Playa Hotels & Resorts(PLYA) - 2020 Q4 - Annual Report

PART I Business Playa Hotels & Resorts N.V. operates 21 all-inclusive resorts in Mexico and the Caribbean, leveraging strategic brand partnerships, with 2020 operations significantly impacted by the COVID-19 pandemic Portfolio Overview as of December 31, 2020 | Metric | Value | | :--- | :--- | | Total Resorts | 21 | | Total Rooms | 8,172 | | Locations | Mexico, Jamaica, Dominican Republic | - Playa's strategy is to leverage globally recognized brand partnerships, such as Hyatt and Hilton, to capitalize on the high volume of U.S. visitors to its operating regions[26][28] - The COVID-19 pandemic had a significant adverse impact on the business starting in the first quarter of 2020, leading to the temporary suspension of operations at all resorts[33] - The company emphasizes its integrated and scalable operating platform, which manages 18 of its resorts and is designed to improve operating efficiency and integrate new acquisitions[34] - As of December 31, 2020, the company employed approximately 8,000 people, with the majority located at its resorts in Jamaica, Mexico, and the Dominican Republic, with staffing levels temporarily adjusted in 2020 due to the pandemic[66] Risk Factors The company faces significant risks including the ongoing COVID-19 pandemic impact, geographic concentration, reliance on strategic partnerships, substantial debt, and a material weakness in internal controls over financial reporting - The COVID-19 pandemic is having a significant material adverse effect on business, results, cash flows, and financial condition, leading to no revenues in Q2 2020 and severely reduced occupancy upon reopening[68][69] - The company is exposed to risks from its geographic concentration in Mexico, Jamaica, and the Dominican Republic, including weather-related events like hurricanes[74] - Critical relationships with Hyatt and Hilton are essential, and their deterioration, failure to maintain brand standards, or termination of franchise agreements could significantly harm the business and portfolio value[77][80][89] - The company has $1.27 billion substantial debt as of December 31, 2020, which could restrict future operations, and its debt agreements impose significant restrictive covenants[116][119] - A material weakness in internal control over financial reporting related to income taxes was identified for both 2020 and 2019, increasing the risk of a material misstatement in financial statements[134] Unresolved Staff Comments The company reported no unresolved staff comments from the SEC - None[180] Properties As of December 31, 2020, the company's portfolio comprises 21 resorts with 8,172 rooms across four geographic segments, with 7,720 rooms owned and 452 managed Portfolio Summary by Status (as of Dec 31, 2020) | Category | Total Rooms | | :--- | :--- | | Total Rooms Owned | 7,720 | | Total Rooms Operated (Managed) | 452 | | Total Rooms Owned and Operated | 8,172 | Portfolio Breakdown by Geographic Segment (Owned Rooms) | Segment | Number of Resorts | Total Rooms | | :--- | :--- | :--- | | Yucatán Peninsula | 7 | 2,642 | | Pacific Coast | 2 | 926 | | Dominican Republic | 6 | 2,644 | | Jamaica | 5 | 1,508 | Legal Proceedings The company is involved in various legal claims and lawsuits, with detailed information incorporated by reference from Note 8 of the Consolidated Financial Statements - Information on legal proceedings is incorporated by reference from Note 8 – Commitments and contingencies in the Consolidated Financial Statements[184] Mine Safety Disclosures This item is not applicable to the company - Not Applicable[185] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's ordinary shares trade on NASDAQ under "PLYA", with 164,029,575 shares outstanding as of February 26, 2021, and no cash dividends paid or anticipated due to retention for operations and credit facility restrictions - The company's ordinary shares have traded on NASDAQ under the symbol "PLYA" since March 13, 2017[187] - The company has never paid cash dividends and does not plan to in the foreseeable future, with payments also being restricted by its Senior Secured Credit Facility[189] - In June 2020, the company sold 4,878,049 ordinary shares to certain buyers for an aggregate purchase price of $20.0 million, at a price of $4.10 per share[192] Selected Financial Data Selected financial data for 2020 reflects a significant downturn due to COVID-19, with total revenue at $273.2 million, a net loss of $262.4 million, and $99.9 million net cash used in operating activities Selected Consolidated Statement of Operations Data ($ in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total revenue | $273,189 | $636,477 | $617,013 | | Operating (loss) income | $(190,237) | $25,710 | $90,597 | | Net (loss) income | $(262,370) | $(4,357) | $18,977 | Selected Consolidated Balance Sheet Data ($ in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total assets | $2,097,665 | $2,196,964 | $2,135,158 | | Total debt | $1,251,267 | $1,040,658 | $989,387 | | Total equity | $568,136 | $809,651 | $839,841 | Selected Consolidated Statement of Cash Flow Data ($ in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash from Operating activities | $(99,938) | $72,188 | $114,430 | | Net cash from Investing activities | $29,412 | $(203,816) | $(204,586) | | Net cash from Financing activities | $222,455 | $36,206 | $89,280 | Management's Discussion and Analysis of Financial Condition and Results of Operations The COVID-19 pandemic severely impacted 2020 performance, leading to a 57.1% decrease in total revenue to $273.2 million and a $262.4 million net loss, prompting significant liquidity preservation measures and phased resort reopenings - The COVID-19 pandemic led to the temporary suspension of operations at all resorts in late March 2020, with reopenings beginning July 1, 2020, resulting in a significant adverse impact on revenue and liquidity[201][202] - To mitigate the pandemic's impact, the company raised $224.0 million in additional capital, sold two resorts for $60.0 million, deferred non-critical capital expenditures, and implemented broad compensation cuts[204] Key Performance Indicators (Total Portfolio, 2020 vs 2019) | Metric | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Occupancy | 26.9% | 77.3% | (65.2)% | | Net Package RevPAR | $76.61 | $198.28 | (61.4)% | | Total Net Revenue ($M) | $262.9 | $607.2 | (56.7)% | | Adjusted EBITDA ($M) | $(21.2) | $150.7 | (114.1)% | - As of December 31, 2020, the company had $146.9 million of available cash (excluding restricted cash) and $1.27 billion total debt obligations[270][273] - Critical accounting policies and estimates involve significant judgment, particularly in areas like business combinations, impairment of property and goodwill, and income taxes[292] Quantitative and Qualitative Disclosures About Market Risk The company is exposed to interest rate risk, with 23% of debt at floating rates, and foreign currency risk, where a 5% adverse change could impact pre-tax net income by approximately $10.5 million annually - The company is exposed to interest rate risk, with 23% of its outstanding debt at floating rates as of year-end 2020, where a 1.0% increase in rates would result in an approximate $1.2 million annual increase in interest expense[313] - The company faces foreign currency risk as approximately 79.5% of its 2020 operating expenses were denominated in local currencies, while revenues are primarily in U.S. dollars[315] - A hypothetical 5% adverse change in foreign exchange rates would have impacted 2020 net income before tax by approximately $5.0 million (Mexican Peso), $2.3 million (Dominican Peso), and $3.2 million (Jamaican Dollar)[316] Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2020, including an unqualified opinion on financials but an adverse opinion on internal control over financial reporting due to a material weakness in income tax provision - The independent auditor, Deloitte & Touche LLP, issued an unqualified opinion on the financial statements but an adverse opinion on the effectiveness of internal control over financial reporting as of December 31, 2020[322][333] - The auditor identified a material weakness in internal control over financial reporting, stating that the company's control activities related to its income tax provision did not operate with a level of precision that would identify a material misstatement[339] Consolidated Balance Sheet Highlights ($ in thousands) | | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $146,919 | $20,931 | | Total Assets | $2,097,665 | $2,196,964 | | Total Debt | $1,251,267 | $1,040,658 | | Total Shareholders' Equity | $568,136 | $809,651 | Consolidated Statement of Operations Highlights ($ in thousands) | | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total revenue | $273,189 | $636,477 | $617,013 | | Operating (loss) income | $(190,237) | $25,710 | $90,597 | | Net (loss) income | $(262,370) | $(4,357) | $18,977 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reported no changes in or disagreements with its accountants on accounting and financial disclosure - None[557] Controls and Procedures Management concluded that disclosure controls and procedures were not effective as of December 31, 2020, due to a material weakness in internal control over financial reporting related to the income tax provision, with a remediation plan initiated - Management concluded that disclosure controls and procedures were not effective as of December 31, 2020[559] - A material weakness was identified in internal control over financial reporting: "The control activities related to our income tax provision did not operate with a level of precision that would identify a material misstatement"[561] - The company has initiated a remediation plan that includes hiring additional resources and implementing enhanced policies, procedures, and controls for income tax accounting[563] Other Information The company reported no other information for this item - None[566] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's 2021 Annual General Meeting of Shareholders Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for the 2021 Annual General Meeting of Shareholders[569] Executive Compensation Information on executive compensation is incorporated by reference from the company's 2021 Annual General Meeting of Shareholders Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for the 2021 Annual General Meeting of Shareholders[570] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership is incorporated by reference from the 2021 Proxy Statement, with 8,043,686 securities available for future issuance under equity compensation plans as of December 31, 2020 - Information is incorporated by reference to the Company's Proxy Statement for the 2021 Annual General Meeting of Shareholders[571] Securities Authorized for Issuance Under Equity Compensation Plans (as of Dec 31, 2020) | Plan Category | Securities remaining for future issuance | | :--- | :--- | | Equity compensation plans approved by security holders | 8,043,686 | | Total | 8,043,686 | Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the company's 2021 Annual General Meeting of Shareholders Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for the 2021 Annual General Meeting of Shareholders[574] Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the company's 2021 Annual General Meeting of Shareholders Proxy Statement - Information is incorporated by reference to the Company's Proxy Statement for the 2021 Annual General Meeting of Shareholders[575] PART IV Exhibits and Financial Statement Schedules This section lists financial statements, schedules, and exhibits filed with the Annual Report on Form 10-K, including corporate governance documents and material contracts - This section contains a list of all financial statements, schedules, and exhibits filed with the 10-K[578][585] Form 10-K Summary This item is not applicable to the company's filing - Not applicable[588]