Park Hotels & Resorts Earnings 2021-03-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

pk-10q_20210331.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37795

Park Hotels & Resorts Inc.

(Exact name of Registrant as specified in its Charter)

Delaware		36-2058176
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)
1775 Tysons Boulevard., 7^th Floor, Tysons, VA		22102
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code): (571) 302-5757

Securities registered pursuant to Section 12(b) of the Act.

Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, $0.01 par value per share	PK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 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 ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding on April 30, 2021 was 236,490,512.

Table of Contents

PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three Months Ended March 31, 2021 and 2020	3
	Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	4
	Condensed Consolidated Statements of Equity for the Three Months Ended March 31, 2021 and 2020	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25
Item 4.	Controls and Procedures	25

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	26
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26
Item 3.	Defaults Upon Senior Securities	26
Item 4.	Mine Safety Disclosures	26
Item 5.	Other Information	26
Item 6.	Exhibits	27
	Signatures	28

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

	March 31, 2021			December 31, 2020
	(unaudited)
ASSETS
Property and equipment, net	$	9,125			9,193
Investments in affiliates		14			14
Intangibles, net		44			45
Cash and cash equivalents		868			951
Restricted cash		32			30
Accounts receivable, net of allowance for doubtful accounts of $2 and $3		38			26
Prepaid expenses		35			39
Other assets		53			60
Operating lease right-of-use assets		225			229
TOTAL ASSETS (variable interest entities - $228 and $229)	$	10,434		$	10,587
LIABILITIES AND EQUITY
Liabilities
Debt	$	5,121			5,121
Accounts payable and accrued expenses		196			147
Due to hotel managers		80			88
Deferred income tax liabilities		10			10
Other liabilities		134			134
Operating lease liabilities		240			244
Total liabilities (variable interest entities - $215 and $213)		5,781			5,744
Commitments and contingencies - refer to Note 13
Stockholders' Equity
Common stock, par value $0.01 per share, 6,000,000,000 shares authorized, 236,832,708 shares issued and 236,435,153 shares outstanding as of March 31, 2021 and 236,217,344 shares issued and 235,915,749 shares outstanding as of December 31, 2020		2			2
Additional paid-in capital		4,520			4,519
Retained earnings		185			376
Accumulated other comprehensive loss		(3	)		(4	)
Total stockholders' equity		4,704			4,893
Noncontrolling interests		(51	)		(50	)
Total equity		4,653			4,843
TOTAL LIABILITIES AND EQUITY	$	10,434		$	10,587

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in millions, except per share data)

	Three Months Ended March 31,
	2021			2020
Revenues
Rooms	$	106		$	362
Food and beverage		22			161
Ancillary hotel		29			57
Other		8			19
Total revenues		165			599

Operating expenses
Rooms		35			112
Food and beverage		21			123
Other departmental and support		78			172
Other property-level		48			60
Management fees		7			25
Impairment loss and casualty gain, net		—			694
Depreciation and amortization		74			75
Corporate general and administrative		18			16
Other		7			21
Total expenses		288			1,298

Gain on sales of assets, net		—			62

Operating loss		(123	)		(637	)

Interest income		—			1
Interest expense		(63	)		(40	)
Equity in losses from investments in affiliates		(4	)		(1	)
Other loss, net		—			(2	)

Loss before income taxes		(190	)		(679	)
Income tax expense		(1	)		(10	)
Net loss		(191	)		(689	)
Net loss attributable to noncontrolling interests		1			1
Net loss attributable to stockholders	$	(190	)	$	(688	)

Other comprehensive loss, net of tax expense:
Currency translation adjustment, net of tax expense of $0		—			4
Change in fair value of interest rate swap, net of tax expense of $0		1			(6	)
Total other comprehensive income (loss)		1			(2	)

Comprehensive loss		(190	)		(691	)
Comprehensive loss attributable to noncontrolling interests		1			1
Comprehensive loss attributable to stockholders	$	(189	)	$	(690	)

Loss per share:
Loss per share - Basic	$	(0.81	)	$	(2.89	)
Loss per share - Diluted	$	(0.81	)	$	(2.89	)

Weighted average shares outstanding - Basic		235			238
Weighted average shares outstanding - Diluted		236			238

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)

	Three Months Ended
	March 31,
	2021			2020
Operating Activities:
Net loss	$	(191	)	$	(689	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization		74			75
Gain on sales of assets, net		—			(62	)
Impairment loss and casualty gain, net		—			694
Equity in losses from investments in affiliates		4			1
Other loss, net		—			2
Share-based compensation expense		6			2
Amortization of deferred financing costs		2			1
Distributions from unconsolidated affiliates		—			4
Changes in operating assets and liabilities		34			(41	)
Net cash used in operating activities		(71	)		(13	)
Investing Activities:
Capital expenditures for property and equipment		(5	)		(26	)
Proceeds from asset dispositions, net		—			205
Contributions to unconsolidated affiliates		(2	)		—
Insurance proceeds for property damage claims		4			1
Net cash (used in) provided by investing activities		(3	)		180
Financing Activities:
Borrowings from credit facilities		—			1,000
Repayments of mortgage debt		(1	)		(2	)
Dividends paid		—			(136	)
Distributions to noncontrolling interests		—			(1	)
Tax withholdings on share-based compensation		(6	)		(6	)
Repurchase of common stock		—			(66	)
Net cash (used in) provided by financing activities		(7	)		789
Net (decrease) increase in cash and cash equivalents and restricted cash		(81	)		956
Cash and cash equivalents and restricted cash, beginning of period		981			386
Cash and cash equivalents and restricted cash, end of period	$	900		$	1,342

Supplemental Disclosures
Non-cash financing activities:
Dividends declared but unpaid	$	—		$	106

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in millions)

												Accumulated
						Additional						Other			Non-
	Common Stock					Paid-in			Retained			Comprehensive			controlling
	Shares			Amount		Capital			Earnings			Loss			Interests			Total
Balance as of December 31, 2020		236		$	2	$	4,519		$	376		$	(4	)	$	(50	)	$	4,843
Share-based compensation, net		—			—		1			(1	)		—			—			—
Net loss		—			—		—			(190	)		—			(1	)		(191	)
Other comprehensive income		—			—		—			—			1						1
Balance as of March 31, 2021		236		$	2	$	4,520		$	185		$	(3	)	$	(51	)	$	4,653

												Accumulated
						Additional						Other			Non-
	Common Stock					Paid-in			Retained			Comprehensive			controlling
	Shares			Amount		Capital			Earnings			Loss			Interests			Total
Balance as of December 31, 2019		239		$	2	$	4,575		$	1,922		$	(3	)	$	(45	)	$	6,451
Share-based compensation, net		—			—		(5	)		1			—			—			(4	)
Net loss		—			—		—			(688	)		—			(1	)		(689	)
Other comprehensive loss		—			—		—			—			(2	)					(2	)
Dividends and dividend equivalents⁽¹⁾		—			—		—			(106	)		—			—			(106	)
Distributions to noncontrolling interests		—			—		—			—			—			(1	)		(1	)
Repurchase of common stock		(4	)		—		(66	)		—			—			—			(66	)
Balance as of March 31, 2020		235		$	2	$	4,504		$	1,129		$	(5	)	$	(47	)	$	5,583

⁽¹⁾	Dividends declared per common share were $0.45 for the three months ended March 31, 2020.

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Organization and Recent Events

Organization

Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company”) is a Delaware corporation that owns a portfolio of premium-branded hotels and resorts primarily located in prime city center and resort locations. On January 3, 2017, Hilton Worldwide Holdings Inc. (“Hilton”) completed the spin-off of a portfolio of hotels and resorts that established Park Hotels & Resorts Inc. as an independent, publicly traded company.

On May 5, 2019, the Company, PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Domestic Sub LLC, a wholly-owned subsidiary of PK Domestic (“Merger Sub”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Chesapeake Lodging Trust (“Chesapeake”). On September 18, 2019, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Chesapeake merged with and into Merger Sub (the “Merger”) and each of Chesapeake’s common shares of beneficial interest, $0.01 par value per share was converted into $11.00 in cash and 0.628 of a share of our common stock. No fractional shares of our common stock were issued in the Merger. The value of any fractional interests to which a Chesapeake shareholder would otherwise have been entitled was paid in cash.

We are a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate, in a manner to qualify as a REIT. From the date of our spin-off from Hilton, Park Intermediate Holdings LLC (our “Operating Company”), directly or indirectly, has held all our assets and has conducted all of our operations. We own 100% of the interests in our Operating Company.

Recent Events

The novel strain of coronavirus and the disease it causes (“COVID-19”) have had and continue to have a significant effect on the hospitality industry and our business. The effects of COVID-19, including government restrictions such as mandated closings of non-essential businesses and travel restrictions, have severely reduced overall lodging demand. Since the beginning of March 2020, we have experienced a significant decline in occupancy and Revenue per Available Room (“RevPAR”) associated with COVID-19 throughout our portfolio, which resulted in a decline in our operating cash flow. However, the distribution of COVID-19 vaccines that began in December 2020 and the reports of their effectiveness have resulted in an improvement in traveler and general consumer sentiment.

We and our hotel managers have taken various actions to mitigate the effects of COVID-19, including temporarily suspending operations at certain of our hotels in March 2020, limiting capacity at our open hotels, deferring approximately $150 million of capital expenditures planned for 2020, reducing budgeted capital expenditures for maintenance projects to approximately $40 million for 2021, suspending our dividend after the first quarter of 2020, and, as a precautionary measure to increase liquidity and preserve financial flexibility, drawing on our revolving credit facility (“Revolver”) and completing two corporate bond offerings totaling $1.4 billion in 2020. We have since commenced a phased reopening of all except seven of our hotels as restrictions are removed and demand returns. The timing of fully reopening these hotels and beginning to reopen our hotels that remain suspended will depend primarily on government restrictions imposed or re-imposed, recommendations of health officials and market demand.

We are committed to using our liquidity to support our hotels’ operations during the COVID-19 pandemic and subsequent recovery, while being focused on continuing to maintain and enhance our stockholders’ value.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

The unaudited condensed consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All significant intercompany transactions and balances within the financial statements have been eliminated.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, 2020 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2021

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP 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. Actual results could differ from those estimates. Interim results are not necessarily indicative of full year performance.

Reclassifications

Certain line items on the condensed consolidated statements of comprehensive loss and the condensed consolidated statements of cash flows for the three months ended March 31, 2020 have been reclassified to conform to the current period presentation.

Summary of Significant Accounting Policies

Our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the SEC on February 26, 2021, contains a discussion of the significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, 2020.

Note 3: Dispositions

During the three months ended March 31, 2020, we sold the Embassy Suites Washington DC Georgetown and our interests in the entity that owns the Hilton São Paulo Morumbi for total gross proceeds of $208 million and recognized a gain, net of selling costs, of $63 million on these hotels, which is included in gain on sales of assets, net in our condensed consolidated statements of comprehensive loss. Additionally, the net gain includes the reclassification of a currency translation adjustment of $7 million from accumulated other comprehensive loss into earnings concurrent with the sale of the Hilton São Paulo Morumbi.

Note 4: Property and Equipment

Property and equipment were:

	March 31, 2021		December 31, 2020
	(in millions)
Land	$	3,429	$	3,429
Buildings and leasehold improvements		6,960		6,951
Furniture and equipment		1,046		1,042
Construction-in-progress		44

Price	24.80	EPS	1
Shares	239	P/E	24
MCap	5,937	P/FCF	17
Net Debt	3,754	EBIT	355
TEV	9,691	TEV/EBIT	27
TTM 2019-09-30, in MM, except price, ratios

10-Q	2021-03-31	Filed 2021-05-07
10-K	2020-12-31	Filed 2021-02-26
10-Q	2020-09-30	Filed 2020-11-06
10-Q	2020-06-30	Filed 2020-08-06
10-Q	2020-03-31	Filed 2020-05-11
10-K	2019-12-31	Filed 2020-02-27
10-Q	2019-09-30	Filed 2019-11-07
10-Q	2019-06-30	Filed 2019-08-01
10-Q	2019-03-31	Filed 2019-05-06
10-K	2018-12-31	Filed 2019-02-28
10-Q	2018-09-30	Filed 2018-11-02
10-Q	2018-06-30	Filed 2018-08-02
10-Q	2018-03-31	Filed 2018-05-04
10-K	2017-12-31	Filed 2018-03-01
10-Q	2017-09-30	Filed 2017-11-03
10-Q	2017-06-30	Filed 2017-08-03
10-Q	2017-03-31	Filed 2017-05-04
10-K	2016-12-31	Filed 2017-03-02

8-K	2020-11-07
8-K	2020-11-05
8-K	2020-10-23
8-K	2020-09-18
8-K	2020-09-15
8-K	2020-09-14
8-K	2020-08-05
8-K	2020-05-29
8-K	2020-05-27
8-K	2020-05-19
8-K	2020-05-18
8-K	2020-05-11
8-K	2020-05-08
8-K	2020-04-24
8-K	2020-03-20
8-K	2020-03-16
8-K	2020-02-26
8-K	2020-02-20
8-K	2020-01-27
8-K	2020-01-15
8-K	2019-11-06
8-K	2019-09-13
8-K	2019-09-02
8-K	2019-08-28
8-K	2019-07-31
8-K	2019-05-06
8-K	2019-05-05
8-K	2019-04-26
8-K	2019-02-27
8-K	2019-02-22
8-K	2019-01-25
8-K	2018-11-01
8-K	2018-06-30
8-K	2018-04-27
8-K	2018-03-31
8-K	2018-03-06
8-K	2018-03-05
8-K	2017-12-31

EX-31.1	pk-ex311_13.htm
EX-31.2	pk-ex312_12.htm
EX-32.1	pk-ex321_11.htm
EX-32.2	pk-ex322_10.htm

PK 10Q Quarterly Report

Park Hotels & Resorts Earnings 2021-03-31