Park Hotels & Resorts(PK) - 2024 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Park Hotels & Resorts Inc Condensed Consolidated Balance Sheets Total assets decreased to $9.085 billion, while total liabilities decreased to $5.343 billion as of March 31, 2024 Condensed Consolidated Balance Sheets (in millions) | | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total Assets | $9,085 | $9,419 | | Cash and cash equivalents | $378 | $717 | | Property and equipment, net | $7,441 | $7,459 | | Total Liabilities | $5,343 | $5,651 | | Debt | $3,764 | $3,765 | | Debt associated with hotels in receivership | $725 | $725 | | Dividends payable | $57 | $362 | | Total Equity | $3,742 | $3,768 | Condensed Consolidated Statements of Operations For Q1 2024, total revenues were $639 million, with net income attributable to stockholders of $28 million Condensed Consolidated Statements of Operations (in millions, except per share data) | | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Total revenues | $639 | $648 | | Rooms | $374 | $382 | | Operating income | $92 | $80 | | Net income attributable to stockholders | $28 | $33 | | Earnings per share – Diluted | $0.13 | $0.15 | Condensed Consolidated Statements of Cash Flows Net cash from operations was $92 million, with a net decrease in cash of $340 million for Q1 2024 Net Cash Flow Summary (in millions) | Activity | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $92 | $104 | | Net cash (used in) provided by investing activities | $(70) | $49 | | Net cash used in financing activities | $(362) | $(217) | | Net decrease in cash | $(340) | $(64) | Notes to Condensed Consolidated Financial Statements The notes detail significant events including asset sales, impairment losses, and the San Francisco hotel receivership - In February 2023, the company sold the Hilton Miami Airport hotel for gross proceeds of $118.25 million, recognizing a net gain of approximately $15 million[28] - In June 2023, the company ceased payments on the $725 million non-recourse CMBS loan (SF Mortgage Loan) for two San Francisco hotels, leading to receivership and a $14 million gain in Q1 2024 from derecognized interest[38][39] - During Q1 2024, the company recognized an impairment loss of approximately $5 million related to one of its hotels[30][43] - As of March 31, 2024, the company had outstanding commitments of approximately $91 million for capital expenditures at its properties[54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses performance, highlighting strong comparable hotel results despite impacts from the San Francisco hotels Overview and Outlook The company operates 43 premium hotels and anticipates continued positive demand momentum through 2024 - The company has interests in 43 premium-branded hotels with over 26,000 rooms, with over 86% being luxury and upper upscale, located in prime U.S. markets[60] - Management expects positive momentum to continue for the remainder of 2024, based on current demand trends, expected increases in city-wide events, and improving international travel[64] Results of Operations Results were impacted by non-comparable hotels, but comparable properties showed strong revenue growth in key markets - The exclusion of the two Hilton San Francisco Hotels from consolidation resulted in a significant year-over-year variance, including a $34 million decrease in rooms revenue from these non-comparable properties[84][85] - Comparable hotel revenue increased, driven by strong performance in Orlando (Signia by Hilton: occupancy +5.4 pts, ADR +8.3%), New York (Hilton Midtown: occupancy +5.7 pts, ADR +2.8%), and Key West (Casa Marina: occupancy +6.1 pts, ADR +24.4% post-renovation)[86][89] - Interest expense on the defaulted SF Mortgage Loan increased by $6 million due to a higher default interest rate of 7.11% (up from 4.11%) and additional late fees[97] Non-GAAP Financial Measures Adjusted EBITDA and Adjusted FFO per share increased year-over-year, reflecting improved operational performance Non-GAAP Performance Summary (in millions, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | | :--- | :--- | :--- | | Adjusted EBITDA | $162 | $146 | | Hotel Adjusted EBITDA | $169 | $152 | | Nareit FFO attributable to stockholders | $84 | $82 | | Adjusted FFO attributable to stockholders | $111 | $92 | | Adjusted FFO per share – Diluted | $0.52 | $0.42 | Liquidity and Capital Resources The company maintains a strong liquidity position with sufficient cash and revolver availability for future obligations - As of March 31, 2024, the company had $378 million in cash and cash equivalents and approximately $950 million available under its Revolver[98][100] - Excluding the defaulted SF Mortgage Loan, the company has no significant debt maturities until June 2025[100] - A first-quarter dividend of $0.25 per share was paid in April 2024, and a second-quarter dividend of $0.25 per share was declared for payment in July 2024[101][110] - The stock repurchase program, authorized in February 2023 for up to $300 million, had $150 million remaining available for repurchases as of March 31, 2024[104] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk exposure stems from interest rate fluctuations affecting its financial instruments - The company's primary market risk exposure is from changes in interest rates[113] Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The CEO and CFO concluded that as of March 31, 2024, the company's disclosure controls and procedures were effective[114] - No material changes were made to internal controls over financial reporting during the most recent fiscal quarter[115] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course legal proceedings not expected to have a material adverse effect - The company is involved in various ordinary course legal proceedings and believes it has adequate reserves to cover potential losses, which are not expected to be materially adverse[118] Risk Factors No material changes to risk factors have occurred since the company's 2023 Annual Report on Form 10-K - No material changes to risk factors were reported since the last Annual Report on Form 10-K[119] Unregistered Sales of Equity Securities and Use of Proceeds No shares were repurchased under the public plan in Q1 2024, with $150 million remaining available - No shares were repurchased as part of the publicly announced plan in Q1 2024; $150 million remains available under the stock repurchase program[123] Defaults Upon Senior Securities The company defaulted on its SF Mortgage Loan, resulting in receivership and a total arrearage of $54 million - The company defaulted on the SF Mortgage Loan after ceasing payments in June 2023; a receiver was appointed in October 2023 to take control of the two Hilton San Francisco hotels[124] - As of May 1, 2024, the total arrearage on the loan was $54 million, which includes $24 million in default interest[124] - The receiver can sell the hotels until November 1, 2024; otherwise, a non-judicial foreclosure is expected by December 2, 2024[124] Exhibits This section lists all exhibits filed with the Form 10-Q, including required CEO and CFO certifications