# Park Hotels & Resorts Inc.: Form 10-Q for the period ended Mar 31, 2023

- Company: [Park Hotels & Resorts Inc.](/companies/pk.md) (CIK 1617406)
- Form: 10-Q
- Filed: 2023-05-01
- Accepted by EDGAR: May 1, 2023, 16:03 ET
- Period: 2023-03-31
- Accession: 0000950170-23-016228
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1617406/000095017023016228/pk-20230331.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1617406/000095017023016228/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2023-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2023-01-01 to 2023-03-31 | $648.0m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Operating income | 3 months, 2023-01-01 to 2023-03-31 | $80.0m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2023-01-01 to 2023-03-31 | $60.0m | us-gaap:InterestExpense |
| Income tax | 3 months, 2023-01-01 to 2023-03-31 | $2.0m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2023-01-01 to 2023-03-31 | $33.0m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.15 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2023-01-01 to 2023-03-31 | $0.15 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2023-01-01 to 2023-03-31 | 221,000,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2023-01-01 to 2023-03-31 | $104.0m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2023-01-01 to 2023-03-31 | $54.0m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 3 months, 2023-01-01 to 2023-03-31 | $56.0m | us-gaap:PaymentsOfDividends |
| Share repurchases | 3 months, 2023-01-01 to 2023-03-31 | $105.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2023-03-31 | $842.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Total assets | at 2023-03-31 | $9.55bn | us-gaap:Assets |
| Total liabilities | at 2023-03-31 | $5.37bn | us-gaap:Liabilities |
| Long-term debt | at 2023-03-31 | $4.59bn | us-gaap:LongTermDebt |
| Shareholders' equity | at 2023-03-31 | $4.24bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 36,764 characters.

*The following discussion and analysis of the financial condition and results of operations of Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements, related notes included elsewhere in this Quarterly Report on Form 10-Q, and with our Annual Report on Form 10-K for the year ended December 31, 2022.*

### Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements include, but are not limited to, statements related to our expectations regarding the performance of our business, our financial results, our liquidity and capital resources, including anticipated repayment of certain of the Company's indebtedness, the completion of capital allocation priorities, the expected repurchase of the Company's stock, the impact to our business and financial condition and that of our hotel management companies, the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts), the effects of competition, 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”, “hopes” 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 our control and which could materially affect our results of operations, financial condition, cash flows, performance or future achievements or events.

All such forward-looking statements are based on current expectations of management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and we urge investors to carefully review the disclosures we make concerning risks and uncertainties in Item 1A: “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2022, as such factors may be updated from time to time in our periodic filings with the SEC, which are accessible on the SEC’s website at www.sec.gov, as well as risks, uncertainties and other factors discussed in this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

### Overview

We have a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. We currently hold investments in entities that have ownership or leasehold interests in 46 hotels, consisting of premium-branded hotels and resorts with over 29,000 rooms, of which approximately 88% are luxury and upper upscale (as defined by Smith Travel Research) and are located in prime U.S. markets and its territories. Our high-quality portfolio includes hotels mostly in major urban and convention areas, such as New York City, Washington, D.C., Chicago, San Francisco, Boston, New Orleans and Denver; and premier resorts in key leisure destinations, including Hawaii, Orlando, Key West and Miami Beach; as well as hotels in select airport and suburban locations.

Our objective is to be the preeminent lodging real estate investment trust (“REIT”), focused on consistently delivering superior, risk-adjusted returns to stockholders through active asset management and a thoughtful external growth strategy while maintaining a strong and flexible balance sheet. As a pure-play real estate company with direct access to capital and independent financial resources, we believe our enhanced ability to implement compelling return on investment initiatives within our portfolio represents a significant embedded growth opportunity. Finally, given our scale and investment expertise, we believe we will be able to successfully execute single-asset and portfolio acquisitions and dispositions to further enhance the value and diversification of our assets throughout the lodging cycle, including potentially taking advantage of the economies of scale that could come from consolidation in the lodging REIT industry.

We operate our business through two operating segments, our consolidated hotels and unconsolidated hotels. Our consolidated hotels operating segment is our only reportable segment. Refer to Note 10: “Business Segment Information” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information regarding our operating segments.

### Recent Events

In February 2023, we sold the 508-room Hilton Miami Airport hotel for gross proceeds of $118.25 million, or $233,000 per key, and utilized a portion of the net proceeds to fully repay the $50 million outstanding under our revolving credit facility ("Revolver").

In March 2023, we purchased two parcels of land, including all improvements, adjacent to the Hilton Hawaiian Village Waikiki Beach Resort, for approximately $18 million, including transaction costs. We accounted for the purchase as an acquisition of an asset, and we intend to develop an additional tower on the acquired parcels as part of the Hilton Hawaiian Village Waikiki Beach Resort.

During the three months ended March 31, 2023, we repurchased approximately 8.8 million shares of our common stock for a total purchase price of $105 million.

### Outlook

Current economic challenges have affected discretionary spending and travel, including supply chain disruptions and increased inflation. Inflationary concerns may affect both consumer sentiment and demand for travel, as well as increase labor or other costs to maintain or operate hotels that cannot be reduced without adversely affecting business growth or hotel value. However, we have relied on the performance of our hotels and active asset management to mitigate the effects of inflation and current macroeconomic uncertainty, including recent pressures on the banking and financial industry. During the first quarter of 2023, we have continued to experience improvements in leisure, group and business transient demand, including our urban hotels. While there can be no assurances that we will not experience further fluctuations in hotel revenues or earnings at our hotels due to inflation and other macroeconomic factors, such as increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts, we expect the positive momentum to continue through the remainder of 2023 based on current demand trends and as demand from international travel is expected to improve during the second half of 2023.

### Key Business Metrics Used by Management

### 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. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us 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 we use ADR to assess pricing levels that we are 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. We consider RevPAR to be a meaningful indicator of our 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.

### Non-GAAP Financial Measures

We also evaluate the performance of our business through certain other financial measures that are not recognized under U.S. GAAP. Each of these non-GAAP financial measures should be considered by investors as supplemental measures to GAAP performance measures such as total revenues, operating profit and net income.

### EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA

EBITDA, presented herein, reflects net income (loss) excluding depreciation and amortization, interest income, interest expense, income taxes and also 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, further adjusted to exclude the following items that are not reflective of our ongoing operating performance or incurred in the normal course of business, and thus, excluded from management's analysis in making day-to-day operating decisions and evaluations of our operating performance against other companies within our industry:

- 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;
- Impairment losses and casualty gains or losses; and
- Other items that we believe are not representative of our current or future operating performance.

Hotel Adjusted EBITDA measures hotel-level results before debt service, depreciation and corporate expenses for our consolidated hotels, which excludes hotels owned by unconsolidated affiliates, and is a key measure of our profitability. We present Hotel Adjusted EBITDA to help us and our investors evaluate the ongoing operating performance of our consolidated hotels.

EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are not recognized terms under 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, our definitions of EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA may not be comparable to similarly titled measures of other companies.

We believe that EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are among the measures used by our management team to make day-to-day operating decisions and evaluate our operating performance between periods and between REITs by removing the effect of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results; and (ii) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA 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 our industry.

EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA 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 our operating performance and results as reported under U.S. GAAP. Some of these limitations are:

- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect our interest expense;
- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect our income tax expense;
- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; and
- other companies in our industry may calculate EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA differently, limiting their usefulness as comparative measures.

We do not use or present EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA as measures of our liquidity or cash flow. These measures have limitations as analytical tools and should not be considered either in isolation or as a substitute for cash flow or other methods of analyzing our cash flows and liquidity as reported under U.S. GAAP. Some of these limitations are:

- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs;
- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements necessary to service interest or principal payments, on our indebtedness;
- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements to pay our taxes;
- EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and
- although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect any cash requirements for such replacements.

Because of these limitations, EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations.

The following table provides a reconciliation of Net income (loss) to Hotel Adjusted EBITDA:

*(in millions)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| **Net income (loss)** | $33 | $(56) |
| Depreciation and amortization expense | 64 | 69 |
| Interest income | (10) | — |
| Interest expense | 60 | 62 |
| Income tax expense | 2 | — |
| Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates | 3 | 1 |
| **EBITDA** | 152 | 76 |
| Gain on sales of assets, net | (15) | — |
| Share-based compensation expense | 4 | 4 |
| Casualty loss | 1 | — |
| Other items | 4 | 2 |
| **Adjusted EBITDA** | 146 | 82 |
| Less: Adjusted EBITDA from investments in affiliates | (7) | (5) |
| Add: All other(1) | 13 | 12 |
| **Hotel Adjusted EBITDA** | $152 | $89 |

(1) Includes *other revenues* and *other expenses*, non-income taxes on TRS leases included in *other property-level expenses and corporate general and administrative expenses.*

### Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders

We present Nareit FFO attributable to stockholders and Nareit FFO per diluted share (defined as set forth below) as non-GAAP measures of our performance. We calculate 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 (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 our 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. We believe Nareit FFO provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs. Our 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 than we do. We calculate Nareit FFO per diluted share as our Nareit FFO divided by the number of fully diluted shares outstanding during a given operating period.

We also present Adjusted FFO attributable to stockholders and Adjusted FFO per diluted share when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance and in our annual budget process. We believe that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor’s complete understanding of our operating performance. We adjust Nareit FFO attributable to stockholders for the following items, which may occur in any period, and refer 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;
- Casualty gains or losses; and
- Other items that we believe are not representative of our current or future operating performance.

The following table provides a reconciliation of Net income (loss) attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders:

*(in millions, except per share amounts)*

|  | Three Months Ended March 31, 2023 | 2022 |
| --- | ---: | ---: |
| **Net income (loss) attributable to stockholders** | $33 | $(57) |
| Depreciation and amortization expense | 64 | 69 |
| Depreciation and amortization expense attributable to noncontrolling interests | (1) | (1) |
| Gain on sales of assets, net | (15) | — |
| Equity investment adjustments: |  |  |
| Equity in earnings from investments in affiliates | (4) | — |
| Pro rata FFO of investments in affiliates | 5 | 2 |
| **Nareit FFO attributable to stockholders** | 82 | 13 |
| Casualty loss | 1 | — |
| Share-based compensation expense | 4 | 4 |
| Other items | 5 | 1 |
| **Adjusted FFO attributable to stockholders** | $92 | $18 |
| **Nareit FFO per share – Diluted(1)** | $0.37 | $0.05 |
| **Adjusted FFO per share – Diluted(1)** | $0.42 | $0.08 |

(1) Per share amounts are calculated based on unrounded numbers.

### Results of Operations

Property dispositions have had a significant effect on the year-over-year comparability of our operations as further illustrated in the table of Hotel Revenues and Operating Expenses below. Since January 1, 2022, we have disposed of six consolidated hotels. The results of operations of these hotels are included in our consolidated results only during our period of ownership.

### Hotel Revenues and Operating Expenses

*(in millions)*

|  | Three Months Ended March 31, 2023 | 2022 | Change | Change from Property Dispositions | Change from Other Factors(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Rooms revenue | $382 | $292 | $90 | $(11) | $101 |
| Food and beverage revenue | 181 | 110 | 71 | (1) | 72 |
| Ancillary hotel revenue | 65 | 61 | 4 | (1) | 5 |
| Rooms expense | 107 | 85 | 22 | (2) | 24 |
| Food and beverage expense | 127 | 87 | 40 | (1) | 41 |
| Other departmental and support expense | 158 | 133 | 25 | (4) | 29 |
| Other property-level expense | 60 | 50 | 10 | (1) | 11 |
| Management fees expense | 30 | 22 | 8 | (1) | 9 |

(1) Change from other factors primarily relates to the market-specific conditions discussed below.

Group, transient, contract and other rooms revenue for the three months ended March 31, 2023, as well as the change for each segment compared to the same period in 2022 are as follows:

*(in millions)*

|  | Three Months Ended March 31, 2023 | 2022 | Change | Change from Property Dispositions | Change from Other Factors(1) |
| --- | ---: | ---: | ---: | ---: | ---: |
| Group rooms revenue | $125 | $73 | $52 | $(2) | $54 |
| Transient rooms revenue | 229 | 199 | 30 | (9) | 39 |
| Contract rooms revenue | 20 | 14 | 6 | — | 6 |
| Other rooms revenue | 8 | 6 | 2 | — | 2 |
| Rooms revenue | $382 | $292 | $90 | $(11) | $101 |

(1) Change from other factors primarily relates to the market-specific conditions discussed below.

#### Market-Specific Conditions

The increases in hotel revenues and operating expenses from other factors were primarily a result of significant occupancy and ADR increases in certain of our largest markets during the three months ended March 31, 2023 compared to the same period in 2022, with our San Francisco, Hawaii and New York markets experiencing the most significant changes. Combined occupancy and ADR at our San Francisco hotels increased 23.3 percentage points and 45.7%, respectively, for the three months ended March 31, 2023 compared to the same period in 2022, as a result of an increase in both group and transient demand, coupled with the reopening of Parc 55 San Francisco - a Hilton Hotel in May 2022. Combined occupancy and ADR at our two Hawaii hotels increased 10.6 percentage points and 10.4%, respectively, for the three months ended March 31, 2023 compared to same period in 2022, driven by an increase in domestic transient demand primarily at the Hilton Hawaiian Village Waikiki Beach Resort, which experienced increases in both occupancy and ADR of 12.3 percentage points and 13.5%, respectively. The New York Hilton Midtown benefited from increases in both group and transient demand resulting in increases in occupancy and ADR of 35.2 percentage points and 4.2%, respectively, for the three months ended March 31, 2023 compared to the same period in 2022.

### Other revenue and Other operating expense

During the three months ended March 31, 2023, *other revenue* and *other operating expense* both increased by $4 million compared to the same period in 2022, primarily due to increases in support services revenue and expense from the hotels that have service arrangements with Hilton Grand Vacations.

### Corporate general and administrative

*(in millions)*

|  | Three Months Ended March 31, 2023 | 2022 | Percent Change |
| --- | ---: | ---: | ---: |
| General and administrative expenses | $11 | $10 | 10.0% |
| Share-based compensation expense | 4 | 4 | — |
| Other items(1) | 1 | 2 | (50.0) |
| Total corporate general and administrative | $16 | $16 | —% |

(1) Consists primarily of disposition costs.

### Gain on sales of assets, net

During the three months ended March 31, 2023, we recognized a net gain of $15 million from the sale of one consolidated hotel.

### Non-operating Income and Expenses

#### Interest income

Interest income increased $10 million during the three months ended March 31, 2023 compared to the same period in 2022 as a result of an increase in cash coupled with an increase in interest rates.

#### Interest expense

Interest expense decreased during the three months ended March 31, 2023 compared to the same period in 2022 as a result of the full repayments in December 2022 of our unsecured delayed draw term loan facility ("2019 Term Facility") and $26 million mortgage loan secured by the Hilton Checkers, partially offset by $50 million of borrowings under our Revolver in December 2022, which was subsequently repaid in February 2023. Interest expense associated with our debt for the three months ended March 31, 2023 and 2022 were as follows:

*(in millions)*

|  | Three Months Ended March 31, 2023 | 2022 | Percent Change |
| --- | ---: | ---: | ---: |
| SF and HHV Mortgage Loans(1) | $21 | $21 | —% |
| Other mortgage loans | 5 | 5 | — |
| Revolver | 1 | 1 | — |
| 2019 Term Facility(2) | — | 1 | (100.0) |
| 2025 Senior Notes(3) | 12 | 12 | — |
| 2028 Senior Notes(3) | 11 | 11 | — |
| 2029 Senior Notes(3) | 9 | 9 | — |
| Other | 1 | 2 | (50.0) |
| Total interest expense | $60 | $62 | (3.2)% |

(1) In October 2016, we entered into a $725 million CMBS loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco (“SF Mortgage Loan”) and a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village Waikiki Beach Resort (“HHV Mortgage Loan”).

(2) In December 2022, we fully repaid our 2019 Term Facility.

(3) Park Intermediate Holdings LLC (our “Operating Company”), PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Finance Co-Issuer Inc. (“PK Finance”) in May 2020 issued an aggregate of $650 million of senior notes due 2025 (“2025 Senior Notes”) and in September 2020 issued an aggregate of $725 million of senior notes due 2028 (“2028 Senior Notes”) and in May 2021 issued an aggregate of $750 million of senior notes due 2029 ("2029 Senior Notes"), collectively referred to as the "Senior Notes".

### Liquidity and Capital Resources

### Overview

We seek to maintain sufficient amounts of liquidity with an appropriate balance of cash, debt and equity to provide financial flexibility. As of March 31, 2023, we had total cash and cash equivalents of $842 million and $33 million of restricted cash. Restricted cash primarily consists of cash restricted as to use by our debt agreements and reserves for capital expenditures in accordance with certain of our management agreements.

During the first quarter of 2023, we continued to experience improvements in leisure, group and business transient demand across our portfolio and expect the positive momentum to continue through the remainder of 2023 based on current demand trends and as demand from international travel is expected to improve during the second half of 2023. We continue to mitigate the effects of macroeconomic and inflationary pressures through active asset management.

With approximately $950 million available under our Revolver and $842 million in existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next year and beyond. We have no significant maturities in 2023, except for the $725 million mortgage loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco due in November 2023, which we expect to address by the end of the second quarter of 2023. We expect to fully repay the $75 million mortgage loan secured by the W Chicago – City Center, due in August 2023, prior to maturity with available cash on hand. Additionally, in February 2023, we fully repaid the $50 million outstanding under our Revolver with net proceeds from the sale of the Hilton Miami Airport hotel, which was sold for gross proceeds of $118.25 million, with the remaining proceeds used for general corporate purposes and stock repurchases. We may also take actions to improve our liquidity, such as the issuance of additional debt, equity or equity-linked securities, if we determine that doing so would be beneficial to us. However, there can no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all.

Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including reimbursements to our hotel manager for payroll and related benefits, costs associated with the operation of our hotels, interest and contractually due principal payments on our outstanding indebtedness, capital expenditures for in-progress renovations and maintenance at our hotels, corporate general and administrative expenses and dividends to our stockholders. Many of the other expenses associated with our hotels are relatively fixed, including portions of rent expense, property taxes and insurance. Since we generally are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the resulting decline in our revenues can have a greater adverse effect on our net cash flow, margins and profits. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements at our hotels, and costs associated with potential acquisitions.

Our commitments to fund capital expenditures for renovations and maintenance at our hotels will be funded by cash and cash equivalents, restricted cash to the extent permitted by our lending agreements and cash flow from operations. We have construction contract commitments of approximately $168 million for capital expenditures at our properties, of which $51 million relates to projects at the Bonnet Creek complex, including the meeting space expansion project and renovation of guestrooms, existing meeting space, lobbies, golf course and other recreational amenities, $39 million relates to the complete renovation of all guestrooms, public spaces and hotel infrastructure at the Casa Marina Key West, Curio Collection, and $30 million relates to the Tapa Tower guestroom renovations at the Hilton Hawaiian Village Waikiki Beach Resort. Our contracts contain clauses that allow us to cancel all or some portion of the work. Additionally, we have established reserves for capital expenditures (“FF&E reserve”) in accordance with our management and certain debt agreements. Generally, these agreements require that we fund 4% of hotel revenues into an FF&E reserve, unless such amounts have been incurred.

Our cash management objectives continue to be to maintain the availability of liquidity, minimize operational costs, make debt payments and fund our capital expenditure programs and future acquisitions. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments.

### Stock Repurchase Program

In February 2023, our Board of Directors terminated a previous stock repurchase program that was approved in February 2022 (the "February 2022 Stock Repurchase Program") and authorized and approved a new stock repurchase program allowing us to repurchase up to $300 million of our common stock over a two-year period ending in February 2025 (the "February 2023 Stock Repurchase Program" and collectively with the February 2022 Stock Repurchase Program the "Stock Repurchase Programs"), subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our Senior Notes. Stock repurchases may be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that would comply with applicable securities laws. The timing of any future stock repurchases and the number of shares to be repurchased will depend upon prevailing market conditions and other factors, and we may suspend the repurchase program at any time. During the three months ended March 31, 2023, we repurchased in aggregate under the Stock Repurchase Programs approximately 8.8 million shares of our common stock for a total purchase price of $105 million. As of March 31, 2023, $225 million remained available for stock repurchases under the February 2023 Stock Repurchase Program.

### Sources and Uses of Our Cash and Cash Equivalents

The following tables summarize our net cash flows and key metrics related to our liquidity:

*(in millions)*

|  | Three Months Ended March 31, 2023 | 2022 | Percent Change |
| --- | ---: | ---: | ---: |
| Net cash provided by operating activities | $104 | $44 | 136.4% |
| Net cash provided by (used in) investing activities | 49 | (21) | 333.3% |
| Net cash used in financing activities | (217) | (69) | 214.5% |

#### Operating Activities

Cash flow from operating activities are primarily generated from the operating income generated at our hotels. The $60 million increase in net cash provided by operating activities for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was primarily due to an increase in cash from operations as a result of an increase in occupancy at our hotels.

#### Investing Activities

The $49 million in net cash provided by investing activities for the three months ended March 31, 2023 was primarily attributable to $116 million of net proceeds from the sale of one of our hotels partially offset by $65 million in capital expenditures and land acquisitions.

The $21 million in net cash used in investing activities for the three months ended March 31, 2022 was attributable to capital expenditures.

#### Financing Activities

The $217 million in net cash used in financing activities for the three months ended March 31, 2023 was primarily attributable to the repurchase of approximately 8.8 million shares of our common stock for $105 million, $56 million of dividends paid and $52 million of debt repayments.

The $69 million in net cash used in financing activities for the three months ended March 31, 2022 was primarily attributable to the repurchase of approximately 3.4 million shares of our common stock for $61 million.

### Dividends

As a REIT, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gains, to our stockholders on an annual basis. Therefore, as a general matter, after consideration of the allowable use of our net operating loss carryforward, we intend to make distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our stockholders, and, as a result, we will not be required to pay tax on our income. Consequently, before consideration of the use of any net operating loss carryforward, it is unlikely that we will be able to retain substantial cash balances that could be used to meet our liquidity needs from our annual taxable income. Instead, we will need to meet these needs from external sources of capital and amounts, if any, by which our cash flow generated from operations exceeds taxable income.

We declared the following dividends to holders of our common stock during 2023:

| Record Date | Payment Date | Dividend per Share |
| --- | --- | ---: |
| March 31, 2023 | April 17, 2023 | $0.15 |

### Debt

As of March 31, 2023, our total indebtedness was approximately $4.6 billion, including approximately $2.1 billion of our Senior Notes, and excluding approximately $169 million of our share of debt from investments in affiliates. Substantially all the debt of such unconsolidated affiliates is secured solely by the affiliates’ assets or is guaranteed by other partners without recourse to us. Refer to Note 6: “Debt” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

### Critical Accounting Estimates

The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our unaudited condensed consolidated financial statements and accompanying footnotes. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year ended December 31, 2022, filed with the Securities and Exchange Commission on February 23, 2023. There have been no material changes to our critical accounting policies or the methods or assumptions we apply.

## Market risk

As filed, 414 characters.

We are exposed to market risk primarily from changes in interest rates, which may affect our future income, cash flows and fair value, depending on changes to interest rates. In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility.

## Controls and procedures

As filed, 1,393 characters.

#### Evaluation of Disclosure Controls and Procedures

Our management has evaluated, under the supervision and with the participation of the Company's Chief Executive Officer and Chief Financial Officer, the effectiveness of the disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, (the “Exchange Act”), as required by paragraph (b) of Rules 13a-15 and 15d-15 of the Exchange Act. Based on this evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of March 31, 2023, our disclosure controls and procedures were effective to ensure that information we are required to disclose in reports filed or submitted with the Securities and Exchange Commission (i) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms and (ii) is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding disclosure.

#### Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 198 characters.

There have been no material changes from the risk factors previously disclosed in response to “Part I – Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2022.

Filed May 1, 2023.
Source: SEC EDGAR, the filing index for accession 0000950170-23-016228. Last ingested by Listed: Oct 24, 2026, 15:14 ET. No prices; not investment advice.