Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE:
PK) today announced results for the second quarter ended June 30,
2020 and provides an operational update on COVID-19.
Second quarter financial highlights include:
- Pro-forma RevPAR was $7.85 a decrease of 95.9% from the same
period in 2019;
- Occupancy for Park’s 18 consolidated hotels open during the
entirety of the second quarter was 20.8%;
- Net loss was $(261) million and net loss attributable to
stockholders was $(259) million;
- Adjusted EBITDA was $(122) million;
- Adjusted FFO attributable to stockholders was $(175)
million;
- Diluted loss per share was $(1.10); and
- Diluted Adjusted FFO per share was $(0.75).
Additional highlights include:
- Issued an aggregate $650 million of senior secured notes
(“Senior Secured Notes”) and utilized the net proceeds to repay
$219 million of the Company’s revolving credit facility
(“Revolver”) and $69 million of the term loan the Company entered
into in 2016 (“2016 Term Loan”). Park also repaid $100 million of
the Revolver with existing cash;
- Increased total liquidity by $300 million, from $1.3 billion as
of March 31, 2020 to $1.6 billion as of June 30, 2020;
- Amended the Company’s credit and term loan facilities to
suspend all financial covenants through March 31, 2021 and
exercised options to extend the Revolver maturity date to December
2021;
- Amended certain mortgage loan agreements to defer interest and
principal payments for three to six months and obtain temporary
suspensions from required cash reserves;
- Commenced the phased reopening of 20 of our previously
suspended hotels, increasing the total number of hotels open to 42,
or 53% of total room count; and
- Continued to take proactive measures to preserve cash and
improved Park’s baseline cash burn rate to approximately $65
million from its original estimate in March of $85 million per
month assuming all hotels have suspended operations.
Thomas J. Baltimore, Jr., Chairman, President and Chief
Executive Officer, stated, “Without a doubt, the last five months
have been the most challenging period our industry has ever faced
as we continue to deal with widespread fear and uncertainty over
COVID-19. Despite these headwinds, I am incredibly proud of the
team’s proactive efforts, as we worked diligently alongside our
partners to dramatically reduce operating expenses, while having
the unwavering support from our lenders to help shore up our
balance sheet. The focus has since shifted to the recovery phase,
as we thoughtfully and methodically work to safely reopen hotels.
While we cannot predict the path of the recovery, with $1.6 billion
of liquidity available, Park remains well positioned to navigate
the disruption from the COVID-19 pandemic.”
Selected Statistical and Financial
Information
(unaudited, amounts in millions, except RevPAR, ADR and per
share data)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
Change(1)
2020
2019
Change(1)
Pro-forma RevPAR
$
7.85
$
192.94
(95.9
)%
$
72.06
$
184.50
(60.9
)%
Pro-forma Occupancy
6.1
%
85.9
%
(79.8
)%pts
33.9
%
81.8
%
(47.9
)% pts
Pro-forma ADR
$
127.65
$
224.59
(43.2
)%
$
212.45
$
225.47
(5.8
)%
Pro-forma Total RevPAR
$
14.47
$
295.80
(95.1
)%
$
116.32
$
284.60
(59.1
)%
Net (loss) income
$
(261
)
$
84
NM(2)
$
(950
)
$
181
NM(2)
Net (loss) income attributable to
stockholders
$
(259
)
$
82
NM(2)
$
(947
)
$
178
NM(2)
Adjusted EBITDA
$
(122
)
$
207
NM(2)
$
(40
)
$
383
NM(2)
Pro-forma Hotel Adjusted EBITDA
$
(108
)
$
248
NM(2)
$
(18
)
$
454
NM(2)
Pro-forma Hotel Adjusted EBITDA margin
(283.1
)%
31.4
%
NM(2)
(3.0
)%
30.0
%
NM(2)
Adjusted FFO attributable to
stockholders
$
(175
)
$
164
NM(2)
$
(118
)
$
300
NM(2)
(Loss) earnings per share - Diluted(1)
$
(1.10
)
$
0.40
NM(2)
$
(4.01
)
$
0.88
NM(2)
Adjusted FFO per share - Diluted(1)
$
(0.75
)
$
0.81
NM(2)
$
(0.50
)
$
1.49
NM(2)
Weighted average shares outstanding -
Diluted
235
202
33
236
202
34
(1) Amounts are calculated based on unrounded numbers.
(2) Percentage change is not meaningful.
COVID-19 Action Plan
Update
The following is an update on the actions Park and its hotel
managers have taken to mitigate the effects of COVID-19 on its
business:
- Continued pursuit of alternative sources of revenue, including
but not limited to housing for applicable government authorities
and hospitals, professional sports leagues and its media crews, as
well as colleges and universities to house students for their
upcoming school year as they look to mitigate potential COVID-19
exposures within their student population;
- Issued an aggregate $650 million of Senior Secured Notes,
further increasing our liquidity to $1.6 billion (including the
$0.3 billion of available capacity remaining under the
Revolver);
- Commenced the phased reopening of 10 hotels during the second
quarter of the 38 hotels previously suspended, increasing
availability by 2,348 rooms, an additional 10 hotels and 2,885
rooms in July 2020, and selected restaurants and other outlets
within the hotels;
- Opened an additional 1,855 rooms at hotels that remained open
throughout the second quarter; and
- Expects to have all but one of the current hotels open by the
end of 2020.
The current status of Park’s hotels as of August 5, 2020 is as
follows (for a list of status by hotel please see Park’s financial
supplement):
Consolidated Hotels
Status
Number of
Hotels
Total Rooms
Rooms
Suspended
Rooms
Available
Percentage of
Rooms
Suspended
Open
37
14,968
4,510
10,458
30
%
Operations suspended
16
13,963
13,963
—
100
%
Total
53
28,931
18,473
10,458
64
%
Unconsolidated Hotels
Status
Number of
Hotels
Total Rooms
Rooms
Suspended
Rooms
Available
Percentage of
Rooms
Suspended
Open
5
2,557
892
1,665
35
%
Operations suspended
2
1,740
1,740
—
100
%
Total
7
4,297
2,632
1,665
61
%
Operational Update
Since the beginning of March, Park has experienced a significant
decline in ADR, occupancy, and RevPAR associated with COVID-19
throughout its portfolio, which has resulted in a decline in Park’s
operating cash flow. Changes in the monthly pro-forma metrics for
the first half of 2020 as compared to the same period in 2019 are
as follows:
Pro-forma ADR
Pro-forma Occupancy
Pro-forma RevPAR
January
(1.0
)%
1.6
%
pts
1.2
%
February
(0.7
)
0.9
0.4
March
(10.1
)
(49.4
)
(63.8
)
April
(47.0
)
(80.9
)
(97.6
)
May
(54.1
)
(79.9
)
(97.3
)
June
(36.5
)
(78.5
)
(93.0
)
Monthly occupancy based on hotels open during the entirety of
each month during the first half of 2020 is as follows:
Number of
Consolidated
Hotels Open
Occupancy
January
53
73.8
%
February
53
79.2
March
25
36.9
April
18
14.4
May
18
20.4
June
22
30.2
Additionally, COVID-19 resulted in decreases of 98.7% and 95.8%
in group and transient revenue, respectively, for the second
quarter as compared to the same period in 2019; however, during the
second quarter of 2020, Park recognized approximately $8 million of
cancellation and attrition revenue.
Each of the Company’s key markets has been significantly
impacted as follows:
- Hawaii: Operations at both of Park’s Hawaii hotels
remain suspended following the extension of the governor’s order
for nonresident visitors to quarantine for a 14-day period through
September 1, 2020;
- San Francisco: As positive cases in California rise,
restrictions on non-essential travelers remain in place and the
reopening of bars and indoor dining has been delayed. Four of
Park’s hotels remain suspended; however, two hotels, the JW
Marriott San Francisco Union Square and Hyatt Centric Fisherman's
Wharf, remain open to house first responders and essential
workers;
- Orlando: The Hilton Orlando, one of our unconsolidated
joint ventures, has remained open supported by demand from the
National Guard, and Park’s Bonnet Creek complex reopened in July to
house professional sports leagues and theme park guests;
- New Orleans: The Hilton New Orleans Riverside reopened
in July, while the W New Orleans – French Quarter remains closed as
the city has reversed its phased reopening, limiting large indoor
gatherings and cancelling citywide events;
- Boston: All of Park’s Boston hotels are open with demand
from airline crews, front line medical staff and other first
responders and increased demand from lack of other operational
hotels in the market;
- New York: As New York continues to have ongoing
restrictions on large gatherings and on certain out-of-state
travelers, the Hilton New York’s operations remain suspended;
- Southern California: Certain of Park’s hotels in
Southern California have remained open due to demand from airline
crew, front line medical staff and other first responders, and most
of Park’s hotels that were suspended have reopened following the
easing of restrictions on non-essential travel;
- Chicago: Chicago requires a 14-day quarantine period for
certain travelers and restrictions on large gatherings continue
with all citywide events cancelled for the second half of 2020. The
W Chicago – Lakeshore and Hilton Chicago/Oak Brook Suites are open
primarily due to demand from airline crews and increased demand
from lack of other operational hotels in the market;
- Key West: The Casa Marina, A Waldorf Astoria Resort, and
The Reach Key West, Curio Collection, reopened in June with nearly
50% occupancy for the month of June following the removal of
tourism restrictions;
- Denver: The Hilton Denver partially reopened in July as
the city eases its restrictions;
- Miami: Both of Park’s Miami hotels, the Royal Palm South
Beach Miami and Hilton Miami Airport, reopened during the quarter
following the easing of Florida’s stay-at-home orders;
- Washington, D.C.: Although Washington, D.C. requires a
14-day quarantine period for non-essential travelers from high-risk
states, most of Park’s hotels have remained open with demand from
airline crews, first responders and other small groups of
dislocated guests; and
- Seattle: Most of Park’s Seattle hotels have remained
open based on demand from airline crews, medical professionals and
local business transient travel, with the two airport hotels
consolidating operations.
Balance Sheet and
Liquidity
Park had the following debt outstanding as of June 30, 2020:
(unaudited, dollars in millions)
Debt
Collateral
Interest Rate
Maturity Date
As of
June 30, 2020
Fixed Rate Debt
Mortgage loan
DoubleTree Hotel Spokane City Center
3.55%
October 2020
$
12
Mortgage loan
Hilton Denver City Center
4.90%
August 2022(1)
60
Mortgage loan
Hilton Checkers Los Angeles
4.11%
March 2023
27
Mortgage loan
W Chicago - City Center
4.25%
August 2023
77
Commercial mortgage-backed
securities loan
Hilton San Francisco Union Square, Parc 55
San Francisco - a Hilton Hotel
4.11%
November 2023
725
Mortgage loan
Hyatt Regency Boston
4.25%
July 2026
140
Commercial mortgage-backed
securities loan
Hilton Hawaiian Village Beach Resort
4.20%
November 2026
1,275
Mortgage loan
Hilton Santa Barbara Beachfront Resort
4.17%
December 2026
165
Senior Secured Notes(2)
7.50%
June 2025
650
Finance lease obligations
3.07%
2021 to 2022
1
Total Fixed Rate Debt
4.88%(3)
3,132
Variable Rate Debt
Revolving credit facility(4)(5)
Unsecured
L + 3.00%
December 2021
681
2016 Term Loan(4)(6)
Unsecured
L + 2.95%
December 2021
631
Mortgage loan
DoubleTree Hotel Ontario Airport
L + 2.25%
May 2022
30
2019 Term Facility(4)(7)
Unsecured
L + 2.65%
September 2024
670
Total Variable Rate Debt
3.13%(3)
2,012
Add: unamortized premium
4
Less: unamortized deferred financing costs
and discount
(30
)
Total Debt(8)
4.25%(3)
$
5,118
(1) The loan matures in August 2042 but is callable by the
lender in August 2022.
(2) The Senior Secured Notes were issued in May 2020 with a
maturity date of June 2025.
(3) Calculated on a weighted average basis.
(4) In May 2020, Park amended its credit and term loan
facilities, which added a LIBOR floor of 25 basis points.
(5) During the second quarter of 2020, Park repaid $319 million
of the Revolver.
(6) The 2016 Term Loan was entered into in December 2016 with a
maturity date of December 2021. Park repaid the 2016 Term Loan by
$50 million and $69 million in December 2019 and June 2020,
respectively.
(7) In August 2019, the Company, Park Intermediate Holdings LLC
and PK Domestic Property LLC entered into a credit agreement with
Bank of America, N.A. and certain other lenders, providing a $950
million unsecured delayed draw term loan facility (the “2019 Term
Facility”), with the $850 million, five-year delayed draw term loan
tranche fully drawn on September 18, 2019 to fund the merger with
Chesapeake Lodging Trust. The $100 million, two-year delayed draw
term loan tranche was unfunded and the commitments thereunder
terminated on September 18, 2019. On December 31, 2019, Park repaid
$180 million of the 2019 Term Facility.
(8) Excludes $225 million of Park’s share of debt of its
unconsolidated joint ventures.
Park’s Net Debt as of June 30, 2020 was $4,060 million. With
total cash and cash equivalents of $1,309 million, including $35
million of restricted cash, Park is maintaining higher than
historical cash levels due to the continued uncertainty surrounding
COVID-19, and Park intends to do so until markets stabilize and
demand in the lodging industry begins to recover. With the actions
taken by Park’s management and its hotel managers, including the
issuance of $650 million of Senior Secured Notes, and with only $12
million of debt maturing in 2020, Park believes it has sufficient
liquidity to satisfy its short-term liquidity obligations even
though many of the Company’s hotels have suspended operations.
In May 2020, Park amended its credit and term loan facilities to
suspend compliance with all existing financial covenants tested
through and including March 31, 2021 and to adjust the levels of
particular financial covenants after such period. As part of the
amendment process, Park (i) agreed to comply with a monthly minimum
liquidity covenant, to pledge equity in certain subsidiaries to
secure the facilities, and for certain subsidiaries to become
guarantors under the facilities, and (ii) exercised its two
six-month extension options on its Revolver to extend its maturity
to December 24, 2021. The amendments also added additional
covenants that restrict Park’s ability to make dividend and
distribution payments (except to the extent required to maintain
REIT status) and stock repurchases, make prepayments of other
indebtedness, make capital expenditures, conduct asset dispositions
or transfers and make investments, including acquisitions or
mergers, in each case subject to various exceptions. Additionally,
during the second quarter of 2020, Park amended certain mortgage
loan agreements to defer interest and principal payments for three
to six months and obtain temporary suspensions from required cash
reserves.
Cash Burn Analysis
Based on an extreme scenario where all of the Company’s hotels suspend operations,
Park’s management has updated the estimated average cash
requirements to support working capital funding, other hotel fixed
costs (such as property taxes, insurance and ground rent), debt
service, and corporate and other non-hotel expenses. Operational
expenses related to Park’s suspended hotels were lower than
originally anticipated. Based on Park’s current liquidity of $1.6
billion (including the $0.3 billion of available capacity remaining
under the Revolver) and assuming the extreme scenario where all
hotels suspend operations, Park believes it currently has two years
of liquidity.
Expense
Average/Month
(in millions)
Hotel operations
$
42
Debt service
19
Corporate & other non-hotel
expenditures
4
Total
$
65
This estimate does not take into account capital expenditures or
any possible alternative sources of revenue that may arise or
payment of cash dividends or other distributions not already
declared and paid in 2020, if any. The estimated cash burn amount
has not been reduced by any amount available to Park under existing
or future debt facilities, or proceeds from issuance of any
additional debt, equity or equity-linked securities.
Park continues to take appropriate measures to reduce the
near-term burn rate, including deferral of payments, hiring freezes
and other cost reduction measures.
Dividends
As a precautionary measure in light of COVID-19, Park has
suspended dividend payments following the payment of its first
quarter 2020 dividend until such time that Park’s Board of
Directors determines a year-end dividend, if any.
Full-Year 2020 Outlook
Given the continued economic uncertainty, travel restrictions
and rapidly-changing circumstances related to the COVID-19
pandemic, in March 2020, Park withdrew its previously issued 2020
guidance. Park is not providing an updated outlook at this
time.
The Company’s ability to predict future operating results is
significantly impacted by the current COVID-19 pandemic. Park
expects that the trends affecting the economy will continue to
depress hotel operating results across the portfolio. The economic
environment lacks sufficient clarity at this time to provide
accurate guidance.
Supplemental Disclosures
In conjunction with this release, Park has furnished a financial
supplement with additional disclosures on its website. Visit
www.pkhotelsandresorts.com for more information. Park has no
obligation to update any of the information provided to conform to
actual results or changes in Park’s portfolio, capital structure or
future expectations.
Conference Call
Park will host a conference call for investors and other
interested parties to discuss second quarter 2020 results on August
6, 2020 beginning at 11 a.m. Eastern Time. Participants may listen
to the live webcast by logging onto the Investors section of the
website at www.pkhotelsandresorts.com. Alternatively, participants
may listen to the live call by dialing (877) 451-6152 in the United
States or (201) 389-0879 internationally and requesting Park Hotels
& Resorts’ Second Quarter 2020 Earnings Conference Call.
Participants are encouraged to dial into the call or link to the
webcast at least ten minutes prior to the scheduled start time.
A replay and transcript of the webcast will be available within
24 hours after the live event on the Investors section of Park’s
website.
Forward-Looking
Statements
This press release contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Forward-looking statements include, but are not limited
to, statements related to Park’s current expectations regarding the
performance of its business, financial results, liquidity and
capital resources, the effects of competition and the effects of
future legislation or regulations, the expected completion of
anticipated dispositions, the declaration and payment of future
dividends, and other non-historical statements. Forward-looking
statements include all statements that are not historical facts,
and in some cases, can be identified by the use of forward-looking
terminology such as the words “outlook,” “believes,” “expects,”
“potential,” “continues,” “may,” “will,” “should,” “could,”
“seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,”
“anticipates” or the negative version of these words or other
comparable words. You should not rely on forward-looking statements
since they involve known and unknown risks, uncertainties and other
factors which are, in some cases, beyond the Company’s control and
which could materially affect its results of operations, financial
condition, cash flows, performance or future achievements or
events. Currently, one of the most significant factors is the
potential adverse effect of COVID-19, including possible
resurgences, on the Company’s financial condition, results of
operations, cash flows and performance, its hotel management
companies and its hotels’ tenants, and the global economy and
financial markets. The extent to which COVID-19 impacts the
Company, its hotel managers, tenants and guests at the Company’s
hotels will depend on future developments, which are highly
uncertain and cannot be predicted with confidence, including the
scope, severity and duration of the pandemic, the actions taken to
contain the pandemic or mitigate its effect, additional closures
that may be mandated or advisable even after the reopening of
certain of the Company’s hotels on a limited basis, whether due to
an increased number of COVID-19 cases or otherwise, and the direct
and indirect economic effects of the pandemic and containment
measures, among others.
Forward-looking statements involve risks, uncertainties and
assumptions. Actual results may differ materially from those
expressed in these forward-looking statements. You should not put
undue reliance on any forward-looking statements and Park urges
investors to carefully review the disclosures Park makes concerning
risk and uncertainties in Item 1A: “Risk Factors” in Park’s
Quarterly Report on form 10-Q for the quarter ended March 31, 2020
and Annual Report on Form 10-K for the year ended December 31,
2019, as such factors may be updated from time to time in Park’s
filings with the SEC, which are accessible on the SEC’s website at
www.sec.gov. Except as required by law, Park undertakes no
obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events
or otherwise.
Non-GAAP Financial
Measures
Park presents certain non-GAAP financial measures in this press
release, including Nareit FFO attributable to stockholders Adjusted
FFO attributable to stockholders, EBITDA, Adjusted EBITDA, Hotel
Adjusted EBITDA, Hotel Adjusted EBITDA margin and Net debt. These
non-GAAP financial measures should be considered along with, but
not as alternatives to, net income (loss) as a measure of its
operating performance. Please see the schedules included in this
press release including the “Definitions” section for additional
information and reconciliations of such non-GAAP financial
measures.
About Park
Park is the second largest publicly traded lodging REIT with a
diverse portfolio of market-leading hotels and resorts with
significant underlying real estate value. Park’s portfolio
currently consists of 60 premium-branded hotels and resorts with
over 33,000 rooms primarily located in prime city center and resort
locations. Visit www.pkhotelsandresorts.com for more
information.
PARK HOTELS & RESORTS
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(unaudited, in millions,
except share and per share data)
June 30, 2020
December 31, 2019
(unaudited)
ASSETS
Property and equipment, net
$
9,323
$
9,594
Assets held for sale, net
—
71
Investments in affiliates
23
35
Goodwill
—
607
Intangibles, net
45
46
Cash and cash equivalents
1,274
346
Restricted cash
35
40
Accounts receivable, net of allowance for
doubtful accounts of $7 and $2
31
180
Prepaid expenses
43
83
Other assets
46
40
Operating lease right-of-use assets
239
248
TOTAL ASSETS (variable interest
entities - $231 and $242)
$
11,059
$
11,290
LIABILITIES AND EQUITY
Liabilities
Debt
$
5,118
$
3,871
Accounts payable and accrued expenses
129
217
Due to hotel managers
74
159
Deferred income tax liabilities
36
50
Other liabilities
123
282
Operating lease liabilities
253
260
Total liabilities (variable interest
entities - $215 and $219)
5,733
4,839
Stockholders' Equity
Common stock, par value $0.01 per share,
6,000,000,000 shares authorized,
235,900,906 shares issued and 235,604,979
shares outstanding as of
June 30, 2020 and 239,589,639 shares
issued and 239,386,877
shares outstanding as of December 31,
2019
2
2
Additional paid-in capital
4,508
4,575
Retained earnings
871
1,922
Accumulated other comprehensive loss
(6
)
(3
)
Total stockholders' equity
5,375
6,496
Noncontrolling interests
(49
)
(45
)
Total equity
5,326
6,451
TOTAL LIABILITIES AND EQUITY
$
11,059
$
11,290
PARK HOTELS & RESORTS
INC.
CONDENSED CONSOLIDATED
STATEMENTS OF OPERATIONS
(unaudited, in millions,
except per share data)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Revenues
Rooms
$
21
$
434
$
383
$
837
Food and beverage
3
195
164
378
Ancillary hotel
15
55
72
110
Other
3
19
22
37
Total revenues
42
703
641
1,362
Operating expenses
Rooms
20
113
132
220
Food and beverage
14
130
137
254
Other departmental and support
60
151
232
300
Other property-level
56
49
116
98
Management fees
—
36
25
69
Impairment loss and casualty gain, net
—
—
694
—
Depreciation and amortization
75
61
150
123
Corporate general and administrative
14
22
30
39
Other
4
18
25
38
Total expenses
243
580
1,541
1,141
Gain (loss) on sales of assets, net
1
(12
)
63
19
Operating (loss) income
(200
)
111
(837
)
240
Interest income
1
2
2
3
Interest expense
(50
)
(33
)
(90
)
(65
)
Equity in (losses) earnings from
investments in affiliates
(8
)
10
(9
)
15
Other loss, net
(1
)
(1
)
(3
)
—
(Loss) income before income
taxes
(258
)
89
(937
)
193
Income tax expense
(3
)
(5
)
(13
)
(12
)
Net (loss) income
(261
)
84
(950
)
$
181
Net loss (income) attributable to
noncontrolling interests
2
(2
)
3
(3
)
Net (loss) income attributable to
stockholders
$
(259
)
$
82
$
(947
)
$
178
(Loss) Earnings per share:
(Loss) earnings per share - Basic
$
(1.10
)
$
0.40
$
(4.01
)
$
0.88
(Loss) earnings per share - Diluted
$
(1.10
)
$
0.40
$
(4.01
)
$
0.88
Weighted average shares outstanding -
Basic
235
201
236
201
Weighted average shares outstanding -
Diluted
235
202
236
202
PARK HOTELS & RESORTS
INC.
NON-GAAP FINANCIAL MEASURES
RECONCILIATIONS
EBITDA AND ADJUSTED
EBITDA
(unaudited, in millions)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net (loss) income
$
(261
)
$
84
$
(950
)
$
181
Depreciation and amortization expense
75
61
150
123
Interest income
(1
)
(2
)
(2
)
(3
)
Interest expense
50
33
90
65
Income tax expense
3
5
13
12
Interest expense, income tax and
depreciation and
amortization included in equity in
earnings from
investments in affiliates
4
7
9
12
EBITDA
(130
)
188
(690
)
390
(Gain) loss on sales of assets, net
(1
)
12
(63
)
(19
)
Acquisition costs
—
6
1
6
Severance expense
—
1
2
2
Share-based compensation expense
4
4
6
8
Impairment loss and casualty gain, net
—
—
694
—
Other items
5
(4
)
10
(4
)
Adjusted EBITDA
$
(122
)
$
207
$
(40
)
$
383
(unaudited, dollars in millions)
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Adjusted EBITDA
$
(122
)
207
$
(40
)
$
383
Less: Adjusted EBITDA from investments
in
affiliates
4
(12
)
—
(22
)
Add: All other(2)
10
14
23
29
Hotel Adjusted EBITDA
(108
)
209
(17
)
390
Add: Adjusted EBITDA from hotels
acquired(1)
—
53
—
90
Less: Adjusted EBITDA from hotels disposed
of
—
(14
)
(1
)
(26
)
Pro-forma Hotel Adjusted
EBITDA(1)
$
(108
)
$
248
$
(18
)
$
454
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
2020
2019
Total Revenues
$
42
$
703
$
641
$
1,362
Less: Other revenue
(3
)
(19
)
(22
)
(37
)
Add: Revenues from hotels acquired(1)
—
151
—
280
Less: Revenues from hotels disposed of
—
(44
)
(6
)
(91
)
Pro-forma Hotel Revenues(1)
$
39
$
791
$
613
$
1,514
Three Months Ended
Six Months Ended
June 30,
June 30,
2020
2019
Change(3)
2020
2019
Change(3)
Pro-forma Hotel Revenues(1)
$
39
$
791
(95.2
)%
$
613
$
1,514
(59.5
)%
Pro-forma Hotel Adjusted EBITDA(1)
$
(108
)
$
248
NM(4)
$
(18
)
$
454
NM(4)
Pro-forma Hotel Adjusted EBITDA
margin(1)(3)
(283.1
)%
31.4
%
NM(4)
(3.0
)%
30.0
%
NM(4)
_____________________________________________________________
(1) Assumes hotels were acquired on
January 1, 2019.
(2) Includes other revenues and other
expenses, non-income taxes on TRS leases included in other
property-level expenses and
corporate general and administrative
expenses in the condensed consolidated statements of
operations.
(3) Percentages are calculated based on
unrounded numbers.
(4) Percentage change is not
meaningful.
PARK HOTELS & RESORTS
INC.
NON-GAAP FINANCIAL MEASURES
RECONCILIATIONS
NAREIT FFO AND ADJUSTED
FFO
(unaudited, in millions, except per share
data)
Three Months Ended June
30,
Six Months Ended June
30,
2020
2019
2020
2019
Net (loss) income attributable to
stockholders
$
(259
)
$
82
$
(947
)
$
178
Depreciation and amortization expense
75
61
150
123
Depreciation and amortization expense
attributable to
noncontrolling interests
(1
)
(1
)
(2
)
(2
)
(Gain) loss on sales of assets, net
(1
)
12
(63
)
(19
)
Gain on sale of investments in
affiliates(1)
(1
)
—
(1
)
—
Impairment loss
—
—
695
—
Equity investment adjustments:
Equity in losses (earnings) from
investments in affiliates
8
(10
)
9
(15
)
Pro rata FFO of investments in
affiliates
(5
)
12
(4
)
21
Nareit FFO attributable to
stockholders
(184
)
156
(163
)
286
Acquisition costs
—
6
1
6
Severance expense
—
1
2
2
Share-based compensation expense
4
4
6
8
Other items(2)
5
(3
)
36
(2
)
Adjusted FFO attributable to
stockholders
$
(175
)
$
164
$
(118
)
$
300
Nareit FFO per share -
Diluted(3)
$
(0.78
)
$
0.77
$
(0.69
)
$
1.42
Adjusted FFO per share -
Diluted(3)
$
(0.75
)
$
0.81
$
(0.50
)
$
1.49
Weighted average shares outstanding -
Diluted
235
202
236
202
(1) Included in other loss, net in the condensed consolidated
statements of operations.
(2) The six months ended June 30, 2020, includes $26 million of
tax expense recognized from hotels sold during the period.
(3) Per share amounts are calculated based on unrounded
numbers.
PARK HOTELS & RESORTS
INC.
NON-GAAP FINANCIAL MEASURES
RECONCILIATIONS
NET DEBT
(unaudited, in millions)
June 30, 2020
Debt
$
5,118
Add: unamortized deferred financing costs
and discount
30
Less: unamortized premium
(4
)
Long-term debt, including current
maturities and excluding
unamortized deferred financing cost,
premiums and discounts
5,144
Add: Park's share of unconsolidated
affiliates debt,
excluding unamortized deferred financing
costs
225
Less: cash and cash equivalents
(1,274
)
Less: restricted cash
(35
)
Net debt
$
4,060
PARK HOTELS & RESORTS INC.
DEFINITIONS
Pro-forma
The Company presents certain data for its consolidated hotels on
a pro-forma hotel basis as supplemental information for investors:
Pro-forma Hotel Revenues, Pro-forma RevPAR, Pro-forma Total RevPAR,
Pro-forma Occupancy, Pro-forma ADR, Pro-forma Hotel Adjusted EBITDA
and Pro-forma Hotel Adjusted EBITDA Margin. The Company presents
pro-forma hotel results to help the Company and its investors
evaluate the ongoing operating performance of its hotels. The
Company’s pro-forma metrics exclude results from property
dispositions and include results from property acquisitions as
though such acquisitions occurred on January 1, 2019.
EBITDA, Adjusted EBITDA, Hotel Adjusted
EBITDA and Hotel Adjusted EBITDA margin
Earnings (loss) before interest expense, taxes and depreciation
and amortization (“EBITDA”), presented herein, reflects net income
(loss) excluding depreciation and amortization, interest income,
interest expense, income taxes and interest expense, income tax and
depreciation and amortization included in equity in earnings
(losses) from investments in affiliates.
Adjusted EBITDA, presented herein, is calculated as EBITDA, as
previously defined, further adjusted to exclude:
- Gains or losses on sales of assets for both consolidated and
unconsolidated investments;
- Costs associated with hotel acquisitions or dispositions
expensed during the period;
- Severance expense;
- Share-based compensation expense;
- Casualty gains or losses;
- Impairment losses; and
- Other items that management believes are not representative of
the Company’s current or future operating performance.
Hotel Adjusted EBITDA measures hotel-level results before debt
service, depreciation and corporate expenses of the Company’s
consolidated hotels but excluding hotels owned by unconsolidated
affiliates, and is a key measure of the Company’s profitability.
The Company presents Hotel Adjusted EBITDA to help the Company and
its investors evaluate the ongoing operating performance of the
Company’s consolidated hotels.
EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel
Adjusted EBITDA margin are not recognized terms under United States
(“U.S.”) GAAP and should not be considered as alternatives to net
income (loss) or other measures of financial performance or
liquidity derived in accordance with U.S. GAAP. In addition, the
Company’s definitions of EBITDA, Adjusted EBITDA, Hotel Adjusted
EBITDA and Hotel Adjusted EBITDA margin may not be comparable to
similarly titled measures of other companies.
The Company believes that EBITDA, Adjusted EBITDA, Hotel
Adjusted EBITDA and Hotel Adjusted EBITDA margin provide useful
information to investors about the Company and its financial
condition and results of operations for the following reasons: (i)
EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted
EBITDA margin are among the measures used by the Company’s
management team to make day-to-day operating decisions and evaluate
its operating performance between periods and between REITs by
removing the effect of its capital structure (primarily interest
expense) and asset base (primarily depreciation and amortization)
from its operating results; and (ii) EBITDA, Adjusted EBITDA, Hotel
Adjusted EBITDA and Hotel Adjusted EBITDA margin are frequently
used by securities analysts, investors and other interested parties
as a common performance measure to compare results or estimate
valuations across companies in the industry.
EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel
Adjusted EBITDA margin have limitations as analytical tools and
should not be considered either in isolation or as a substitute for
net income (loss) or other methods of analyzing the Company’s
operating performance and results as reported under U.S. GAAP.
Nareit FFO attributable to stockholders,
Adjusted FFO attributable to stockholders Nareit FFO per share -
diluted and Adjusted FFO per share - diluted
Nareit FFO attributable to stockholders and Nareit FFO per
diluted share (defined as set forth below) are presented herein as
non-GAAP measures of the Company’s performance. The Company
calculates funds from (used in) operations (“FFO”) attributable to
stockholders for a given operating period in accordance with
standards established by the National Association of Real Estate
Investment Trusts (“Nareit”), as net income or loss attributable to
stockholders (calculated in accordance with U.S. GAAP), excluding
depreciation and amortization, gains or losses on sales of assets,
impairment, and the cumulative effect of changes in accounting
principles, plus adjustments for unconsolidated joint ventures.
Adjustments for unconsolidated joint ventures are calculated to
reflect the Company’s pro rata share of the FFO of those entities
on the same basis. As noted by Nareit in its December 2018 “Nareit
Funds from Operations White Paper – 2018 Restatement,” since real
estate values historically have risen or fallen with market
conditions, many industry investors have considered presentation of
operating results for real estate companies that use historical
cost accounting to be insufficient by themselves. For these
reasons, Nareit adopted the FFO metric in order to promote an
industry-wide measure of REIT operating performance. The Company
believes Nareit FFO provides useful information to investors
regarding its operating performance and can facilitate comparisons
of operating performance between periods and between REITs. The
Company’s presentation may not be comparable to FFO reported by
other REITs that do not define the terms in accordance with the
current Nareit definition, or that interpret the current Nareit
definition differently. The Company calculates Nareit FFO per
diluted share as Nareit FFO divided by the number of fully diluted
shares outstanding during a given operating period.
The Company also presents Adjusted FFO attributable to
stockholders and Adjusted FFO per diluted share when evaluating its
performance because management believes that the exclusion of
certain additional items described below provides useful
supplemental information to investors regarding the Company’s
ongoing operating performance. Management historically has made the
adjustments detailed below in evaluating its performance and in its
annual budget process. Management believes that the presentation of
Adjusted FFO provides useful supplemental information that is
beneficial to an investor’s complete understanding of operating
performance. The Company adjusts Nareit FFO attributable to
stockholders for the following items, which may occur in any
period, and refers to this measure as Adjusted FFO attributable to
stockholders:
- Costs associated with hotel acquisitions or dispositions
expensed during the period;
- Severance expense;
- Share-based compensation expense; and
- Other items that management believes are not representative of
the Company’s current or future operating performance.
Net Debt
Net debt, presented herein, is a non-GAAP financial measure that
the Company uses to evaluate its financial leverage. Net debt is
calculated as (i) long-term debt, including current maturities and
excluding unamortized deferred financing costs; and (ii) the
Company’s share of investments in affiliate debt, excluding
unamortized deferred financing costs; reduced by (a) cash and cash
equivalents; and (b) restricted cash and cash equivalents.
The Company believes Net debt provides useful information about
its indebtedness to investors as it is frequently used by
securities analysts, investors and other interested parties to
compare the indebtedness of companies. Net debt should not be
considered as a substitute to debt presented in accordance with
U.S. GAAP. Net debt may not be comparable to a similarly titled
measure of other companies.
Occupancy
Occupancy represents the total number of room nights sold
divided by the total number of room nights available at a hotel or
group of hotels. Room nights available to guests have not been
adjusted for suspended or reduced operations at certain of our
hotels as a result of COVID-19, unless otherwise noted. Occupancy
measures the utilization of the Company’s hotels’ available
capacity. Management uses occupancy to gauge demand at a specific
hotel or group of hotels in a given period. Occupancy levels also
help management determine achievable Average Daily Rate (“ADR”)
levels as demand for rooms increases or decreases.
Average Daily Rate
ADR represents rooms revenue divided by total number of room
nights sold in a given period. ADR measures average room price
attained by a hotel and ADR trends provide useful information
concerning the pricing environment and the nature of the customer
base of a hotel or group of hotels. ADR is a commonly used
performance measure in the hotel industry, and management uses ADR
to assess pricing levels that the Company is able to generate by
type of customer, as changes in rates have a more pronounced effect
on overall revenues and incremental profitability than changes in
occupancy, as described above.
Revenue per Available Room
Revenue per Available Room (“RevPAR”) represents rooms revenue
divided by the total number of room nights available to guests for
a given period. Room nights available to guests have not been
adjusted for suspended or reduced operations at certain of our
hotels as a result of COVID-19. Management considers RevPAR to be a
meaningful indicator of the Company’s performance as it provides a
metric correlated to two primary and key factors of operations at a
hotel or group of hotels: occupancy and ADR. RevPAR is also a
useful indicator in measuring performance over comparable
periods.
Total RevPAR
Total RevPAR represents rooms, food and beverage and other hotel
revenues divided by the total number of room nights available to
guests for a given period. Room nights available to guests have not
been adjusted for suspended or reduced operations at certain of our
hotels as a result of COVID-19. Management considers Total RevPAR
to be a meaningful indicator of the Company’s performance as
approximately one-third of revenues are earned from food and
beverage and other hotel revenues. Total RevPAR is also a useful
indicator in measuring performance over comparable periods.
References to RevPAR, Total RevPAR and ADR are presented on a
currency neutral basis (prior periods are reflected using current
period exchange rates), unless otherwise noted.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200805005923/en/
Investors Ian Weissman + 1 571 302 5591
Grafico Azioni Park Hotels and Resorts (NYSE:PK)
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