Park Hotels & Resorts(PK) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The unaudited condensed consolidated financial statements as of June 30, 2025, show total assets decreased to $8.87 billion, with a net loss of $59 million for the six months, driven by a $70 million impairment and higher depreciation Condensed Consolidated Balance Sheets Total assets decreased to $8.87 billion as of June 30, 2025, primarily due to reduced property and equipment, impacting total equity Condensed Consolidated Balance Sheet Highlights (in millions) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $8,870 | $9,161 | | Property and equipment, net | $7,176 | $7,398 | | Cash and cash equivalents | $319 | $402 | | Total Liabilities | $5,482 | $5,567 | | Debt | $3,840 | $3,841 | | Debt associated with hotels in receivership | $725 | $725 | | Total Equity | $3,388 | $3,594 | Condensed Consolidated Statements of Operations The company reported a net loss of $62 million for H1 2025, a shift from prior-year income, primarily due to a $70 million impairment and increased depreciation Statement of Operations Summary (in millions, except per share data) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Total Revenues | $1,302 | $1,325 | | Operating Income | $72 | $213 | | Net (Loss) Income Attributable to Stockholders | $(62) | $92 | | (Loss) Earnings Per Share – Diluted | $(0.31) | $0.44 | - A significant driver of the net loss was a $70 million impairment and casualty loss recorded in the first six months of 2025, compared to only $13 million in the prior year period[13] - Depreciation and amortization expense increased to $191 million for the first six months of 2025 from $129 million in the same period of 2024[13] Condensed Consolidated Statements of Cash Flows Net cash from operations decreased to $194 million in H1 2025, while investing activities used less cash due to asset dispositions Cash Flow Summary (in millions) | Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $194 | $209 | | Net cash used in investing activities | $(45) | $(121) | | Net cash used in financing activities | $(242) | $(354) | | Net decrease in cash | $(93) | $(266) | Notes to Condensed Consolidated Financial Statements Key notes include the $80 million sale of Hyatt Centric, ongoing receivership for two San Francisco hotels with a $725 million defaulted loan, a $70 million impairment, and $161 million in capital commitments - In May 2025, the company sold the Hyatt Centric Fisherman's Wharf for gross proceeds of $80 million, recognizing a net gain of approximately $1 million[29] - The company ceased payments on a $725 million non-recourse CMBS loan for two San Francisco hotels in June 2023, with hotels now in receivership and a sale agreement executed in July 2025[37] - A $70 million impairment loss was recognized in H1 2025 related to the Hyatt Centric Fisherman's Wharf prior to its sale[42] - As of June 30, 2025, the company had outstanding commitments of approximately $161 million for capital expenditures, including major renovations at Royal Palm South Beach Miami and Hilton Hawaiian Village[60] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses mixed operational performance, cautious optimism for 2025, the default on the $725 million SF Mortgage Loan, and strong liquidity with a new $300 million stock repurchase program - The company's portfolio consists of 39 premium-branded hotels with approximately 25,000 rooms, primarily in luxury and upper upscale segments in prime U.S. markets[66] - Management expresses cautious optimism for 2025, expecting improvements in demand and benefits from transformative renovations, despite macroeconomic uncertainties like inflation and high interest rates[71] - As of June 30, 2025, the company had $319 million in cash and cash equivalents and $950 million available under its revolving credit facility, providing sufficient liquidity[113][114] Results of Operations Q2 2025 total revenues decreased by $14 million, with varied market performance, including growth in Orlando and declines in Hawaii and Miami due to renovations and closures Rooms Revenue Breakdown (in millions) | Revenue Type | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Group rooms revenue | $121 | $128 | $(7) | | Transient rooms revenue | $250 | $255 | $(5) | | Total Rooms Revenue | $401 | $416 | $(15) | - Strong performance was noted in Orlando, New Orleans, New York, and Key West, driven by renovations and demand increases[95][96][97][99][100] - Performance was negatively impacted by decreases in Hawaii due to renovation disruption and in Miami due to the full-scale renovation and operational suspension of the Royal Palm South Beach Miami[101] - Depreciation expense increased significantly due to $56 million in accelerated depreciation for the renovation at the Royal Palm South Beach Miami[105] Non-GAAP Financial Measures Adjusted EBITDA decreased to $327 million and Adjusted FFO to $221 million for H1 2025, reflecting a challenging operating environment Reconciliation of Net (Loss) Income to Hotel Adjusted EBITDA (in millions) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net (loss) income | $(59) | $96 | | EBITDA | $270 | $345 | | Adjusted EBITDA | $327 | $355 | | Hotel Adjusted EBITDA | $342 | $368 | Reconciliation to Nareit FFO and Adjusted FFO (in millions, except per share) | Metric | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :--- | :--- | :--- | | Net (loss) income attributable to stockholders | $(62) | $92 | | Nareit FFO attributable to stockholders | $167 | $206 | | Adjusted FFO attributable to stockholders | $221 | $248 | | Nareit FFO per share – Diluted | $0.83 | $0.98 | | Adjusted FFO per share – Diluted | $1.10 | $1.18 | Liquidity and Capital Resources The company maintains strong liquidity with $319 million cash and $950 million revolver availability, utilizing cash for dividends and share repurchases under a new $300 million program - Total liquidity includes $319 million in cash and $950 million available under the revolving credit facility[114] - In February 2025, a new $300 million stock repurchase program was authorized, with 3.5 million shares repurchased for $45 million during the first six months of 2025[118][119] - Cash from operations decreased by $15 million year-over-year to $194 million for the six months ended June 30, 2025, mainly due to lower occupancy at certain hotels[121] - The company declared a quarterly dividend of $0.25 per share for Q2 and Q3 2025[115][126] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure stems from interest rate changes, which may be mitigated through hedging arrangements - The primary market risk exposure is from changes in interest rates[129] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that as of June 30, 2025, disclosure controls and procedures were effective[130] - No material changes to internal control over financial reporting occurred in the second quarter of 2025[131] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course litigation, but management expects no material adverse effect on financial position or liquidity - The company is involved in ordinary course litigation but does not expect it to have a material adverse effect[133] Risk Factors No material changes to risk factors have been reported since the company's Annual Report on Form 10-K for the year ended December 31, 2024 - No material changes to risk factors were reported since the last Annual Report[134] Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 3.7 million shares under a new $300 million program authorized in February 2025, with $275 million remaining available Purchases of Equity Securities (Jan-Mar 2025) | Period | Total Shares Purchased | Avg. Price Paid | Remaining Authorization (in millions) | | :--- | :--- | :--- | :--- | | Jan 2025 | 1,430,264 | $14.00 | $14 | | Feb 2025 | 178,986 | $12.73 | $300 | | Mar 2025 | 2,085,011 | $11.97 | $275 | - A new $300 million stock repurchase program was authorized on February 14, 2025, expiring in February 2027[142] Defaults Upon Senior Securities The company defaulted on its SF Mortgage Loan in June 2023, with $132 million in arrearage, leading to receivership and an expected sale of the securing hotels by October 2025 - The company ceased payments on the SF Mortgage Loan in June 2023, leading to a notice of default[138] - As of August 1, 2025, total arrearage on the loan was $132 million[138] - The hotels are in receivership and a purchase and sale agreement has been executed with an expected closing by October 29, 2025[138] Exhibits This section lists exhibits filed with the Form 10-Q, including agreements, corporate governance documents, and officer certifications