QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended September 30, 2019
OR
☐
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
COMMISSION FILE NO. 1-38012
Playa Hotels & Resorts N.V.
(Exact name of registrant as specified in its charter)
The
Netherlands
98-1346104
(State or other jurisdiction of incorporation or organization)
(IRS Employer Identification Number)
Prins Bernhardplein 200
1097 JB
Amsterdam,
the
Netherlands
Not Applicable
(Address of Principal Executive Offices)
(Zip Code)
+3120571 12 02
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Ordinary Shares, €0.10 par value
PLYA
NASDAQ
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 such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (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 Act). Yes ☐ No ☒
As of October 31, 2019, there were 129,351,389 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 130,894,830 shares issued and 129,491,038 shares outstanding as of September 30, 2019, and 130,494,734 shares issued and 130,440,126 shares outstanding as of December 31, 2018)
14,206
14,161
Treasury shares (at cost, 1,403,792 shares as of September 30, 2019 and 54,608 shares as of December 31, 2018)
(10,701
)
(394
)
Paid-in capital
998,864
992,297
Accumulated other comprehensive loss
(29,070
)
(3,658
)
Accumulated deficit
(148,998
)
(162,565
)
Total shareholders' equity
824,301
839,841
Total liabilities and shareholders' equity
$
2,144,195
$
2,135,158
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
1
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Operations
($ in thousands, except share data)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2019
2018
2019
2018
Revenue
Package
$
111,091
$
123,633
$
416,978
$
402,627
Non-package
20,065
18,800
68,975
61,752
Management fees
83
152
1,568
503
Cost reimbursements
1,586
227
5,123
349
Total revenue
132,825
142,812
492,644
465,231
Direct and selling, general and administrative expenses
Direct
87,252
91,573
273,577
250,742
Selling, general and administrative
30,771
28,489
94,647
87,742
Pre-opening
257
87
548
87
Depreciation and amortization
29,417
20,138
77,636
51,709
Reimbursed costs
1,586
227
5,123
349
Gain on insurance proceeds
—
(686
)
—
(2,207
)
Direct and selling, general and administrative expenses
149,283
139,828
451,531
388,422
Operating (loss) income
(16,458
)
2,984
41,113
76,809
Interest expense
(9,936
)
(7,637
)
(34,796
)
(35,151
)
Other expense
(2,537
)
(390
)
(2,775
)
(1,836
)
Net (loss) income before tax
(28,931
)
(5,043
)
3,542
39,822
Income tax (provision) benefit
(1,530
)
(379
)
10,025
(6,606
)
Net (loss) income
$
(30,461
)
$
(5,422
)
$
13,567
$
33,216
Earnings per share
(Losses) earnings per share - Basic
$
(0.23
)
$
(0.04
)
$
0.10
$
0.28
(Losses) earnings per share - Diluted
$
(0.23
)
$
(0.04
)
$
0.10
$
0.28
Weighted average number of shares outstanding during the period - Basic
129,841,264
130,478,993
130,265,112
119,344,659
Weighted average number of shares outstanding during the period - Diluted
129,841,264
130,478,993
130,601,247
119,647,364
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
2
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Comprehensive (Loss) Income
($ in thousands)
(unaudited)
Three Months Ended September 30,
Nine Months Ended September 30,
2019
2018
2019
2018
Net (loss) income
$
(30,461
)
$
(5,422
)
$
13,567
$
33,216
Other comprehensive (loss) income, net of taxes
Unrealized loss on interest rate swaps
(4,588
)
—
(25,230
)
—
Pension obligation (loss) gain
(6
)
37
(182
)
(26
)
Total other comprehensive (loss) income
(4,594
)
37
(25,412
)
(26
)
Comprehensive (loss) income
$
(35,055
)
$
(5,385
)
$
(11,845
)
$
33,190
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
3
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Shareholders' Equity
($ in thousands, except share data)
(unaudited)
Ordinary Shares
Treasury Shares
Paid-In Capital
Accumulated Other
Comprehensive Loss
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Balance at December 31, 2018
130,440,126
$
14,161
54,608
$
(394
)
$
992,297
$
(3,658
)
$
(162,565
)
$
839,841
Net income
—
—
—
—
—
—
42,988
42,988
Other comprehensive loss
—
—
—
—
—
(6,009
)
—
(6,009
)
Share-based compensation
249,044
29
—
—
2,719
—
—
2,748
Repurchase of ordinary shares
(198,179
)
—
198,179
(1,522
)
—
—
(1,522
)
Balance at March 31, 2019
130,490,991
$
14,190
252,787
$
(1,916
)
$
995,016
$
(9,667
)
$
(119,577
)
$
878,046
Net income
—
—
—
—
—
—
1,040
1,040
Other comprehensive loss
—
—
—
—
—
(14,809
)
—
(14,809
)
Share-based compensation
141,491
15
—
—
1,999
—
—
2,014
Repurchase of ordinary shares
(304,587
)
—
304,587
(2,400
)
—
—
—
(2,400
)
Balance at June 30, 2019
130,327,895
$
14,205
557,374
$
(4,316
)
$
997,015
$
(24,476
)
$
(118,537
)
$
863,891
Net loss
—
—
—
—
—
—
(30,461
)
(30,461
)
Other comprehensive loss
—
—
—
—
—
(4,594
)
—
(4,594
)
Share-based compensation
9,561
1
—
—
1,849
—
—
1,850
Repurchase of ordinary shares
(846,418
)
—
846,418
(6,385
)
—
—
—
(6,385
)
Balance at September 30, 2019
129,491,038
$
14,206
1,403,792
$
(10,701
)
$
998,864
$
(29,070
)
$
(148,998
)
$
824,301
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
4
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Shareholders' Equity (continued)
($ in thousands, except share data)
(unaudited)
Ordinary Shares
Treasury Shares
Paid-In Capital
Accumulated Other
Comprehensive Loss
Accumulated Deficit
Total
Shares
Amount
Shares
Amount
Balance at December 31, 2017
110,297,697
$
11,803
7,367
$
(80
)
$
773,194
$
(3,826
)
$
(181,542
)
$
599,549
Net income
—
—
—
—
—
—
21,817
21,817
Other comprehensive loss
—
—
—
—
—
(81
)
—
(81
)
Share-based compensation
48,699
6
—
—
1,780
—
—
1,786
Balance at March 31, 2018
110,346,396
$
11,809
7,367
$
(80
)
$
774,974
$
(3,907
)
$
(159,725
)
$
623,071
Net income
—
—
—
—
—
—
16,821
16,821
Other comprehensive income
—
—
—
—
—
18
—
18
Shares issued in business combination (see Note 4)
20,000,000
2,336
—
—
213,064
—
—
215,400
Share-based compensation
132,597
15
—
—
2,089
—
—
2,104
Balance at June 30, 2018
130,478,993
$
14,160
7,367
$
(80
)
$
990,127
$
(3,889
)
$
(142,904
)
$
857,414
Net loss
—
—
—
—
—
—
(5,422
)
(5,422
)
Other comprehensive income
—
—
—
—
—
37
—
37
Share-based compensation
—
—
—
—
1,182
—
—
1,182
Repurchase of Earnout Warrants (see Note 11)
—
—
—
—
(55
)
—
—
(55
)
Balance at September 30, 2018
130,478,993
$
14,160
7,367
$
(80
)
$
991,254
$
(3,852
)
$
(148,326
)
$
853,156
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
5
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)
Nine Months Ended September 30,
2019
2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income
$
13,567
$
33,216
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation and amortization
77,636
51,709
Amortization of debt discount and issuance costs
1,026
1,175
Share-based compensation
6,612
5,072
Loss (gain) on derivative financial instruments
199
(1,817
)
Deferred income taxes
(9,786
)
—
Amortization of key money
(187
)
—
Gain on property damage insurance proceeds
—
(203
)
Other
2,018
985
Changes in assets and liabilities:
Trade and other receivables, net
15,911
14,522
Accounts receivable from related parties
2,715
(4,826
)
Inventories
320
(214
)
Prepayments and other assets
(10,418
)
(3,845
)
Trade and other payables
(12,882
)
(4,815
)
Payables to related parties
3,548
(692
)
Income tax payable
(1,578
)
85
Other liabilities
4,349
704
Net cash provided by operating activities
93,050
91,056
INVESTING ACTIVITIES
Capital expenditures
(165,484
)
(67,252
)
Acquisition of Sagicor business, net of cash acquired
—
(93,128
)
Receipt of key money
2,500
—
Purchase of intangibles
(2,485
)
(1,505
)
Proceeds from disposal of property and equipment
104
—
Property damage insurance proceeds
2,009
203
Net cash used in investing activities
(163,356
)
(161,682
)
FINANCING ACTIVITIES
Proceeds from debt issuance
—
99,499
Repayment of Term Loan
(7,575
)
(7,325
)
Repurchase of Earnout Warrants
—
(55
)
Repurchase of ordinary shares
(10,307
)
—
Net cash (used in) provided by financing activities
(17,882
)
92,119
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS
(88,188
)
21,493
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD
$
116,353
$
117,229
CASH, CASH EQUIVALENTS AND RESTRICTED CASH, END OF THE PERIOD
$
28,165
$
138,722
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
6
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows (Continued)
($ in thousands)
(unaudited)
Nine Months Ended September 30,
2019
2018
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of interest capitalized
$
33,373
$
40,783
Cash paid for income taxes, net
$
6,527
$
9,131
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Capital expenditures incurred but not yet paid
$
9,046
$
439
Right-of-use assets obtained in exchange for new operating lease liabilities
$
1,393
$
—
Intangible assets capitalized but not yet paid
$
459
$
674
Interest capitalized but not yet paid
$
35
$
43
Par value of vested restricted share awards
$
45
$
21
Non-cash issuance of shares in business combination (see Note 4)
$
—
$
215,400
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
7
Playa Hotels & Resorts N.V.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization, operations and basis of presentation
Background
Playa Hotels & Resorts N.V. (“Playa” or the “Company”) is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations. As of September 30, 2019, we owned and/or managed a portfolio of 21 resorts located in Mexico, the Dominican Republic and Jamaica. Unless otherwise indicated or the context requires otherwise, references in our condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.
Basis of preparation, presentation and measurement
Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements as of and for the year ended December 31, 2018, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 2019 (the “Annual Report”).
In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation.
The results of operations for the three and nine months ended September 30, 2019 are not necessarily indicative of the results of operations to be expected for the full year ended December 31, 2019. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.
Note 2. Significant accounting policies
Derivative financial instruments
We use derivative financial instruments, primarily interest rate swap contracts, to hedge our exposure to interest rate risk. Such derivative financial instruments are initially recorded at fair value on the date on which a derivative contract is entered into and are subsequently remeasured to fair value at period end. As of March 20, 2019, we elected to adopt hedge accounting and designate our existing interest rate swaps as cash flow hedges. Changes in the fair value of a derivative contract that is qualified, designated and highly effective as a cash flow hedge are recorded in total other comprehensive (loss) income in our Condensed Consolidated Statements of Comprehensive (Loss) Income and reclassified into interest expense in our Condensed Consolidated Statements of Operations in the same period or periods during which the hedged transaction affects earnings. If a derivative contract does not meet this criteria, then the change in fair value is recognized in earnings.
8
Standards adopted
Standard
Description
Date of Adoption
Effect on the Financial Statements or Other Significant Matters
This standard introduces a lessee model that brings most leases on the balance sheet. This will increase a lessee’s reported assets and liabilities—in some cases very significantly. Lessor accounting remains substantially similar to current U.S. GAAP.
January 2019
We adopted ASU 2016-02 using the transition method outlined in ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, resulting in no cumulative adjustment to accumulated deficit as our lease portfolio consists solely of operating leases. Refer to Note 9 for further discussion.
ASU No. 2018-02, Income Statement-Reporting Comprehensive Income (Topic 220)
This standard provides guidance regarding the treatment of stranded income tax effects in accumulated other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017. Entities can make an election to reclassify these stranded income tax effects from accumulated other comprehensive income to retained earnings.
January 2019
We adopted ASU 2018-02 and concluded that the effect on our Condensed Consolidated Financial Statements was immaterial. The tax effects presented in accumulated other comprehensive loss relate to our employee benefit plan and have been historically immaterial.
Standards not yet adopted
Standard
Description
Date of Adoption
Effect on the Financial Statements or Other Significant Matters
This standard amends current guidance on the impairment of financial instruments by adding an impairment model (known as the current expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses.
January 2020
The adoption of ASU 2016-13 is not expected to have a material effect on our Condensed Consolidated Financial Statements. Our financial instruments that are subject to credit risk primarily include trade accounts receivable, which are short term in nature. Further, we evaluated our historical credit losses of trade accounts receivables for the years 2014 through 2018, noting that they were immaterial. We do not expect our incurred losses to significantly differ from what is currently expected over the life of the trade receivables.
Note 3. Revenue
The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in Note 19) ($ in thousands):