Playa Hotels & Resorts(PLYA) - 2021 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This part presents the company's unaudited financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the first quarter Item 1. Financial Statements (unaudited) This section presents the unaudited condensed consolidated financial statements for Q1 2021, including core financial statements and detailed notes, reflecting the significant impact of the COVID-19 pandemic Condensed Consolidated Balance Sheets | Metric | As of March 31, 2021 ($ in millions) | As of December 31, 2020 ($ in millions) | Change ($ in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------- | :---------------------- | | Cash and cash equivalents | 200.4 | 146.9 | 53.5 | | Total assets | 2,068.9 | 2,097.7 | (28.8) | | Debt | 972.0 | 1,251.3 | (279.3) | | Total liabilities | 1,430.2 | 1,529.5 | (99.3) | | Total shareholders' equity | 638.7 | 568.1 | 70.6 | Condensed Consolidated Statements of Operations | Metric | Three Months Ended March 31, 2021 ($ in millions) | Three Months Ended March 31, 2020 ($ in millions) | Change ($ in millions) | % Change | | :-------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | :------- | | Total revenue | 77.7 | 177.2 | (99.5) | (56.1)% | | Operating (loss) income | (52.8) | 3.4 | (56.2) | (1,646.3)% | | Net loss | (69.7) | (22.6) | (47.2) | 209.2% | | Losses per share - Basic | (0.43) | (0.17) | (0.26) | 152.9% | Condensed Consolidated Statements of Comprehensive Loss | Metric | Three Months Ended March 31, 2021 ($ in millions) | Three Months Ended March 31, 2020 ($ in millions) | Change ($ in millions) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | | Net loss | (69.7) | (22.6) | (47.2) | | Unrealized gain (loss) on interest rate swaps | 2.9 | (15.0) | 17.9 | | Total other comprehensive income (loss) | 2.9 | (15.1) | 18.0 | | Comprehensive loss | (66.9) | (37.7) | (29.2) | Condensed Consolidated Statements of Shareholders' Equity | Metric | As of March 31, 2021 ($ in millions) | As of December 31, 2020 ($ in millions) | Change ($ in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------- | :---------------------- | | Ordinary shares | 18.5 | 14.9 | 3.6 | | Paid-in capital | 1,167.4 | 1,030.1 | 137.3 | | Accumulated deficit | (502.4) | (429.3) | (73.2) | | Total shareholders' equity | 638.7 | 568.1 | 70.6 | - Equity issuance in Q1 2021 contributed $137.7 million to paid-in capital[16] Condensed Consolidated Statements of Cash Flows | Cash Flow Activity | Three Months Ended March 31, 2021 ($ in millions) | Three Months Ended March 31, 2020 ($ in millions) | Change ($ in millions) | | :-------------------------------- | :------------------------------------------------- | :------------------------------------------------- | :---------------------- | | Net cash (used in) provided by operating activities | (26.6) | 26.7 | (53.3) | | Net cash provided by investing activities | 29.6 | 2.0 | 27.6 | | Net cash provided by financing activities | 50.4 | 19.9 | 30.5 | | Increase in cash and cash equivalents | 53.5 | 48.7 | 4.8 | Notes to the Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering key accounting policies, revenue, assets, liabilities, equity, and segment information, highlighting COVID-19's ongoing impact Note 1. Organization, operations and basis of presentation - Playa Hotels & Resorts N.V. is a leading owner, operator, and developer of 22 all-inclusive resorts in Mexico, the Dominican Republic, and Jamaica[23] - Due to COVID-19, all resorts temporarily suspended operations from late March through June 2020, with all except the Capri Resort reopened as of March 31, 2021[24] Note 2. Significant accounting policies - The adoption of ASU No. 2019-12 resulted in a $3.4 million cumulative-effect adjustment to opening retained earnings for Q1 2021, impacting deferred tax liabilities and expense for Dominican Republic resorts[28] Note 3. Revenue | Revenue Type | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | Change ($ in millions) | % Change | | :------------- | :----------------------- | :----------------------- | :---------------------- | :------- | | Package | 63.9 | 153.1 | (89.2) | (58.3)% | | Non-package | 13.0 | 22.6 | (9.6) | (42.4)% | | Management fees| 0.3 | 0.6 | (0.3) | (46.7)% | | Cost reimbursements | 0.5 | 1.0 | (0.4) | (46.0)% | | Total revenue | 77.7 | 177.2 | (99.5) | (56.1)% | | Geographic Segment | Q1 2021 Total Revenue ($ in millions) | Q1 2020 Total Revenue ($ in millions) | | :----------------- | :------------------------------------- | :------------------------------------- | | Yucatán Peninsula | 34.7 | 64.3 | | Pacific Coast | 8.9 | 21.8 | | Dominican Republic | 20.9 | 35.6 | | Jamaica | 12.7 | 54.5 | Note 4. Property and equipment - On February 5, 2021, the company sold Dreams Puerto Aventuras for $34.5 million in cash, recognizing a $0.2 million loss[35] - On March 31, 2021, an agreement was made to sell Capri Resort for $55.0 million in cash, resulting in a $24.0 million impairment loss[37] Note 5. Income taxes - The company recognized an income tax benefit of $2.0 million for Q1 2021, a significant increase from a $1.1 million provision in Q1 2020, primarily due to lower pre-tax book income, impairment on Capri Resort, and foreign exchange rate fluctuations[41] - An additional $3.0 million valuation allowance was recognized against deferred tax assets of Mexico and Jamaica entities[40][41] Note 6. Related party transactions | Related Party | Transaction | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | | :------------ | :---------- | :----------------------- | :----------------------- | | Hyatt | Franchise fees | 3.5 | 5.5 | | Sagicor | Insurance premiums | 0.2 | 0.4 | | Sagicor | Cost reimbursements | 0.4 | 0.7 | | Chief Executive Officer | Lease expense | 0.2 | 0.2 | | DKCM | Interest expense | 5.4 | — | Note 8. Ordinary shares - On January 11, 2021, the company issued 28,750,000 ordinary shares in a public equity offering, receiving $137.7 million in cash, net of costs[50] - As of March 31, 2021, there were 164,029,575 ordinary shares outstanding[51] Note 11. Debt | Debt Type | As of March 31, 2021 ($ in millions) | As of December 31, 2020 ($ in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------- | | Revolving Credit Facilities | — | 84.7 | | Term Loan (net) | 1,060.7 | 1,062.7 | | Property Loan (net) | 102.1 | 101.6 | | Financing lease obligations | 2.3 | 2.3 | | Total debt, net | 1,165.1 | 1,251.3 | - The Fifth Amendment to the Amended & Restated Credit Agreement extended $68.0 million of the revolving credit facility to January 2024, repaid the $84.7 million outstanding balance, and increased the interest rate on the extended portion to LIBOR plus 4.00%[62] - The company was in compliance with all applicable financial covenants as of March 31, 2021, including maintaining a minimum liquidity balance of $60.0 million through the Relief Period (March 31, 2022)[63] Note 12. Derivative financial instruments - The company uses two interest rate swaps with fixed notional values of $200.0 million and $600.0 million to mitigate interest rate risk, fixing LIBOR at 2.85% on $800.0 million of its Term Loan[64] | Metric | As of March 31, 2021 ($ in millions) | As of December 31, 2020 ($ in millions) | | :-------------------------- | :------------------------------------ | :------------------------------------- | | Interest rate swaps (Derivative financial instruments) | 40.8 | 46.3 | - Unrealized gain on interest rate swaps was $2.9 million for Q1 2021, compared to a loss of $15.0 million for Q1 2020, recognized through other comprehensive income (loss)[13] Note 13. Fair value of financial instruments | Financial Instrument | Fair Value (March 31, 2021, $ in millions) | Fair Value (December 31, 2020, $ in millions) | Fair Value Hierarchy Level | | :------------------- | :------------------------------------------ | :------------------------------------------- | :------------------------- | | Interest rate swap | 40.8 | 46.3 | Level 2 | | Financial Instrument | Fair Value (March 31, 2021, $ in millions) | Fair Value Hierarchy Level | | :------------------- | :------------------------------------------ | :------------------------- | | Impaired long-lived assets (Capri Resort) | 55.0 | Level 2 | Note 15. Segment information - The company evaluates business segment performance primarily on Adjusted EBITDA and Owned Resort EBITDA, which are non-GAAP measures[81][82] | Metric | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | Change ($ in millions) | % Change | | :-------------------------- | :----------------------- | :----------------------- | :---------------------- | :------- | | Segment Owned Net Revenue | 74.8 | 170.5 | (95.7) | (56.1)% | | Segment Owned Resort EBITDA | 6.5 | 60.7 | (54.1) | (89.2)% | | Total Adjusted EBITDA | (2.5) | 50.3 | (52.8) | (105.0)% | Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of Q1 2021 financial condition and operations, emphasizing the adverse impact of COVID-19 on revenue, profitability, and liquidity, alongside mitigation strategies and key performance metrics Cautionary Note Regarding Forward-Looking Statements - The report contains forward-looking statements subject to various factors that could cause actual outcomes to differ materially, with the COVID-19 pandemic being one of the most significant factors[89] Overview - Playa is a leading owner, operator, and developer of 22 all-inclusive resorts (8,366 rooms) in Mexico, Jamaica, and the Dominican Republic[92] | Metric | Q1 2021 | Q1 2020 | Change | | :------------------ | :------ | :------ | :----- | | Net loss | $(69.7)M | $(22.6)M | $(47.1)M | | Total revenue | $77.7M | $177.2M | $(99.5)M | | Net Package RevPAR | $91.40 | $197.55 | $(106.15) | | Adjusted EBITDA | $(2.5)M | $50.3M | $(52.8)M | Impact of COVID-19 Pandemic - The COVID-19 pandemic severely reduced occupancy levels and significantly disrupted global leisure travel, leading to temporary resort suspensions and adverse economic effects[94][95] - As of March 31, 2021, the company had $200.4 million in available cash and implemented several liquidity measures[97] - Raised $138.0 million in additional capital through an equity offering in January 2021[99] - Repaid the outstanding balance under the Revolving Credit Facility and amended/extended it in February 2021[99] - Sold Dreams Puerto Aventuras for $34.5 million in February 2021[99] - Entered an agreement to sell Capri Resort for $55.0 million in March 2021[99] Our Portfolio of Resorts - As of March 31, 2021, Playa's portfolio consisted of 22 owned and/or managed resorts (8,366 rooms) across the Yucatán Peninsula, Pacific Coast, Dominican Republic, and Jamaica[100][102] Results of Operations The company experienced significant declines in revenue and profitability for Q1 2021 compared to Q1 2020, primarily due to reduced occupancy from the COVID-19 pandemic, leading to substantial operating losses despite cost-cutting measures Total Revenue and Total Net Revenue | Metric | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | Change ($ in millions) | % Change | | :------------------ | :----------------------- | :----------------------- | :---------------------- | :------- | | Total revenue | 77.7 | 177.2 | (99.5) | (56.1)% | | Total Net Revenue | 75.3 | 171.2 | (95.9) | (56.0)% | | Occupancy (Total Portfolio) | 31.6% | 66.6% | (35.0)pts | (52.6)% | | Net Package RevPAR (Total Portfolio) | $91.40 | $197.55 | $(106.15) | (53.7)% | - The decreases in total revenue and total net revenue were primarily due to reduced occupancy at all resorts as a result of the COVID-19 pandemic[107] Direct Expenses | Metric | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | Change ($ in millions) | % Change | | :------------------ | :----------------------- | :----------------------- | :---------------------- | :------- | | Net Direct Expenses | 58.3 | 92.8 | (34.5) | (37.2)% | | Salaries and wages | 25.0 | 37.6 | (12.6) | (33.4)% | | Food and beverages | 10.3 | 20.9 | (10.6) | (50.7)% | - Net Direct Expenses decreased due to reduced occupancy and cost-cutting measures in response to the COVID-19 pandemic[112][113] Selling, General and Administrative Expenses - Selling, general and administrative expenses decreased by $9.2 million (27.1%) year-over-year, driven by reduced advertising and commissions ($5.0 million), professional fees ($1.2 million), and corporate personnel costs ($1.1 million)[116] Depreciation and Amortization Expense - Depreciation and amortization expense decreased by $4.1 million (16.3%) year-over-year, primarily due to $2.2 million of accelerated depreciation in 2020 and $2.2 million from asset sales[117] Impairment Loss - Impairment loss increased by $7.8 million (48.5%) year-over-year, driven by a $24.0 million property and equipment impairment for the Capri Resort in Q1 2021, partially offset by $16.2 million in goodwill impairment losses in Q1 2020[118] Interest Expense - Interest expense decreased by $2.8 million (13.3%) year-over-year, primarily due to a $9.0 million decrease from the change in fair value of interest rate swaps, partially offset by additional interest from the Additional Senior Secured Credit Facility ($2.2 million) and Property Loan Agreement ($2.5 million)[119] - Cash interest paid increased by $4.8 million (33.9%) to $18.9 million[120] Income Tax Benefit - The company recorded an income tax benefit of $2.0 million for Q1 2021, compared to an income tax provision of $1.1 million for Q1 2020[121] Key Indicators of Financial and Operating Performance This section defines and explains key financial and operational metrics, including revenue measures, occupancy, ADR, RevPAR, and Adjusted EBITDA, along with the usefulness and limitations of these non-GAAP measures Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total Net Revenue and Net Direct Expenses - Definitions provided for Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total Net Revenue, and Net Direct Expenses, emphasizing the exclusion of compulsory tips for clearer operating results[123][124][125][126][128][129] Occupancy - Occupancy measures the utilization of a resort's total available capacity, indicating demand and influencing Net Package ADR optimization[130] Net Package ADR - Net Package ADR (Average Daily Rate) reflects the average rate paid for all-inclusive packages, providing insights into pricing and guest base[131] Net Package RevPAR - Net Package RevPAR (Revenue Per Available Room) is the product of Net Package ADR and occupancy, serving as a key performance measure in the all-inclusive lodging industry[132] EBITDA, Adjusted EBITDA, Adjusted EBITDA Margin, Owned Resort EBITDA, and Owned Resort EBITDA Margin - Definitions provided for EBITDA, Adjusted EBITDA (excluding various non-core items), Adjusted EBITDA Margin, Owned Resort EBITDA, and Owned Resort EBITDA Margin, which are non-GAAP financial measures used for performance evaluation[133][134][135][136] Usefulness and Limitation of Non-U.S. GAAP Measures - Non-U.S. GAAP measures are useful for comparing performance consistently by removing non-core impacts and are key performance indicators for management, but they have limitations as they may not be comparable across companies and are not substitutes for U.S. GAAP measures[137][138][139][140] Comparable Non-U.S. GAAP Measures - Comparable non-U.S. GAAP measures (Adjusted EBITDA, Total Net Revenue, Net Package Revenue, Net Non-package Revenue, Net Direct Expenses) are presented to eliminate disparities from resort acquisitions, dispositions, or closures, providing consistent metrics for operating resorts[141] - Comparable resorts for Q1 2021 exclude Dreams Puerto Aventuras (sold Feb 2021) and Jewel Dunn's River/Runaway Bay (sold May 2020)[142] Segment Results All geographic segments experienced significant declines in Owned Net Revenue and Owned Resort EBITDA for Q1 2021 due to COVID-19's impact on occupancy, with varying regional performance and specific property influences | Segment | Q1 2021 Owned Net Revenue ($ in millions) | Q1 2020 Owned Net Revenue ($ in millions) | % Change | | :----------------- | :------------------------------------- | :------------------------------------- | :------- | | Yucatán Peninsula | 33.6 | 62.3 | (46.1)% | | Pacific Coast | 8.6 | 21.2 | (59.2)% | | Dominican Republic | 20.9 | 35.6 | (41.3)% | | Jamaica | 11.7 | 51.4 | (77.2)% | | Segment | Q1 2021 Owned Resort EBITDA ($ in millions) | Q1 2020 Owned Resort EBITDA ($ in millions) | % Change | | :----------------- | :------------------------------------- | :------------------------------------- | :------- | | Yucatán Peninsula | 7.2 | 24.9 | (71.2)% | | Pacific Coast | 0.5 | 8.9 | (94.5)% | | Dominican Republic | 1.7 | 7.8 | (78.6)% | | Jamaica | (2.8) | 19.1 | (114.6)% | Yucatán Peninsula | Metric | Q1 2021 | Q1 2020 | Change | | :------------------ | :------ | :------ | :----- | | Occupancy | 41.8% | 74.1% | (32.3)pts | | Net Package ADR | $290.91 | $299.22 | $(8.31) | | Net Package RevPAR | $121.66 | $221.58 | $(99.92) | | Owned Net Revenue | $33.6M | $62.3M | $(28.7)M | | Owned Resort EBITDA | $7.2M | $24.9M | $(17.7)M | - Comparable Owned Net Revenue decreased by 43.6% and Comparable Owned Resort EBITDA decreased by 70.2% due to reduced occupancy from the COVID-19 pandemic[145][146] Pacific Coast | Metric | Q1 2021 | Q1 2020 | Change | | :------------------ | :------ | :------ | :----- | | Occupancy | 28.0% | 62.4% | (34.4)pts | | Net Package ADR | $311.06 | $344.28 | $(33.22) | | Net Package RevPAR | $87.20 | $214.92 | $(127.72) | | Owned Net Revenue | $8.6M | $21.2M | $(12.5)M | | Owned Resort EBITDA | $0.5M | $8.9M | $(8.4)M | - Owned Net Revenue decreased by 59.2% and Owned Resort EBITDA decreased by 94.5%, primarily due to reduced occupancy and a significant decrease in MICE (meetings, incentives, conventions and events) room nights[148][149] Dominican Republic | Metric | Q1 2021 | Q1 2020 | Change | | :------------------ | :------ | :------ | :----- | | Occupancy | 26.0% | 57.3% | (31.3)pts | | Net Package ADR | $282.27 | $227.33 | $54.94 | | Net Package RevPAR | $73.33 | $130.21 | $(56.88) | | Owned Net Revenue | $20.9M | $35.6M | $(14.7)M | | Owned Resort EBITDA | $1.7M | $7.8M | $(6.1)M | - Owned Net Revenue decreased by 41.3% and Owned Resort EBITDA decreased by 78.6% due to reduced occupancy, though Net Package ADR was positively impacted by the performance of Hyatt Ziva and Zilara Cap Cana[150][151] Jamaica | Metric | Q1 2021 | Q1 2020 | Change | | :------------------ | :------ | :------ | :----- | | Occupancy | 26.3% | 70.8% | (44.5)pts | | Net Package ADR | $279.87 | $349.22 | $(69.35) | | Net Package RevPAR | $73.57 | $247.17 | $(173.60) | | Owned Net Revenue | $11.7M | $51.4M | $(39.7)M | | Owned Resort EBITDA | $(2.8)M | $19.1M | $(21.9)M | - Comparable Owned Net Revenue decreased by 71.3% and Comparable Owned Resort EBITDA decreased by 120.9% (shifting to negative) due to reduced occupancy and a negative impact on Net Package ADR from a higher mix of lower chain scale resorts[153][154] Non-U.S. GAAP Financial Measures | Metric | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | | :-------------------------- | :----------------------- | :----------------------- | | Net loss | (69.7) | (22.6) | | EBITDA | (32.6) | 24.5 | | Adjusted EBITDA | (2.5) | 50.3 | | Owned Resort EBITDA | 6.5 | 60.7 | | Comparable Owned Resort EBITDA | 6.2 | 55.5 | Seasonality - The lodging industry's seasonality typically results in highest demand and rates between mid-December and April, but the COVID-19 pandemic has altered this trend in 2020 and 2021[157][158] Inflation - While lodging operators can adjust room rates for inflation, competitive pressures and the COVID-19 pandemic may limit the company's ability to fully offset inflationary cost increases[159] Liquidity and Capital Resources The company's liquidity was significantly impacted by COVID-19, but available cash increased through equity raises and asset sales, with short-term needs met by existing cash and long-term needs potentially requiring further financing - Available cash increased to $200.4 million as of March 31, 2021, from $146.9 million at December 31, 2020, primarily due to a $137.7 million equity raise and $34.3 million from the sale of Dreams Puerto Aventuras[161] - Short-term liquidity requirements ($68.0 million in contractual obligations for 2021) are expected to be met through existing cash, non-core asset sales (e.g., Capri Resort for $55.0 million), and potential short-term borrowings from the $85.0 million Revolving Credit Facility[162][163] - Total debt obligations decreased by $87.2 million to $1,180.1 million as of March 31, 2021, mainly due to the repayment of the $84.7 million Revolving Credit Facility balance[164][182] Cash Flows | Cash Flow Activity | Q1 2021 ($ in millions) | Q1 2020 ($ in millions) | | :-------------------------------- | :----------------------- | :----------------------- | | Net cash (used in) provided by operating activities | (26.6) | 26.7 | | Net cash provided by investing activities | 29.6 | 2.0 | | Net cash provided by financing activities | 50.4 | 19.9 | Senior Secured Credit Facility - The Senior Secured Credit Facility includes a Term Loan (LIBOR + 2.75%, 1.0% LIBOR floor, matures April 27, 2024) and a Revolving Credit Facility (LIBOR + 3.00% or 4.00%, matures April 27, 2022 or January 27, 2024)[172] - Obligations are guaranteed by material subsidiaries and the company (limited recourse), collateralized by liens on Mexico resorts, personal property, and equity interests in certain subsidiaries[173][174] Additional Credit Facility - Entered into on June 12, 2020, the Additional Credit Facility totals $94.0 million, consisting of Term A1 ($35.0 million, 11.4777% fixed), Term A2 ($31.0 million, 11.4777% fixed), and Term A3 ($28.0 million, LIBOR + 3.00%, 1.0% LIBOR floor), all maturing April 27, 2024[175][177] - The facility does not require principal payments prior to maturity but includes mandatory prepayment requirements for certain asset sales if the net leverage ratio is above 4.00x[176] Property Loan Agreement - A $110.0 million Property Loan, entered into on June 12, 2020, has a fixed interest rate of 9.25% and matures on July 1, 2025, with no principal payments required prior to maturity[179] - The loan is collateralized by Hyatt Ziva and Hyatt Zilara Cap Cana (Dominican Republic) and Hilton Rose Hall Resort & Spa (Jamaica), and requires cash reserves until properties achieve a 1.50x debt service coverage ratio for two consecutive quarters[179][180] Contractual Obligations - Total debt decreased by $87.2 million from December 31, 2020, to March 31, 2021, primarily due to the repayment of the $84.7 million Revolving Credit Facility balance[182] - Anticipated prepayments from asset sales include $27.6 million in May 2022 (Jewel Dunn's River/Runaway Bay) and $11.9 million in February 2023 (Dreams Puerto Aventuras)[183] Off Balance Sheet Arrangements - The company had no off-balance sheet arrangements for the three months ended March 31, 2021 and 2020[184] Critical Accounting Policies and Estimates - No material changes to critical accounting policies or methodologies, but the COVID-19 pandemic has increased uncertainty, impacting the ability to use past results for future performance estimates[185][186] Fair Value of Financial Instruments - Financial instruments include cash, receivables, payables, derivatives, and debt; refer to Note 13 for detailed fair value information[187][188] Related Party Transactions - Refer to Note 6 for detailed information on related party transactions[189] Recent Accounting Pronouncements - Refer to Note 2 for information on recent accounting pronouncements[190] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the company's exposure to market risks, specifically interest rate and foreign currency risks, quantifying the potential impact of hypothetical changes on earnings and cash flows Interest Rate Risk - As of March 31, 2021, 17% of outstanding indebtedness bore interest at floating rates and 83% at fixed rates[192] - A 1.0% increase in floating rates would decrease annual earnings and cash flows by approximately $0.2 million, assuming a $0 million Revolving Credit Facility balance; a 1.0% decrease would have no impact due to the 1.0% LIBOR floor[192] Foreign Currency Risk - Approximately 3.4% of revenues and 82.6% of operating expenses for Q1 2021 were denominated in currencies other than the U.S. dollar[193][194] - A 5% adverse change in foreign exchange rates would impact net income before tax by approximately $1.5 million for Mexican Peso-denominated expenses, $0.8 million for Dominican Peso, and $0.7 million for Jamaican Dollar[195] Item 4. Controls and Procedures The company's disclosure controls and procedures were ineffective as of March 31, 2021, due to an unremediated material weakness in income tax provision, with ongoing remediation efforts requiring sustained testing Disclosure Controls and Procedures - The company's disclosure controls and procedures were not effective as of March 31, 2021, due to an identified material weakness[197] Changes in Internal Control Over Financial Reporting - A material weakness in internal control over financial reporting related to the income tax provision (the 'Tax Weakness') identified as of December 31, 2020, remains unremediated as of March 31, 2021[198] - Remediation efforts include hiring additional resources and developing enhanced policies, procedures, and controls for income tax accounting, but effectiveness requires successful testing over several quarters[198][199] PART II. OTHER INFORMATION This part covers legal proceedings, risk factors, equity sales, defaults, and other required disclosures for the reporting period Item 1. Legal Proceedings The company is involved in various claims and lawsuits in the normal course of business, none of which are expected to have a material adverse effect on its financial condition or operations - The company is involved in various claims and lawsuits in the normal course of business, but none are expected to have a material adverse effect on its financial condition, cash flows, or results of operations[201] Item 1A. Risk Factors No material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K as of March 31, 2021 - No material changes to risk factors from the Annual Report on Form 10-K as of March 31, 2021[202] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities during the period - No unregistered sales of equity securities, use of proceeds, or issuer purchases of equity securities[203][204][205] Item 3. Defaults Upon Senior Securities The company reported no defaults upon senior securities during the period - No defaults upon senior securities[206] Item 4. Mine Safety Disclosures This item is not applicable to the company - Not applicable[207] Item 5. Other Information The company reported no other information for the period - No other information to report[208] Item 6. Exhibits This section lists the exhibits filed as part of the Form 10-Q, including amendments to credit agreements, CEO/CFO certifications, and XBRL financial statements - Key exhibits include Fifth Amendment to Amended & Restated Credit Agreement, Second Amendment to Credit Agreement, CEO/CFO certifications (Sections 302 and 906), and XBRL financial statements[210]