Park Hotels & Resorts Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Amounts are in millions of dollars except per-share data, percentages, and hotel statistics. The company owns and operates premium-branded hotels and resorts as a REIT.
Financial performance and liquidity
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Total revenue | $323 | $42 | $488 | $641 |
| Operating loss | $(44) | $(200) | $(167) | $(837) |
| Net loss attributable to stockholders | $(116) | $(259) | $(306) | $(947) |
| Diluted loss per share | $(0.49) | $(1.10) | $(1.30) | $(4.01) |
| Hotel Adjusted EBITDA (non-GAAP) | $42 | $(108) | $6 | $(17) |
- Q2 revenue recovery was led by rooms revenue of $207, versus $21 a year earlier. The first-half revenue decline versus 2020 reflects the period mix and continuing pandemic disruption; results are not directly comparable with the prior year.
- Q2 interest expense was $66, up from $50; first-half interest expense was $129, up from $90, largely reflecting senior notes issued in 2020 and 2021.
- First-half operating cash flow was $(161), investing cash flow was $154, and financing cash flow was $(30). Investing inflows primarily reflected hotel-sale proceeds; operating cash use was broadly similar to the prior-year $(158).
- At June 30, cash and cash equivalents were $909, restricted cash was $35, and debt was $5.1 billion. Total assets were $10.3 billion and total liabilities were $5.7 billion.
Changes versus comparable periods
- Recovery accelerated in Q2 from the exceptionally depressed Q2 2020 comparison. Pro forma Q2 occupancy was 42.3%; RevPAR was up 909.7% year over year but remained 59.2% below Q2 2019. The filing attributes the improvement to stronger leisure demand, vaccinations, and easing restrictions.
- First-half net loss narrowed substantially, principally because 2020 included $607 of goodwill impairment and other hotel impairment charges. First-half 2021 included $5 of impairment expense.
- The company sold three hotels in Q2 for gross proceeds of approximately $173, using net proceeds to repay the revolving credit facility and part of the 2019 Term Facility. It issued $750 of 2029 Senior Secured Notes at 4.875% and used proceeds in part to repay revolving and term-facility borrowings.
- The quarterly dividend remained suspended after the first-quarter 2020 payment. No shares were repurchased under the public repurchase program in the first half of 2021; the program expired in February 2021.
Outlook, risks, and unusual items
- Management expected broader recovery in the second half of 2021 and into 2022, citing improved leisure demand and group bookings, but gave no specific financial guidance. It cautioned that pandemic recovery remained uncertain and further revenue or earnings declines were possible.
- As of August 6, 2021, 46 consolidated hotels were open and three remained suspended. Reopening timing depended on restrictions, health guidance, and demand. COVID-19 variants, renewed restrictions, vaccine effectiveness and uptake, and economic conditions were cited as significant uncertainties.
- Management said available cash, revolving-credit capacity, note proceeds, and asset-sale proceeds supported near-term liquidity needs. It expected cash flows for the remainder of 2021 to remain below pre-pandemic levels and intended to retain elevated cash balances. The filing does not provide a clear quantified forecast of future cash flow or hotel performance.
- A $75 mortgage loan secured by the W Chicago City Center was in default after the company stopped debt-service payments in January 2021; the stated rate was 4.25% and default rate 8.25%. Management was seeking an amendment, with no assurance of agreement.
- Outstanding capital-expenditure commitments were approximately $55. The company reserved approximately $8 for Hilton spin-off-related litigation concerning an Australian tax audit and paid Hilton approximately $11 in February 2021 toward a required deposit and expenses; the exposure could change.
- After quarter-end, the Hotel Adagio was sold for gross proceeds of $82, with net proceeds used to repay $77 of the term facility. A sale of Le Meridien San Francisco for approximately $222 was expected to close in Q3 2021; the company anticipated a $13–$14 loss after transaction costs.
Investor facts to verify
- Whether hotel demand, occupancy, ADR, and RevPAR continued recovering after Q2, particularly relative to 2019 levels, and whether suspended hotels reopened.
- Cash burn, available revolving-credit capacity, debt maturities and covenant requirements, and the company’s ability to refinance or repay debt.
- Progress on the W Chicago City Center loan default and any material change in the Australian tax litigation or other contingencies.
- Completion and actual net proceeds of announced asset sales, and how proceeds were applied to debt.
- Timing and conditions for any dividend reinstatement, given the continuing suspension and REIT distribution requirements.