.5 points due to acquisitions and the decrease in same-store revenue.

General and administrative expenses. General and administrative expenses decreased $817,000, or 3%, from $26.5 million in 2001 to $25.7 million in 2002, primarily due to cost reduction initiatives. As a percentage of revenues, general and administrative expenses increased 0.9 points due to the decrease in same-store revenues.

Other expenses from managed entities. Other expenses from managed entities increased $1.8 million, or 11%, from $15.7 million in 2001 to $17.5 million in 2002, due to an increase in payroll for managed entities. These expenses are reimbursed at our cost by our entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities increased 2.9 points due to acquisitions and the decrease in same-store revenues.

Depreciation. Depreciation increased $484,000, or 20%, from $2.5 million in 2001 to $3.0 million in 2002, primarily due to increased technology capital expenditures. As a percentage of revenues, depreciation increased 0.6 points due to the increase in technology capital expenditures.

Goodwill Amortization. Upon the adoption of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets,” goodwill is no longer being amortized as of January 1, 2002 (see Note 2).

Interest and other expense, net. Interest expense, net of interest income, increased $807,000, or 40%, from $2.0 million in 2001 to $2.8 million in 2002, primarily due to increased debt levels and an increased weighted average borrowing rate. As a percentage of revenues, interest increased 0.9 points due to the increase in borrowing costs and a decrease in same-store revenues.

Provision for income taxes. Provision for income taxes decreased $2.4 million, or 46%, from $5.3 million in 2001 to $2.9 million in 2002, primarily due to a decline in taxable income.

Beach

The following table sets forth the condensed consolidated results of operations for the three and six months ended June 30, 2001 and 2002 for our Beach operations in Gulf Shores, Alabama; Bethany Beach, Delaware; Anna Maria Island, Beaches of South Walton, Bonita Springs, Bradenton, Captiva Island, Destin, Fort Myers, Fort Myers Beach, Fort Walton Beach, Lido Key, Longboat Key, Marco Island, Naples, Navarre Beach, New Port Richey, Okaloosa Island, Orlando, Panama City, Pensacola, Perdido Key, Sanibel Island, Sarasota, Siesta Key, Vanderbilt Beach and Venice, Florida; St. Simons Island, Georgia; Nantucket, Massachusetts; Outer Banks, North Carolina; Lake Erie Islands, Ohio; and Hilton Head Island, South Carolina.


	Three Months Ended June 30,								Six Months Ended June 30,

(dollars in thousands)	2001				2002				2001				2002

Revenues	$	31,779	100.0	%	$	30,027	100.0	%	$	49,373	100.0	%	$	46,527	100.0	%
Direct operating expenses		13,133	41.4			13,355	44.5			23,224	47.0			23,497	50.5
General and administrative expenses		5,657	17.8			4,818	16.0			11,059	22.4			9,720	20.9
Other expenses from managed entities		1,249	3.9			1,655	5.5			2,157	4.4			2,746	5.9

Operating income before depreciation and goodwill amortization		11,740	36.9			10,199	34.0			12,933	26.2			10,564	22.7
Depreciation		405	1.3			515	1.7			749	1.5			959	2.1
Goodwill amortization		816	2.5			—	—			1,542	3.1			—	—

Operating income	$	10,519	33.1	%	$	9,684	32.3	%	$	10,642	21.6	%	$	9,605	20.6	%

Page 12 of 25

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 — Beach

Revenues. Revenues decreased $1.8 million, or 6%, from $31.8 million in 2001 to $30.0 million in 2002. Excluding Other revenue from managed entities, revenues decreased $2.2 million, or 7%, from $30.5 million in 2001 to $28.4 million in 2002, primarily due to a 9.2% decrease in gross lodging revenues primarily driven by lower ADR and a slight decline in managed units.

Direct operating expenses. Direct operating expenses increased $222,000, or 2%, from $13.1 million in 2001 to $13.4 million in 2002, primarily due to a 0.9 point increase in occupancy. As a percentage of revenues, direct operating expenses increased 3.1 points due to the decrease in same-store revenues.

General and administrative expenses. General and administrative expenses decreased $839,000, or 15%, from $5.7 million in 2001 to $4.8 million in 2002, primarily due to cost reduction initiatives. As a percentage of revenues, general and administrative expenses decreased 1.8 points due to cost reduction initiatives.

Other expenses from managed entities. Other expenses from managed entities increased $406,000, or 33%, from $1.2 million in 2001 to $1.7 million in 2002, due to an increase in payroll for managed entities. These expenses are reimbursed at our cost by our entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities increased 1.6 points due to the decrease in same-store revenues.

Depreciation. Depreciation increased $110,000, or 27%, from $405,000 in 2001 to $515,000 in 2002, primarily due to the increase in technology capital expenditures for our Beach operations. As a percentage of revenues, depreciation increased 0.4 points due to the increase in technology capital expenditures and the decrease in same-store revenues.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 — Beach

Revenues. Revenues decreased $2.8 million, or 6%, from $49.3 million in 2001 to $46.5 million in 2002. Excluding Other revenue from managed entities, revenues decreased $3.4 million, or 7%, from $47.2 million in 2001 to $43.8 million in 2002, primarily due to an 8.9 percent decrease in gross lodging revenues primarily driven by lower ADR and a slight decline in managed units.

Direct operating expenses. Direct operating expenses increased $273,000, or 1%, from $23.2 million in 2001 to $23.5 million in 2002, primarily due to our Beach acquisitions. As a percentage of revenues, direct operating expenses increased 3.5 points due to the decrease in same-store revenues.

General and administrative expenses. General and administrative expenses decreased $1.3 million, or 12%, from $11.1 million in 2001 to $9.7 million in 2002, primarily due to cost reduction initiatives. As a percentage of revenues, general and administrative expenses decreased 1.5 points due to the cost reduction initiatives.

Other expenses from managed entities. Other expenses from managed entities increased $589,000, or 27%, from $2.2 million in 2001 to $2.7 million in 2002, due to an increase in payroll for managed entities. These expenses are reimbursed at our cost by entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities increased 1.5 points due to the decrease in same-store revenues.

Depreciation. Depreciation increased $210,000, or 28%, from $749,000 in 2001 to $959,000 in 2002, primarily due to the increase in technology capital expenditures. As a percentage of revenues, direct operating expenses increased 0.6 points due to the increase in technology capital expenditures.

Page 13 of 25

Hawaii

The following table sets forth the condensed consolidated results of operations for the three and six months ended June 30, 2001 and 2002 for our Hawaiian operations on the islands of Hawaii, Kauai, Maui and Oahu.


	Three Months Ended June 30,								Six Months Ended June 30,

(dollars in thousands)	2001				2002				2001				2002

Revenues	$	12,377	100.0	%	$	12,361	100.0	%	$	27,314	100.0	%	$	25,826	100.0	%
Direct operating expenses		2,270	18.3			1,844	14.9			4,539	16.6			3,576	13.8
General and administrative expenses		1,719	13.9			2,092	16.9			3,539	13.0			4,200	16.3
Other expenses from managed entities		6,404	51.8			7,193	58.2			13,123	48.0			14,331	55.5

Operating income before depreciation and goodwill amortization		1,984	16.0			1,232	10.0			6,113	22.4			3,719	14.4
Depreciation		126	1.0			117	1.0			250	0.9			236	0.9
Goodwill amortization		18	0.1			—	—			36	0.2			—	—

Operating income	$	1,840	14.9	%	$	1,115	9.0	%	$	5,827	21.3	%	$	3,483	13.5	%

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 — Hawaii

Revenues. Revenues decreased $18,000, or 0.1%, from $12.4 million in 2001 to $12.4 million in 2002. Excluding Other revenue from managed entities, revenues decreased $806,000, or 13%, from $6.0 million in 2001 to $5.2 million in 2002, primarily due to a 5.8% decrease in gross lodging revenues primarily driven by lower ADR and a slight decline in managed units.

Direct operating expenses. Direct operating expenses decreased $386,000, or 17%, from $2.3 million in 2001 to $1.9 million in 2002, primarily due to a 2.1 point decrease in occupancy and cost reduction initiatives. As a percentage of revenues, direct operating expenses decreased 3.4 points due to the increase in direct operating expenses while revenues remained flat.

General and administrative expenses. General and administrative expenses increased $373,000, or 22%, from $1.7 million in 2001 to $2.1 million in 2002, primarily due to an increase in professional fees. As a percentage of revenues, general and administrative expenses increased 3.0 points due to the increase in general and administrative expenses while revenues remained flat.

Other expenses from managed entities. Other expenses from managed entities increased $788,000, or 12%, from $6.4 million in 2001 to $7.2 million in 2002, due to an increase in payroll for managed entities. These expenses are reimbursed at our cost by entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities increased 6.4 points due to the increase in other expenses from managed entities and the decrease in same-store revenues.

Depreciation. Depreciation decreased $9,000, or 7%, from $126,000 in 2001 to $117,000 in 2002, primarily due to certain in-service assets being fully depreciated. As a percentage of revenues, depreciation remained relatively flat.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 — Hawaii

Revenues. Revenues decreased $1.5 million, or 5%, from $27.3 million in 2001 to $25.8 million in 2002. Excluding Other revenue from managed entities, revenues decreased $2.7 million, or 19%, from $14.2 million in 2001 to $11.5 million in 2002, primarily due to an 11.5% decrease in lodging revenues driven by a 10.0% decrease in ADR and a 4.0% decrease in units under management.

Direct operating expenses. Direct operating expenses decreased $963,000, or 21%, from $4.5 million in 2001 to $3.6 million in 2002, primarily due to a 3.4 point decrease in occupancy and cost reduction initiatives. As a percentage of revenues, direct operating expenses decreased 2.8 points, primarily due to the decrease in occupancy and cost reduction initiatives.

General and administrative expenses. General and administrative expenses increased $662,000, or 19%, from $3.5 million in 2001 to $4.2 million in 2002, primarily due to a 3.4 point decrease in occupancy and cost reduction

Page 14 of 25

initiatives. As a percentage of revenues, general and administrative expenses increased 3.3 points due to the increase in general and administrative expenses and the decrease in same-store revenues.

Other expenses from managed entities. Other expenses from managed entities increased $1.2 million, or 9%, from $13.1 million in 2001 to $14.3 million in 2002, due to an increase in payroll for managed entities. These expenses are reimbursed at our cost by entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities increased 7.5 points due to the increase in other expenses from managed entities and the decrease in same-store revenues.

Depreciation. Depreciation decreased $14,000, or 6%, from $250,000 in 2001 to $236,000 in 2002, primarily due to certain in-service assets being fully depreciated. As a percentage of revenues, depreciation remained relatively flat.

Mountain

The following table sets forth the condensed consolidated results of operations for the three and six months ended June 30, 2001 and 2002 for our Mountain operations in Whistler, British Columbia; Aspen, Breckenridge, Crested Butte, Dillon, Keystone, Snowmass Village, Steamboat Springs and Telluride, Colorado; Sun Valley, Idaho; Big Sky, Montana; Mt. Bachelor and Sunriver, Oregon; Gatlinburg and Pigeon Forge, Tennessee; and The Canyons, Deer Valley and Park City, Utah.


	Three Months Ended June 30,										Six Months Ended June 30,

(dollars in thousands)	2001					2002					2001				2002

Revenues	$	5,442		100.0	%	$	5,100		100.0	%	$	23,765	100.0	%	$	22,057	100.0	%
Direct operating expenses		5,157		94.8			5,034		98.7			12,720	53.5			12,376	56.1
General and administrative expenses		2,215		40.7			1,788		35.1			4,796	20.2			3,839	17.4
Other expenses from managed entities		158		2.9			133		2.6			439	1.9			407	1.9

Operating (loss) income before depreciation and goodwill amortization		(2,088	)	(38.4	)		(1,855	)	(36.4	)		5,810	24.4			5,435	24.6
Depreciation		284		5.2			256		5.0			577	2.4			517	2.3
Goodwill amortization		294		5.4			—		—			588	2.5			—	—

Operating (loss) income	$	(2,666	)	(49.0	)%	$	(2,111	)	(41.4	)%	$	4,645	19.5	%	$	4,918	22.3	%

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 — Mountain

Revenues. Revenues decreased $342,000, or 6%, from $5.4 million in 2001 to $5.1 million in 2002. Excluding Other revenue from managed entities, revenues decreased $317,000, or 6%, from $5.3 million in 2001 to $5.0 million in 2002, primarily due to the 12.0% decrease in lodging revenues primarily driven by a decline in occupancy that was partially off-set by a $416,000 increase in Real estate and other revenues.

Direct operating expenses. Direct operating expenses decreased $123,000, or 2%, from $5.2 million in 2001 to $5.0 million in 2002, primarily due to 3.4 point increase in occupancy and cost reduction initiatives. As a percentage of revenues, direct operating expenses increased 3.9 points, primarily due to the decrease in revenues.

General and administrative expenses. General and administrative expenses decreased $427,000, or 19%, from $2.2 million in 2001 to $1.8 million in 2002, primarily due to cost reduction initiatives. As a percentage of revenues, direct general and administrative expenses increased 5.6 points, primarily due to the decrease in revenues.

Other expenses from managed entities. Other expenses from managed entities decreased $25,000, or 16%, from $158,000 in 2001 to $133,000 in 2002, due to a decrease in payroll for managed entities. These expenses are reimbursed at our cost by entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities decreased 0.3 points due to the decrease in payroll for managed entities.

Depreciation. Depreciation decreased $28,000, or 10%, from $284,000 in 2001 to $256,000 in 2002, primarily due to certain in-service assets being fully depreciated. As a percentage of revenues, depreciation remained relatively flat.

Page 15 of 25

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 — Mountain

Revenues. Revenues decreased $1.7 million, or 7%, from $23.8 million in 2001 to $22.1 million in 2002. Excluding Other revenue from managed entities, revenues decreased $1.7 million, or 7%, from $23.3 million in 2001 to $21.7 million in 2002, primarily due to the 5.7% decrease in same-store lodging revenues primarily driven by lower occupancy.

Direct operating expenses. Direct operating expenses decreased $344,000, or 3%, from $12.7 million in 2001 to $12.4 million in 2002, primarily due to the 2.2 point decrease in occupancy and cost reduction initiatives. As a percentage of revenues, direct operating expenses increased 2.6 points due to the decrease in same-store lodging revenues.

General and administrative expenses. General and administrative expenses decreased $957,000, or 20%, from $4.8 million in 2001 to $3.8 million in 2002, primarily due to cost reduction initiatives. As a percentage of revenues, general and administrative expenses decreased 2.8 points due to cost reduction initiatives.

Other expenses from managed entities. Other expenses from managed entities decreased $32,000, or 7%, from $439,000 in 2001 to $407,000 in 2002, due to a decrease in payroll for managed entities. These expenses are reimbursed at our cost by entities under our management (see Note 2). The reimbursements for these amounts are reflected in revenues. As a percentage of revenues, other expenses from managed entities remained relatively flat.

Depreciation. Depreciation decreased $60,000, or 10%, from $577,000 in 2001 to $517,000 in 2002, primarily due to certain in-service assets being fully depreciated. As a percentage of revenues, depreciation remained relatively flat.

Desert

The following table sets forth the condensed consolidated results of operations for the three and six months ended June 30, 2001 and 2002 for our Desert operations in Phoenix, Scottsdale and Tucson, Arizona; and Palm Desert and Palm Springs, California.


	Three Months Ended June 30,										Six Months Ended June 30,

(dollars in thousands)	2001					2002					2001				2002

Revenues	$	703		100.0	%	$	550		100.0	%	$	2,413	100.0	%	$	1,890	100.0	%
Direct operating expenses		448		63.7			377		68.5			955	39.6			850	45.0
General and administrative expenses		194		27.6			273		49.7			396	16.4			492	26.0
Other expenses from managed entities		—		—			—		—			—	—			—	—

Operating (loss) income before depreciation and goodwill amortization		61		8.7			(100	)	(18.2	)		1,062	44.0			548	29.0
Depreciation		24		3.4			13		2.4			50	2.1			29	1.5
Goodwill amortization		54		7.7			—		—			108	4.5			—	—

Operating (loss) income	$	(17	)	(2.4	)%	$	(113	)	(20.6	)%	$	904	37.4	%	$	519	27.5	%

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 — Desert

Revenues. Revenues decreased $153,000, or 22%, from $703,000 in 2001 to $550,000 in 2002 primarily due to the 27.8% decrease in lodging revenues primarily driven by lower ADR and a decline in managed units.

Direct operating expenses. Direct operating expenses decreased $71,000, or 16%, from $448,000 in 2001 to $377,000 in 2002, primarily due to the 14.3% decrease in units under management. As a percentage of revenues, direct operating expenses increased 4.8 points due to the decrease in lodging revenues.

General and administrative expenses. General and administrative expenses increased $79,000, or 41%, from $194,000 in 2001 to $273,000 in 2002, primarily due to the opening of a new office and an increase in insurance costs. As a

Page 16 of 25

percentage of revenues, general and administrative expenses increased 22.1 points due to the increase in general and administrative expenses and the decrease in lodging revenues.

Other expenses from managed entities. These operations do not have any arrangements with managed entities to receive reimbursements for any payroll related costs.

Depreciation. Depreciation decreased $11,000, or 46%, from $24,000 in 2001 to $13,000 in 2002. As a percentage of revenues, depreciation decreased 1.0 points due to the decrease in lodging revenues.

Goodwill amortization. Upon the adoption of Statement of Financial Accounting Standards No. 142 “Goodwill and Other Intangible Assets,” goodwill is no longer being amortized as of January 1, 2002. The goodwill balances related to our Desert operations were considered impaired upon the January 1, 2002 adoption of this standard. As a result, we recorded a non-cash $8.1 million write-down of goodwill, partially off-set by a $1.9 million income tax benefit (see Note 2).

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 — Desert

Revenues. Revenues decreased $523,000, or 22%, from $2.4 million in 2001 to $1.9 million in 2002, primarily due to the 21.9% decrease in lodging revenues primarily driven by lower ADR and a decline in managed units.

Direct operating expenses. Direct operating expenses decreased $105,000, or 11%, from $955,000 in 2001 to $850,000 in 2002, primarily due to the 14.3% decrease in units under management. As a percentage of revenues, direct operating expenses increased 5.4 points due to the decrease in lodging revenues.

General and administrative expenses. General and administrative expenses increased $96,000, or 24%, from $396,000 in 2001 to $492,000 in 2002, primarily due to the opening of a new office and an increase in insurance costs. As a percentage of revenues, general and administrative expenses increased 9.6 points due to the increase in general and administrative expenses and the decrease in lodging revenues.

Other expenses from managed entities. These operations do not have any arrangements with managed entities to receive reimbursements for any payroll related costs.

Depreciation. Depreciation decreased $21,000, or 42%, from $50,000 in 2001 to $29,000 in 2002, primarily due to certain in-service assets being fully depreciated. As a percentage of revenues, depreciation decreased 0.6 points due to certain in-service assets being fully depreciated.

Other

The following table sets forth the condensed consolidated results of operations for the three and six months ended June 30, 2002 and 2001 for our Other operations comprised of ResortQuest Technologies and corporate.


	Three Months Ended June 30,										Six Months Ended June 30,

(dollars in thousands)	2001					2002					2001					2002

Revenues	$	908		100.0	%	$	819		100.0	%	$	1,693		100.0	%	$	1,572		100.0	%
Direct operating expenses		486		53.5			472		57.6			966		57.1			925		58.8
General and administrative expenses		2,929		N/M			3,352		N/M			6,686		N/M			7,408		N/M
Other expenses from managed entities		—		—			—		—			—		—			—		—

Operating loss before depreciation and goodwill amortization		(2,507	)	N/M			(3,005	)	N/M			(5,959	)	N/M			(6,761	)	N/M
Depreciation		471		51.9			632		77.2			853		50.4			1,222		77.7
Goodwill amortization		255		28.1			—		—			510		30.1			—		—

Operating loss	$	(3,233	)	N/M		$	(3,637	)	N/M		$	(7,322	)	N/M		$	(7,983	)	N/M

Page 17 of 25

Three Months Ended June 30, 2002 Compared to Three Months Ended June 30, 2001 — Other

Revenues. Revenues decreased $89,000, or 10%, from $908,000 in 2001 to $819,000 in 2002, primarily due to a decline in software activities as potential customers await the new version of First Resort Software released in July 2002.

Direct operating expenses. Direct operating expenses decreased $14,000, or 3%, from $486,000 in 2001 to $472,000 in 2002, primarily due to a decline in software sales activity, As a percentage of revenues, direct operating expenses increased 4.1 points, primarily due to the decrease in revenues.

General and administrative expenses. General and administrative expenses increased $423,000, or 14%, from $2.9 million in 2001 to $3.4 million in 2002, primarily due to the regional accounting center and new technology office that were not fully staffed until the end of 2001.

Other expenses from managed entities. These operations do not have any arrangements with managed entities to receive reimbursements for any payroll related costs.

Depreciation. Depreciation increased $161,000, or 34%, from $471,000 in 2001 to $632,000 in 2002, primarily due to increased technology capital expenditures related to enhancements to our website and the implementation of our new financial management technology platform. As a percentage of revenues, depreciation increased 25.3 points due to the increase in technology capital expenditures.

Six Months Ended June 30, 2002 Compared to Six Months Ended June 30, 2001 — Other

Revenues. Revenues decreased $121,000, or 7%, from $1.7 million in 2001 to $1.6 million in 2002, primarily due to a decline in software activities as potential customers await the new version of First Resort Software released in July 2002.

Direct operating expenses. Direct operating expenses decreased $41,000, or 4%, from $966,000 in 2001 to $925,000 in 2002, primarily due to a decline in software sales activities. As a percentage of revenues, direct operating expenses increased 1.7 points due to the decrease in revenues.

General and administrative expenses. General and administrative expenses increased $722,000, or 11%, from $6.7 million in 2001 to $7.4 million in 2002, primarily due to the new technology office that was not fully staffed until the end of 2001 and the $502,000 in unusual expenses recorded in the first quarter of this year. These unusual expenses represent professional fees resulting from employee-related matters and a study to explore financing and strategic growth alternatives.

Other expenses from managed entities. These operations do not have any arrangements with managed entities to receive reimbursements for any payroll related costs.

Depreciation. Depreciation increased $369,000, or 43%, from $853,000 in 2001 to $1.2 million in 2002, primarily due to increased technology capital expenditures related to enhancements to our website and the implementation of our new financial management technology platform. As a percentage of revenues, depreciation increased 27.3 points due to the increase in technology capital expenditures.

Liquidity and Capital Resources

ResortQuest conducts all of its operations through its subsidiaries operating in over 50 premier resort locations. Accordingly, the primary internal source of our liquidity is through the cash flows realized from our subsidiaries and our long-term borrowings. We utilize a consolidated daily cash management system that allows us to fully utilize all unrestricted cash to repay outstanding debt in order to reduce our net interest expense.

We generated $12.7 million of cash in operating activities for the six months ended June 30, 2002 primarily due to increases in deferred revenue and property owner payables. Cash used in investing activities was approximately $5.9 million for the six months ended June 30, 2002, due to $1.4 million in net acquisition related payments and $4.5 million in purchases of property, equipment and software. The majority of these costs represent our continued investment in the new release of our First Resort Software product launched in July 2002. For the six months ended June 30, 2002, cash used in financing activities totaled $4.0 million, primarily due to net repayments on

Page 18 of 25

borrowings under our Credit Facility.

At June 30, 2002, we had approximately $40.0 million in cash, of which $36.9 million represents cash held in escrow. The cash held in escrow is released at varying times in accordance with state regulations, generally based upon the guest stay or, in the case of real estate sales deposits, when the property is sold. At June 30, 2002, we had a working capital deficit of $30.2 million and up to $15.1 million remaining, subject to certain restrictions, available under our Credit Facility. We anticipate that our cash flows from operations will provide cash in excess of our normal working capital needs, debt service requirements and planned capital expenditures over the next year.

Long-Term Borrowings

As of June 30, 2002, our long-term debt, including current maturities, was comprised of $50.0 million in Senior Notes due June 2004, $24.8 million in borrowings under our Credit Facility that expires in January 2004 and $169,000 in capital lease obligations and other borrowings assumed in connection with certain acquisitions that have varying maturities through 2004. At June 30, 2002 the Company was in violation under our Credit Facility of a fixed charge coverage ratio as defined in the agreement. Compliance with such covenant was waived by lenders in a limited waiver agreement dated June 28, 2002.

Registration and Equity Offerings

We have registered 8.0 million shares of common stock through various shelf registration statement filings. As of June 30, 2002, we had issued 3,289,487 shares under these shelf registration statements in connection with acquisitions, with the remaining 4,710,513 shares available for future acquisitions.

Acquisition Strategy

Although our strategy for the next few quarters is to focus on internal growth, we intend to continue to pursue, subject to our debt agreements, selected acquisition opportunities in strategic and existing markets. There can be no assurance that we will be able to identify, acquire or profitably manage additional businesses or successfully integrate acquired businesses into 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. Furthermore, acquisitions involve a number of 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 flows from operations, borrowings under our Credit Facility, other debt fundings and the issuance of common stock. Our ability to fund future acquisitions through borrowings under the Credit Facility may be limited by certain restrictive covenants of the facility, the satisfaction of which may be dependent upon our ability to raise additional equity through either offerings for cash or the issuance of stock as consideration for acquisitions.

Non-compete and Employment Agreements

We have entered into non-compete agreements with many of the former owners of the companies that now comprise ResortQuest. These non-compete agreements are generally three to five years in length effective the day the operations are merged with ResortQuest. Additionally, we have entered into employment agreements with many of these former owners, all senior corporate officers and several key employees. Among other things, these agreements allow for severance payments and some include acceleration of stock option awards upon a change in control of ResortQuest, as defined under the agreements. At June 30, 2002, the maximum amount of compensation that would be payable under all agreements if a change in control occurred without prior written notice would be approximately $16.8 million.

Page 19 of 25

Seasonality and Quarterly Fluctuations

Our business is highly seasonal. Our results of operations are subject to quarterly fluctuations caused primarily by the seasonal variations in the vacation rental and property management industry, with peak seasons dependent on whether the resort is primarily a summer or winter destination. Our quarterly results of operations may also be subject to fluctuations as a result of the timing and cost of acquisitions, the timing of real estate sales, changes in relationships with travel providers, extreme weather conditions or other factors affecting leisure travel and the vacation rental and property management industry.

Critical Accounting Policies and Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and assumptions, including those related to bad debts, trade and other receivables, valuation of property, equipment and software, goodwill, self-insurance reserves, and contingencies and litigation. Our estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying amounts of assets and liabilities that are not readily apparent from other sources. We believe the following critical accounting policies affect our more significant estimates and assumptions used in preparing our consolidated financial statements. Actual results could differ from our estimates.

Trade and other receivables are reflected net of an estimated allowance for doubtful accounts. This estimate is based primarily on historical experience and assumptions with respect to future payment trends.

Property, equipment and software are stated at cost, or in the case of equipment acquired under capital lease, the present value of future lease payments, less accumulated depreciation. Certain costs for developing, customizing and installing software for internal use and for sale to third parties are capitalized. Revenues related to the sale of software to third parties are recognized when the systems are installed. Depreciation is computed using the straight-line method over the estimated useful lives of the recorded assets or the lease terms. We periodically, or upon the occurrence of certain events, review the balances of these long-lived assets for possible impairment. The assessment of long-lived assets for impairment requires us to make certain judgments, including the estimate of cash flows from the respective assets.

In accordance with Statement of Financial Accounting Standard No. 142, “Goodwill and Other Intangible Assets,” as of January 1, 2002, the goodwill balance recorded by the Company is no longer amortized, but reviewed annually and upon the occurrence of certain events for impairment. The calculation of the impairment charge recorded on January 1, 2002 requires us to make estimates of future cash flows with respect to the identified net assets acquired. Prior to January 1, 2002, goodwill has been amortized on a straight-line basis over 40 years, other than that associated with the acquisition of First Resort Software, Inc., which has been amortized over 15 years.

We are self-insured for various levels of workers’ compensation and employee medical and dental insurance coverage. Insurance reserves include the present values of projected settlements for claims. Projected settlements are estimated based on historical trends and actuarial data.

We are involved with various legal actions arising in the course of our business. Legal reserves are established for actions where the outcomes of the cases are probable and monetary damages are reasonably estimable as determined by in-house and external legal counsel. We do not believe that any of the remaining actions will have a material adverse effect on our business, financial condition or results of operations.

Revenues are primarily derived through property management fees, service fees and real estate commissions. Property management fees are recognized ratably over the guest stay. Service fees are recognized as services are provided. Real estate commissions are recognized for real estate brokerage commissions at time of closing.

New Accounting Pronouncements

During the quarter ended March 31, 2002, we changed our method of accounting for reimbursable costs to conform to the Financial Accounting Standards Board’s Emerging Issues Task Force Consensus No. 01-14, “Income Statement Characterization of Reimbursements Received for ‘Out-of-Pocket’ Expenses Incurred” (“EITF No. 01-14”), issued earlier this year and effective for us on January 1, 2002. As a result, reimbursements received are recorded as revenue and the costs incurred on behalf of managed associations and properties are recorded as expenses. These costs, which relate primarily to payroll costs at managed properties and associations where we are the employer, are reflected in other revenue and expenses from managed entities in the condensed consolidated statements of income. Revenue and expenses for the prior periods have been reclassified to conform with the current year presentation. Since the reimbursements are made based upon the costs incurred with no added margin, the expenses and related revenue are identical, and thus the adoption of EITF No. 01-14 did not have any effect on our operating income, total or per share net income, cash flows or financial position.

In June 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 141, “Business Combinations”, and No. 142, “Goodwill and Other Intangible Assets”. Statement No. 141 eliminates the poolings-of-interests method of accounting for business combinations and requires all transactions initiated after June 30, 2001, to be accounted for using the purchase method. Under Statement No. 142, goodwill related to our future acquisitions is not subject to amortization, and goodwill related to our historical acquisitions is no longer amortized as of January 1, 2002. Goodwill is subject to reviews for impairment annually and upon the occurrence of certain events, and if impaired, a write-down will be recorded. Upon our adoption of Statement No. 142, each of our geographical resort regions with assigned goodwill was valued as a reporting unit. If the fair value of the reporting unit was greater than the book value, including assigned goodwill, no further testing was required. However, if the book value, including goodwill, was greater than the fair value of the reporting unit, the assets and liabilities of the reporting unit needed to be valued. The difference between the fair value of the reporting unit and the fair value of the assets is the implied fair value of goodwill. To the extent that the implied fair value of goodwill was less than the book value of goodwill, an impairment charge was recognized as a cumulative effect of a change in accounting principle. Based on this test, we recorded a non-cash $8.1 million write-down of our goodwill related to our Desert resort operations, partially off-set by a $1.9 million income tax benefit. The Desert resort operations are expected to continue to experience declining cash flows as a result of the economics of the Desert markets. See Note 2 for the table presenting the adjusted net income and earnings per share excluding goodwill amortization.

We have completed the process of evaluating the impact of Statement No. 143, “Accounting for Asset Retirement Obligations”, and we do not expect this statement to have a material impact on our financial position or results of operations upon its adoption in 2003. Effective January 1, 2002, we adopted Statement No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”; the adoption of this statement did not have a material impact on our financial position or results of operations. During the quarter ended June 30, 2002, the Statement No. 145, “Rescission of Statements No. 4, 44, and 64, Amendment of Statement No. 13, and Technical Corrections,” was issued and has been adopted. This adoption had no material impact to our financial position or results of operations. Also during the quarter ended June 30, 2002, Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” was issued and is effective for activities initiated after December 31, 2002. The Company has yet to evaluate the impact of this statement and is therefore unable to disclose the impact that adopting Statement No. 146 will have on its financial position and results of operations when such statement is adopted.

Risks Associated With Forward Looking Statements

This report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1993, as amended, 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 acquisitions, factors affecting internal growth and management of growth, our acquisition strategy and availability of financing, the travel and tourism industry, seasonality, quarterly fluctuations and general economic conditions, and our dependence on technology, e-commerce and travel providers. Important factors that could cause actual results to differ materially include, but are not limited to, those listed in our previous filings with the Securities and Exchange Commission.

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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.

Page 21 of 25

ResortQuest International, Inc.
Performance Statistics
Total System ⁽²⁾


		Three Months Ended									Six Months Ended

		June 30,			June 30,						June 30,			June 30,
		2001			2002			VAR			2001			2002			VAR

Beach
	Gross Lodging Revenues(1)	$	65,087		$	59,080			(9.2	)%	$	102,532		$	93,439			(8.9	)%
	Occupancy		46.5	%		47.4	%		0.9	pts		53.0	%		51.7	%		(1.3	)pts
	ADR	$	190.81		$	180.18			(5.6	)%	$	137.42		$	133.74			(2.7	)%
	RevPAU	$	88.81		$	85.39			(3.9	)%	$	72.88		$	69.11			(5.2	)%
	Total Units		9,674			9,327			(3.6	)%		9,674			9,327			(3.6	)%

Hawaii
	Gross Lodging Revenues(1)	$	34,953		$	32,938			(5.8	)%	$	79,141		$	70,061			(11.5	)%
	Occupancy		71.3	%		69.2	%		(2.1	)pts		76.9	%		73.5	%		(3.4	)pts
	ADR	$	112.13		$	100.58			(10.3	)%	$	117.53		$	105.80			(10.0	)%
	RevPAU	$	79.95		$	69.60			(12.9	)%	$	90.36		$	77.72			(14.0	)%
	Total Units		5,743			5,512			(4.0	)%		5,743			5,512			(4.0	)%

Mountain
	Gross Lodging Revenues(1)	$	5,843		$	5,141			(12.0	)%	$	39,195		$	37,724			(3.8	)%
	Occupancy		22.1	%		18.7	%		(3.4	)pts		38.7	%		36.4	%		(2.3	)pts
	ADR	$	102.50		$	110.50			7.8	%	$	199.99		$	204.96			2.5	%
	RevPAU	$	22.62		$	20.67			(8.6	)%	$	77.42		$	74.53			(3.7	)%
	Total Units		3,204			3,265			1.9	%		3,204			3,265			1.9	%

Desert
	Gross Lodging Revenues(1)	$	1,524		$	1,100			(27.8	)%	$	6,037		$	4,713			(21.9	)%
	Occupancy		31.8	%		34.8	%		3.0	pts		49.1	%		50.3	%		(1.2	)pts
	ADR	$	100.33		$	88.25			(12.0	)%	$	127.68		$	124.76			(2.3	)%
	RevPAU	$	31.88		$	30.75			(3.5	)%	$	62.68		$	62.81			0.2	%
	Total Units		547			469			(14.3	)%		547			469			(14.3	)%

Total
	Gross Lodging Revenues(1)	$	107,407		$	98,259			(8.5	)%	$	226,905		$	205,937			(9.2	)%
	Occupancy		49.1	%		49.3	%		0.2	pts		57.6	%		55.8	%		(1.8	)pts
	ADR	$	148.14		$	137.55			(7.1	)%	$	136.46		$	130.11			(4.7	)%
	RevPAU	$	72.76		$	67.79			(6.8	)%	$	78.64		$	72.65			(7.6	)%
	Total Units		19,168			18,573			(3.1	)%		19,168			18,573			(3.1	)%

(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 by us.

(2)		Total system statistics include all exclusive managed contracts from the period under management through June 30, 2001 and June 30, 2002. Excluded from these statistics are non-exclusive management contracts which approximated 1,400 units as of June 30, 2001 and 1,500 as of June 30, 2002. Also excluded from these statistics are owner use nights and renovation nights which were approximately 13.1% of gross available nights in the three months ended June 30, 2001, and 12.3% of gross available nights in the three months ended June 30, 2002, 13.5% of gross available nights in the six months ended June 30, 2001, and 13.9% of gross available nights in the six months ended June 30, 2002.

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ResortQuest International, Inc.
Performance Statistics
Same-Store ⁽²⁾


		Three Months Ended									Six Months Ended

		June 30,			June 30,						June 30,			June 30,
		2001			2002			VAR			2001			2002			VAR

Beach
	Gross Lodging Revenues(1)	$	65,087		$	59,080			(9.2	)%	$	89,099		$	81,756			(8.2	)%
	Occupancy		46.5	%		47.4	%		0.9	pts		54.6	%		54.4	%		(0.2	)pts
	ADR	$	190.81		$	180.18			(5.6	)%	$	128.23		$	124.90			(2.6	)%
	RevPAU	$	88.81		$	85.39			(3.9	)%	$	70.00		$	67.89			(3.0	)%
	Total Units		9,674			9,327			(3.6	)%		8,302			8,156			(1.8	)%

Hawaii
	Gross Lodging Revenues(1)	$	34,953		$	32,938			(5.8	)%	$	79,141		$	70,061			(11.5	)%
	Occupancy		71.3	%		69.2	%		(2.1	)pts		76.9	%		73.5	%		(3.4	)pts
	ADR	$	112.13		$	100.58			(10.3	)%	$	117.53		$	105.80			(10.0	)%
	RevPAU	$	79.95		$	69.60			(12.9	)%	$	90.36		$	77.72			(14.0	)%
	Total Units		5,743			5,512			(4.0	)%		5,743			5,512			(4.0	)%

Mountain
	Gross Lodging Revenues(1)	$	5,843		$	5,141			(12.0	)%	$	38,063		$	35,899			(5.7	)%
	Occupancy		22.1	%		18.7	%		(3.4	)pts		38.3	%		36.1	%		(2.2	)pts
	ADR	$	102.50		$	110.50			7.8	%	$	202.75		$	209.54			3.3	%
	RevPAU	$	22.62		$	20.67			(8.6	)%	$	77.69		$	75.56			(2.7	)%
	Total Units		3,204			3,265			1.9	%		3,015			3,086			2.4	%

Desert
	Gross Lodging Revenues(1)	$	1,524		$	1,100			(27.8	)%	$	6,037		$	4,713			(21.9	)%
	Occupancy		31.8	%		34.8	%		3.0	pts		49.1	%		50.3	%		1.2	pts
	ADR	$	100.33		$	88.25			(12.0	)%	$	127.68		$	124.76			(2.3	)%
	RevPAU	$	31.88		$	30.75			(3.5	)%	$	62.68		$	62.81			0.2	%
	Total Units		547			469			(14.3	)%		547			469			(14.3	)%

Total
	Gross Lodging Revenues(1)	$	107,407		$	98,259			(8.5	)%	$	212,340		$	192,429			(9.4	)%
	Occupancy		49.1	%		49.3	%		0.2	pts		58.6	%		57.5	%		(1.1	)pts
	ADR	$	148.14		$	137.55			(7.1	)%	$	132.45		$	126.11			(4.8	)%
	RevPAU	$	72.76		$	67.79			(6.8	)%	$	77.64		$	72.45			(6.7	)%
	Total Units		19,168			18,573			(3.1	)%		17,607			17,223			(2.2	)%

(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 by us.

(2)		For better comparability, the three months ended June 30 statistics exclude all non-exclusive management contracts, which approximated 1,500 units as of June 30, 2002. The six months ended June 30 excluded all non-exclusive management contracts as well as all properties that were not acquired by ResortQuest prior to the second quarter of 2001, which approximated 2,900 units as of June 30, 2002. Also excluded from these statistics are owner use nights and renovation nights which were approximately 13.1% of gross available nights in the three months ended June 30, 2001, and 12.3% of gross available nights in the three months ended June 30, 2002, 12.8% of gross available nights in the six months ended June 30, 2001, and 13.0% of gross available nights in the six months ended June 30, 2002.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

We do not have significant market risk with respect to interest rates, foreign currency exchanges or other market rate or price risks, and we do not hold any financial instruments for trading purposes. At June 30, 2002, $24.8 million of our long-term borrowings accrue interest at variable interest rates. Based on this debt level, annual interest expense would increase by approximately $129,000, if interest rates were to increase by 52 basis points, or 10%, over the current weighted average interest rate of these variable rate borrowings.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Changes in Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

Not applicable.

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Item 4. Submission of Matters to a Vote of Security Holders

An annual meeting of the stockholders of ResortQuest International, Inc. was held on Thursday, May 30, 2002. At the meeting, the stockholders considered and voted upon a proposal to elect seven members (William W. Abbott, Jr., Elan J. Blutinger, David L. Levine, Colin V. Reed, David C. Sullivan, Joseph V. Vittoria, and Theodore L. Weise) to the board of directors of the Company.

The stockholders approved the proposal. Voting results are as follows:


	(A)		(B)
For		12,582,964		12,231,464
Withheld		226,969		578,469
Unvoted		6,433,316		6,433,316

Total shares		19,243,249		19,243,249

(A) Voting results for director nominees Abbott, Blutinger, Reed, Sullivan, Vittoria and Weise.

(B) Voting results for director nominee Levine.

Item 5. Other Information

Not applicable.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits filed herewith

99.1 — Certification of Principal Executive Officer

99.2 — Certification of Principal Financial Officer

(b) Reports on Form 8-K:

On May 29, 2002, we filed a report on Form 8-K announcing that our Board of Directors had appointed Deloitte and Touche LLP as the Company’s independent auditor for 2002, replacing Arthur Andersen LLP.

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 by the undersigned thereunto duly authorized.


	RESORTQUEST INTERNATIONAL, INC.


August 19, 2002	By:	/s/ J. Mitchell Collins

		J. Mitchell Collins
		Senior Vice President and
		Chief Financial Officer
		(Principal Financial Officer,
		Chief Accounting Officer
		and Duly Authorized Officer)

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(A)		Voting results for director nominees Abbott, Blutinger, Reed, Sullivan, Vittoria and Weise.
(B)		Voting results for director nominee Levine.

(b)		Reports on Form 8-K:

		On May 29, 2002, we filed a report on Form 8-K announcing that our Board of Directors had appointed Deloitte and Touche LLP as the Company’s independent auditor for 2002, replacing Arthur Andersen LLP.