Park Hotels & Resorts(PK) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements The company's Q1 2023 financial statements show significant performance improvement, with total revenues increasing by 35.3% to $648 million and a swing from a $56 million net loss to a $33 million net income Condensed Consolidated Balance Sheets As of March 31, 2023, total assets decreased to $9,553 million from $9,731 million, primarily due to reduced cash, while total liabilities also decreased to $5,365 million Condensed Consolidated Balance Sheets (in millions) | Account | March 31, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $9,553 | $9,731 | | Cash and cash equivalents | $842 | $906 | | Property and equipment, net | $8,198 | $8,301 | | Total Liabilities | $5,365 | $5,440 | | Debt | $4,566 | $4,617 | | Total Equity | $4,188 | $4,291 | Condensed Consolidated Statements of Operations Total revenues increased by 35.3% to $648 million for the three months ended March 31, 2023, resulting in a net income of $33 million compared to a $57 million net loss in the prior-year period Condensed Consolidated Statements of Operations (in millions, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Total Revenues | $648 | $479 | | Operating Income | $80 | $1 | | Net Income (Loss) Attributable to Stockholders | $33 | $(57) | | Earnings (Loss) per Share – Diluted | $0.15 | $(0.24) | - The company recognized a $15 million gain on the sale of assets during Q1 2023, which contributed to the positive net income[15] Condensed Consolidated Statements of Cash Flows Net cash provided by operating activities significantly increased to $104 million in Q1 2023, with $49 million from investing activities and $217 million used in financing activities Summary of Cash Flows (in millions) | Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $104 | $44 | | Net cash provided by (used in) investing activities | $49 | $(21) | | Net cash used in financing activities | $(217) | $(69) | | Net decrease in cash | $(64) | $(46) | Notes to Condensed Consolidated Financial Statements The notes detail the company's REIT organization, accounting policies, and key financial activities including land acquisition, hotel sale, debt structure, and $168 million in capital expenditure commitments - In March 2023, the company purchased two parcels of land adjacent to the Hilton Hawaiian Village Waikiki Beach Resort for approximately $18 million[31] - 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[32] - Total debt as of March 31, 2023, was approximately $4.6 billion, with contractual maturities of $861 million in 2023[36][41] - The company has outstanding commitments of approximately $168 million for capital expenditures, including major projects at the Bonnet Creek complex, Casa Marina Key West, and Hilton Hawaiian Village[54] Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes strong Q1 2023 performance to improved demand across segments, maintaining a strong liquidity position with $842 million in cash and nearly $1 billion available under its revolving credit facility Overview and Outlook The company operates a portfolio of 46 premium-branded hotels in prime U.S. markets, expecting positive momentum to continue through 2023 driven by improving demand and anticipated international travel recovery - The company holds investments in 46 hotels with over 29,000 rooms, with approximately 88% being luxury and upper upscale, located in prime U.S. markets[60] - Management expects positive momentum to continue through 2023, based on current demand trends and an expected improvement in international travel during the second half of the year[66] Results of Operations Increased revenues and operating expenses were driven by significant market recovery, with rooms revenue increasing by $90 million and strong growth in key markets like San Francisco, Hawaii, and New York Change in Hotel Revenues and Operating Expenses (Q1 2023 vs Q1 2022, in millions) | Category | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Rooms revenue | $382 | $292 | $90 | | Food and beverage revenue | $181 | $110 | $71 | | Total corporate general and administrative | $16 | $16 | $0 | - Market-specific recovery was strong in Q1 2023 vs Q1 2022: - San Francisco: Occupancy +23.3 percentage points, ADR +45.7% - Hawaii: Occupancy +10.6 percentage points, ADR +10.4% - New York (Hilton Midtown): Occupancy +35.2 percentage points, ADR +4.2%[88] Non-GAAP Financial Measures The company uses non-GAAP measures like EBITDA and FFO, with Hotel Adjusted EBITDA increasing to $152 million and Adjusted FFO attributable to stockholders rising to $92 million in Q1 2023 Reconciliation of Net Income (Loss) to Hotel Adjusted EBITDA (in millions) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income (loss) | $33 | $(56) | | EBITDA | $152 | $76 | | Adjusted EBITDA | $146 | $82 | | Hotel Adjusted EBITDA | $152 | $89 | Reconciliation to Adjusted FFO (in millions, except per share) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net income (loss) attributable to stockholders | $33 | $(57) | | Nareit FFO attributable to stockholders | $82 | $13 | | Adjusted FFO attributable to stockholders | $92 | $18 | | Adjusted FFO per share – Diluted | $0.42 | $0.08 | Liquidity and Capital Resources As of March 31, 2023, the company had $842 million in cash and $946 million available under its Revolver, with plans to address a $725 million mortgage due in November 2023 - As of March 31, 2023, the company had total liquidity of approximately $1.8 billion, consisting of $842 million in cash and $946 million of available capacity under its Revolver[38][96] - The company plans to address the $725 million mortgage loan secured by its San Francisco hotels, due in November 2023, by the end of the second quarter of 2023[98] - In February 2023, a new $300 million stock repurchase program was authorized; during Q1 2023, the company repurchased 8.8 million shares for a total of $105 million[65][104] - A dividend of $0.15 per share was declared for Q1 2023[111] Quantitative and Qualitative Disclosures About Market Risk The company is primarily exposed to market risk from changes in interest rates, which can affect future income, cash flows, and the fair value of its financial instruments - The company's main market risk exposure is from changes in interest rates[114] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes in internal control over financial reporting - The CEO and CFO concluded that as of March 31, 2023, the company's disclosure controls and procedures were effective[115] - No material changes were made to the company's internal control over financial reporting during the most recent fiscal quarter[116] PART II. OTHER INFORMATION Legal Proceedings The company is involved in ordinary course litigation but does not expect the outcomes to have a material adverse effect on its consolidated financial position or operations - The company is involved in ordinary course litigation but does not expect the outcomes to have a material adverse effect on its consolidated financial position[118] Risk Factors There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2022 - No material changes from the risk factors disclosed in the 2022 Form 10-K were reported[119] Unregistered Sales of Equity Securities and Use of Proceeds During Q1 2023, the company repurchased 8,990,348 shares, including 8,815,500 under publicly announced programs, with a new $300 million repurchase program authorized in February 2023 Purchases of Equity Securities (Q1 2023) | Period | Total Shares Purchased | Weighted Avg. Price Paid | Shares Purchased as Part of Program | Max Value Remaining in Program (in millions) | | :--- | :--- | :--- | :--- | :--- | | Jan 2023 | 2,536,900 | $11.64 | 2,536,900 | $43 | | Feb 2023 | 174,848 | $13.78 | — | $300 | | Mar 2023 | 6,278,600 | $11.93 | 6,278,600 | $225 | | Total | 8,990,348 | | 8,815,500 | | - A new $300 million stock repurchase program was authorized on February 17, 2023, expiring in February 2025, which replaced the previous program[124] Other Information There was no other information to report for this period - None[127]