UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~September 30,~~March 31, ~~2021~~2022


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 001-37795

Park Hotels & Resorts Inc.

(Exact name of Registrant as specified in its Charter)


Delaware		36-2058176
(State or other jurisdiction of incorporation or organization)		(I.R.S Employer Identification No.)
1775 Tysons Boulevard., 7th Floor, Tysons, VA		22102
(Address of principal executive offices)		(Zip Code)

(Registrant’s telephone number, including area code): (571) 302-5757

Securities registered pursuant to Section 12(b) of the Act.


Title of each class	Trading Symbol	Name of exchange on which registered
Common Stock, $0.01 par value per share	PK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The number of shares of common stock outstanding on ~~October 29, 2021~~April 27, 2022 was ~~236,479,179~~233,370,080.

Table of Contents


PART I. FINANCIAL INFORMATION		Page

Item 1.	Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020~~2021	3
	Condensed Consolidated Statements of Comprehensive Loss for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	4
	Condensed Consolidated Statements of Cash Flows for the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	5
	Condensed Consolidated Statements of Equity for the Three ~~and Nine~~ Months Ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1614
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2723
Item 4.	Controls and Procedures	2723

PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	2824
Item 1A.	Risk Factors	2824
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2824
Item 3.	Defaults Upon Senior Securities	2824
Item 4.	Mine Safety Disclosures	2924
Item 5.	Other Information	2925
Item 6.	Exhibits	3026
	Signatures	3127

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
	(unaudited)						(unaudited)
ASSETS
Property and equipment, net	$	8,549			9,193		$	8,465		$	8,511
Investments in affiliates		14			14			16			15
Intangibles, net		44			45			44			44
Cash and cash equivalents		772			951			639			688
Restricted cash		70			30			78			75
Accounts receivable, net of allowance for doubtful accounts of $2 and $3		62			26
Accounts receivable, net of allowance for doubtful accounts of $2 and $2								106			96
Prepaid expenses		34			39			58			35
Other assets		34			60			65			69
Operating lease right-of-use assets		215			229			232			210
TOTAL ASSETS (variable interest entities - $239 and $229)	$	9,794		$	10,587
TOTAL ASSETS (variable interest entities - $240 and $237)							$	9,703		$	9,743
LIABILITIES AND EQUITY
Liabilities
Debt	$	4,670			5,121		$	4,671		$	4,672
Accounts payable and accrued expenses		204			147			200			156
Due to hotel managers		96			88			113			111
Deferred income tax liabilities		9			10
Other liabilities		115			134			184			174
Operating lease liabilities		232			244			250			227
Total liabilities (variable interest entities - $218 and $213)		5,326			5,744
Commitments and contingencies - refer to Note 13
Total liabilities (variable interest entities - $219 and $219)								5,418			5,340
Commitments and contingencies - refer to Note 10
Stockholders' Equity
Common stock, par value $0.01 per share, 6,000,000,000 shares authorized, 236,884,447 shares issued and 236,479,696 shares outstanding as of September 30, 2021 and 236,217,344 shares issued and 235,915,749 shares outstanding as of December 31, 2020		2			2
Common stock, par value $0.01 per share, 6,000,000,000 shares authorized, 233,835,899 shares issued and 233,324,391 shares outstanding as of March 31, 2022 and 236,888,804 shares issued and 236,483,990 shares outstanding as of December 31, 2021								2			2
Additional paid-in capital		4,529			4,519			4,473			4,533
(Accumulated deficit) retained earnings		(16	)		376
Accumulated other comprehensive loss		0			(4	)
Accumulated deficit								(142	)		(83	)
Total stockholders' equity		4,515			4,893			4,333			4,452
Noncontrolling interests		(47	)		(50	)		(48	)		(49	)
Total equity		4,468			4,843			4,285			4,403
TOTAL LIABILITIES AND EQUITY	$	9,794		$	10,587		$	9,703		$	9,743

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in millions, except per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
Revenues
Rooms	$	274		$	70		$	587		$	453		$	292		$	106
Food and beverage		76			10			152			174			110			22
Ancillary hotel		58			15			137			87			61			29
Other		15			3			35			25			16			8
Total revenues		423			98			911			739			479			165

Operating expenses
Rooms		76			30			170			162			85			35
Food and beverage		63			18			126			155			87			21
Other departmental and support		119			64			298			296			133			78
Other property-level		51			84			151			200			50			48
Management fees		19			2			40			27			22			7
Impairment and casualty loss, net		2			2			7			696
Depreciation and amortization		68			75			213			225			69			74
Corporate general and administrative		14			13			48			42			16			18
Acquisition costs		0			9			0			10
Other		14			6			34			31			16			7
Total expenses		426			303			1,087			1,844			478			288

(Loss) gain on sales of assets, net		(11	)		(1	)		(5	)		62
Operating income (loss)														1			(123	)

Operating loss		(14	)		(206	)		(181	)		(1,043	)

Interest income		0		0				0			2
Interest expense		(66	)		(59	)		(195	)		(149	)		(62	)		(63	)
Equity in losses from investments in affiliates		0			(7	)		(6	)		(16	)		—			(4	)
Other loss, net		(5	)		(3	)		(7	)		(6	)
Other gain, net														5			0

Loss before income taxes		(85	)		(275	)		(389	)		(1,212	)		(56	)		(190	)
Income tax benefit (expense)		3			(1	)		2			(14	)
Income tax expense														0			(1	)
Net loss		(82	)		(276	)		(387	)		(1,226	)		(56	)		(191	)
Net (income) loss attributable to noncontrolling interests		(4	)	0				(5	)		3			(1	)		1
Net loss attributable to stockholders	$	(86	)	$	(276	)	$	(392	)	$	(1,223	)	$	(57	)	$	(190	)

Other comprehensive income (loss), net of tax expense:
Currency translation adjustment, net of tax expense of $0		0			1			0			4
Other comprehensive income, net of tax expense:
Change in fair value of interest rate swap, net of tax expense of $0		1			0			2			(6	)		0			1
Loss from interest rate swap reclassified into earnings		2			0			2			0
Total other comprehensive income (loss)		3			1			4			(2	)
Total other comprehensive income														0			1

Comprehensive loss		(79	)		(275	)		(383	)		(1,228	)		(56	)		(190	)
Comprehensive (loss) income attributable to noncontrolling interests		(4	)	—				(5	)		3
Comprehensive (income) loss attributable to noncontrolling interests														(1	)		1
Comprehensive loss attributable to stockholders	$	(83	)	$	(275	)	$	(388	)	$	(1,225	)	$	(57	)	$	(189	)

Loss per share:
Loss per share – Basic	$	(0.36	)	$	(1.17	)	$	(1.66	)	$	(5.19	)	$	(0.24	)	$	(0.81	)
Loss per share – Diluted	$	(0.36	)	$	(1.17	)	$	(1.66	)	$	(5.19	)	$	(0.24	)	$	(0.81	)

Weighted average shares outstanding – Basic		236			235			236			236			235			235
Weighted average shares outstanding – Diluted		236			235			236			236			235			236

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in millions)


	Nine Months Ended						Three Months Ended
	September 30,						March 31,
	2021			2020			2022			2021
Operating Activities:
Net loss	$	(387	)	$	(1,226	)	$	(56	)	$	(191	)
Adjustments to reconcile net loss to net cash used in operating activities:
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		213			225			69			74
Loss (gain) on sales of assets, net		5			(62	)
Impairment and casualty loss, net		7			696
Equity in losses from investments in affiliates		6			16			0			4
Other loss, net		7			6
Other gain, net								(1	)		0
Share-based compensation expense		15			10			4			6
Amortization of deferred financing costs		9			6			3			2
Distributions from unconsolidated affiliates		0			5
Deferred income taxes		(1	)		2
Changes in operating assets and liabilities		31			48			25			34
Net cash used in operating activities		(95	)		(274	)
Net cash provided by (used in) operating activities								44			(71	)
Investing Activities:
Capital expenditures for property and equipment		(28	)		(70	)		(21	)		(5	)
Proceeds from asset dispositions, net		454			207
Contributions to unconsolidated affiliates		(5	)		(2	)		0			(2	)
Insurance proceeds for property damage claims		4			1			0			4
Net cash provided by investing activities		425			136
Net cash used in investing activities								(21	)		(3	)
Financing Activities:
Borrowings from credit facilities		0			1,000
Repayments of credit facilities		(1,193	)		(1,099	)
Proceeds from issuance of Senior Secured Notes		750			1,376
Proceeds from issuance of mortgage debt		14			0
Repayments of mortgage debt		(18	)		(4	)		(2	)		(1	)
Debt issuance costs		(15	)		(39	)		(3	)		0
Dividends paid		0			(241	)
Distributions to noncontrolling interests, net		(2	)		(1	)
Tax withholdings on share-based compensation		(5	)		(5	)		(3	)		(6	)
Repurchase of common stock		0			(66	)		(61	)		0
Net cash (used in) provided by financing activities		(469	)		921
Net (decrease) increase in cash and cash equivalents and restricted cash		(139	)		783
Net cash used in financing activities								(69	)		(7	)
Net decrease in cash and cash equivalents and restricted cash								(46	)		(81	)
Cash and cash equivalents and restricted cash, beginning of period		981			386			763			981
Cash and cash equivalents and restricted cash, end of period	$	842		$	1,169		$	717		$	900

Supplemental Disclosures
Non-cash financing activities:
Dividends declared but unpaid							$	2		$	0

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(unaudited, in millions)



																										Additional						Non-
																					Common Stock					Paid-in			Accumulated			controlling
																					Shares			Amount		Capital			Deficit			Interests			Total
Balance as of December 31, 2021																						236		$	2	$	4,533		$	(83	)	$	(49	)	$	4,403
Share-based compensation, net																						—			—		1			—			—			1
Net loss																						—			—		—			(57	)		1			(56	)
Dividends and dividend equivalents(1)																						—			—		—			(2	)		—			(2	)
Repurchase of common stock																						(3	)		—		(61	)		—			—			(61	)
Balance as of March 31, 2022																						233		$	2	$	4,473		$	(142	)	$	(48	)	$	4,285

												Accumulated																	Retained			Accumulated
						Additional			Retained Earnings			Other			Non-											Additional			Earnings			Other			Non-
	Common Stock					Paid-in			(Accumulated			Comprehensive			controlling						Common Stock					Paid-in			(Accumulated			Comprehensive			controlling
	Shares			Amount		Capital			Deficit)			(Loss) Income			Interests			Total			Shares			Amount		Capital			Deficit)			(Loss) Income			Interests			Total
Balance as of December 31, 2020		236		$	2	$	4,519		$	376		$	(4	)	$	(50	)	$	4,843			236		$	2	$	4,519		$	376		$	(4	)	$	(50	)	$	4,843
Share-based compensation, net		—			—		1			(1	)		—			—			—			—			—		1			(1	)		—			—			—
Net loss		—			—		—			(190	)		—			(1	)		(191	)		—			—		—			(190	)		—			(1	)		(191	)
Other comprehensive income		—			—		—			—			1			—			1			—			—		—			—			1			—			1
Balance as of March 31, 2021		236		$	2	$	4,520		$	185		$	(3	)	$	(51	)	$	4,653			236		$	2	$	4,520		$	185		$	(3	)	$	(51	)	$	4,653
Share-based compensation, net		—			—		5			1			—			—			6
Net loss		—			—		—			(116	)		—			2			(114	)
Balance as of June 30, 2021		236			2		4,525			70			(3	)		(49	)		4,545
Share-based compensation, net		—			—		4			—			—			—			4
Net loss		—			—		—			(86	)		—			4			(82	)
Other comprehensive income		—			—		—			—			3			—			3
Distributions to noncontrolling interests		—			—		—			—			—			(2	)		(2	)
Balance as of September 30, 2021		236		$	2	$	4,529		$	(16	)	$	—		$	(47	)	$	4,468

												Accumulated
						Additional						Other			Non-
	Common Stock					Paid-in			Retained			Comprehensive			controlling
	Shares			Amount		Capital			Earnings			(Loss) Income			Interests			Total
Balance as of December 31, 2019		239		$	2	$	4,575		$	1,922		$	(3	)	$	(45	)	$	6,451
Share-based compensation, net		—			—		(5	)		1			—			—			(4	)
Net loss		—			—		—			(688	)		—			(1	)		(689	)
Other comprehensive loss		—			—		—			—			(2	)					(2	)
Dividends and dividend equivalents(1)		—			—		—			(106	)		—			—			(106	)
Distributions to noncontrolling interests		—			—		—			—			—			(1	)		(1	)
Repurchase of common stock		(4	)		—		(66	)		—			—			—			(66	)
Balance as of March 31, 2020		235		$	2	$	4,504		$	1,129		$	(5	)	$	(47	)	$	5,583
Share-based compensation, net		1			—		4			1			—			—			5
Net loss		—			—		—			(259	)		—			(2	)		(261	)
Other comprehensive loss		—			—		—			—			(1	)		—			(1	)
Balance as of June 30, 2020		236			2		4,508			871			(6	)		(49	)		5,326
Share-based compensation, net		—			—		4			—			—			—			4
Net loss		—			—		—			(276	)		—			—			(276	)
Other comprehensive income		—			—		—			—			1			—			1
Balance as of September 30, 2020		236		$	2	$	4,512		$	595		$	(5	)	$	(49	)	$	5,055

(1) Dividends declared per common share were $~~0.45~~0.01 for the three months ended March 31, ~~2020.~~2022.

Refer to the notes to the unaudited condensed consolidated financial statements.

PARK HOTELS & RESORTS INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

Note 1: Organization and Recent Events

Organization

Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company” and, exclusive of any subsidiaries, "Park Parent") is a Delaware corporation that owns a portfolio of premium-branded hotels and resorts primarily located in prime city center and resort locations. On January 3, 2017, Hilton Worldwide Holdings Inc. (“Hilton”) completed the spin-off of a portfolio of hotels and resorts that established Park Hotels & Resorts Inc. as an independent, publicly traded company.

On May 5, 2019, the Company, PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Domestic Sub LLC, a wholly-owned subsidiary of PK Domestic (“Merger Sub”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Chesapeake Lodging Trust (“Chesapeake”). On September 18, 2019, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Chesapeake merged with and into Merger Sub (the “Merger”) and each of Chesapeake’s common shares of beneficial interest, $0.01 par value per share, was converted into $11.00 in cash and 0.628 of a share of our common stock. NaN fractional shares of our common stock were issued in the Merger. The value of any fractional interests to which a Chesapeake shareholder would otherwise have been entitled was paid in cash.

We are a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate, in a manner to qualify as a REIT. To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we distribute to our stockholders annually and the diversity of ownership of our stock. From the date of our spin-off from Hilton, Park Intermediate Holdings LLC (our “Operating Company”), directly or indirectly, has held all our assets and has conducted all of our operations. ~~We own~~Park Parent owned 100% of the interests in our Operating ~~Company.~~Company until December 31, 2021 when the business undertook an internal reorganization transitioning our structure to a traditional umbrella partnership REIT structure ("UPREIT"). Effective January 1, 2022, Park Parent became the managing member of our Operating Company and PK Domestic REIT Inc., a direct subsidiary of Park Parent, became a member. We may, in the future, issue interests in (or from) our Operating Company in connection with acquiring hotels, financing, compensation or other purposes.

COVID-19 Update

The novel strain of coronavirus and the disease it causes (“COVID-19”) have had and continue to have ~~a significant~~an effect on the hospitality industry and our business. The effects of COVID-19, including government restrictions such as mandated closings of non-essential businesses and travel restrictions, have severely reduced overall lodging demand. Since the beginning ofBeginning in March 2020, we ~~have~~ experienced a significant decline in occupancy and Revenue per Available Room (“RevPAR”) associated with COVID-19 throughout our portfolio, which resulted in a decline in our operating cash flow. The increase in vaccination rates across the country and the easing or removal of government restrictions, quarantining and “social distancing” mandates ~~have~~ resulted in increased travel and hospitality spending ~~during~~beginning in the second ~~and third quarters~~quarter of 2021. ~~However, the seasonal decline in leisure travel and the delay in return of business travel, coupled with~~Although concerns over the spread of the ~~Delta~~Omicron variant ~~have~~ reduced ~~near-term demand.~~

~~We and our hotel managers have taken various actions to mitigate~~demand in the ~~effects~~first six weeks of ~~COVID-19, including temporarily suspending operations at certain of our hotels~~the quarter, we witnessed recovery beginning in ~~March 2020, limiting capacity at~~mid-February 2022 as COVID-19 cases declined across the country and business travel accelerated, and saw the return of group demand. We expect positive momentum to continue for our ~~open~~leisure focused hotels ~~deferring approximately $150~~ ~~million of capital expenditures planned~~and increased demand for ~~2020, reducing forecasted capital expenditures for maintenance projects to approximately $~~56 ~~million for 2021, suspending our dividend after the first quarter of 2020,~~both group and ~~as a precautionary measure to increase liquidity and preserve financial flexibility, drawing on our revolving credit facility (“Revolver”) and completing~~ 3 ~~corporate bond offerings totaling $2.1~~ ~~billion in 2020 and 2021. We have since commenced a phased reopening of all except~~ 2 of our hotels as restrictions are removed and demand returns. The timing of fully reopening our remaining suspended hotels will depend primarily on government restrictions imposed or re-imposed, recommendations of health officials and market demand.

~~We are committed to using our liquidity to support our hotels’ operations~~business transient travel during the ~~COVID-19 pandemic and subsequent recovery, while being focused on continuing to maintain and enhance our stockholders’ value.~~remainder of the year.

Note 2: Basis of Presentation and Summary of Significant Accounting Policies

Basis of Presentation

Principles of Consolidation

The unaudited condensed consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). We have condensed or omitted certain information and footnote disclosures normally included in financial statements presented in accordance with U.S. GAAP. In our opinion, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, including normal recurring items, considered necessary for a fair presentation of the interim periods. All significant intercompany transactions and balances within the financial statements have been eliminated.

These financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the year ended December 31, ~~2020~~2021 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (“SEC”) on February ~~26, 2021.~~18, 2022.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Interim results are not necessarily indicative of full year performance.

Reclassifications

Certain line items on the condensed consolidated balance sheets as of December 31, 2021 have been reclassified to conform to the current period presentation.

Summary of Significant Accounting Policies

Our Annual Report on Form 10-K for the year ended December 31, ~~2020,~~2021, filed with the SEC on February ~~26, 2021,~~18, 2022, contains a discussion of the significant accounting policies. There have been no significant changes to our significant accounting policies since December 31, ~~2020.~~2021.

~~Note 3: Dispositions and Acquisitions~~

~~Dispositions~~

~~During the nine months ended September 30, 2021, we sold the~~ 5 ~~consolidated hotels listed in the table below, received total gross proceeds of approximately $477~~ ~~million and recognized a net $~~5 ~~million loss due to selling costs, which is included in (loss) gain on sales of assets, net~~ ~~in our condensed consolidated statements of comprehensive loss. In addition, we recognized a $~~5 million impairment loss from the classification of the Hotel Adagio, Autograph Collection, as held for sale at June 30, 2021, as the selling costs reduced the gross proceeds to less than the net book value of the property, which is included in ~~impairment and casualty loss, net~~ ~~in our condensed consolidated statements of comprehensive loss.~~


~~Hotel~~	~~Location~~	~~Month Sold~~
~~W New Orleans – French Quarter~~	~~New Orleans, Louisiana~~	~~April 2021~~
~~Hotel Indigo San Diego Gaslamp Quarter(1)~~	~~San Diego, California~~	~~June 2021~~
~~Courtyard Washington Capitol Hill Navy Yard(1)~~	~~Washington, D.C.~~	~~June 2021~~
~~Hotel Adagio, Autograph Collection~~	~~San Francisco, California~~	~~July 2021~~
~~Le Meridien San Francisco~~	~~San Francisco, California~~	~~August 2021~~

~~(1)~~ ~~Sold as a portfolio in the same transaction.~~

~~Net proceeds from the sales of these hotels were used to repay $~~37 ~~million under the Revolver, which currently has no remaining balance outstanding, and partially repay $419~~ ~~million of our term loan facility due in 2024 (“2019 Term Facility”).~~

~~In February 2020, we sold the Embassy Suites Washington DC Georgetown and our interests in the entity that owns the Hilton São Paulo Morumbi for total gross proceeds of $208~~ ~~million and recognized a gain, net of selling costs, of $~~64 ~~million on these hotels, which is included in~~ ~~(loss) gain on sales of assets, net~~ ~~in our condensed consolidated statements of comprehensive loss. Additionally, the net gain includes the reclassification of a currency translation adjustment of $~~7 ~~million from accumulated other comprehensive loss into earnings concurrent with the sale of the Hilton São Paulo Morumbi.~~

~~Acquisitions~~

~~For the three months ended September 30, 2020, we incurred an additional $~~9 million in acquisition costs in connection with the September 2019 Merger Agreement with Chesapeake, primarily related to transfer taxes based on new information received during the period, which is included in ~~acquisition costs~~ ~~in our condensed consolidated statements of comprehensive loss.~~

Note 4:3: Property and Equipment

Property and equipment were:


	September 30, 2021			December 31, 2020			March 31, 2022			December 31, 2021
	(in millions)						(in millions)
Land	$	3,333		$	3,429		$	3,336		$	3,333
Buildings and leasehold improvements		6,600			6,951			6,616			6,606
Furniture and equipment		1,000			1,042			1,013			1,005
Construction-in-progress		63			52			82			82
		10,996			11,474			11,047			11,026
Accumulated depreciation and amortization		(2,447	)		(2,281	)		(2,582	)		(2,515	)
	$	8,549		$	9,193		$	8,465		$	8,511

Depreciation of property and equipment was $68 million and $7573 million during the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020, respectively, and $212~~ ~~million and $224~~ ~~million during the nine months ended September 30, 2021 and 2020,~~ respectively.

~~For the nine months ended September 30, 2021, we recognized $~~5 million of impairment losses related to one of our hotels, which was classified as held for sale as of June 30, 2021, and subsequently sold in July 2021, as the estimated selling costs were expected to reduce the gross proceeds below the net book value of the property.

~~For the nine months ended September 30, 2020, we recognized $~~90 ~~million of impairment losses, primarily related to one of our hotels, and our inability to recover the carrying value of the asset because of COVID-19.~~

Note 5:4: Consolidated Variable Interest Entities ("VIEs") and Investments in Affiliates

Consolidated VIEs

We consolidate VIEs that own 3 hotels in the U.S. We are the primary beneficiary of these VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of these entities. Our condensed consolidated balance sheets include the following assets and liabilities of these entities:


	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
	(in millions)				(in millions)
Property and equipment, net	$	211	$	216	$	208	$	209
Cash and cash equivalents		19		8		19		18
Restricted cash		4		2		8		6
Accounts receivable, net		4		1		3		3
Prepaid expenses		1		1		2		1
Other assets		0		1
Debt		208		207		206		208
Accounts payable and accrued expenses		7		5		8		7
Due to hotel manager						1		1
Other liabilities		3		1		4		3

Unconsolidated Entities

Investments in affiliates were:


	Ownership %	September 30, 2021		December 31, 2020		Ownership %	March 31, 2022		December 31, 2021
		(in millions)					(in millions)
Hilton San Diego Bayfront	25%	$	11	$	11	25%	$	12	$	11
All others (6 hotels)(1)	20% - 50%		3		3
All others (5 hotels)						20% - 50%		4		4
		$	14	$	14		$	16	$	15

~~(1)~~ ~~The ground lease for the Embassy Suites Secaucus Meadowlands expired on~~ ~~October 31, 2021~~ ~~and the property was turned over to the ground lessor on that date.~~

The affiliates in which we own investments accounted for under the equity method had total debt of approximately $942 million and $943 million as of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, respectively. Substantially all the debt is secured solely by the affiliates’ assets or is guaranteed by other partners without recourse to us.

Note ~~6: Goodwill~~

Due to the effects of COVID-19, we assessed goodwill for impairment during the first quarter of 2020 and determined that the carrying value of our consolidated and unconsolidated hotel reporting units exceeded their respective estimated fair value. As a result, we fully impaired our remaining goodwill balance, recognizing an impairment loss of $~~607~~ ~~million in the first quarter of 2020.~~

~~Note 7:~~5: Debt

Debt balances and associated interest rates as of ~~September 30, 2021~~March 31, 2022 were:


			Principal balance as of								Principal balance as of
	Interest Rate at September 30, 2021	Maturity Date	September 30, 2021			December 31, 2020			Interest Rate at March 31, 2022	Maturity Date	March 31, 2022			December 31, 2021
			(in millions)								(in millions)
SF CMBS Loan(1)	4.11%	November 2023	$	725		$	725
HHV CMBS Loan(1)	4.20%	November 2026		1,275			1,275
Mortgage loans	Average rate of 4.81%	2022 to 2026(2)(3)		505			509
SF Mortgage Loan(1)									4.11%	November 2023	$	725		$	725
HHV Mortgage Loan(1)									4.20%	November 2026		1,275			1,275
Other mortgage loans									Average rate of 4.22%	2022 to 2027(2)		501			503
2019 Term Facility~~(4)~~(3)	L + 2.65%	August 2024		78			670		L + 2.65%	August 2024		78			78
Revolver~~(4)~~(3)	L + 3.00%	2021 to 2023(5)		0			601		L + 3.00%	December 2023		0			0
2025 Senior Secured Notes~~(6)~~(4)	7.50%	June 2025		650			650		7.50%	June 2025		650			650
2028 Senior Secured Notes~~(6)~~(4)	5.88%	October 2028		725			725		5.88%	October 2028		725			725
2029 Senior Secured Notes(4)	4.88%	May 2029		750			0		4.88%	May 2029		750			750
Finance lease obligations	3.07%	2021 to 2022		0			1
				4,708			5,156					4,704			4,706
Add: unamortized premium				3			3					4			4
Less: unamortized deferred financing costs and discount				(41	)		(38	)				(37	)		(38	)
			$	4,670		$	5,121				$	4,671		$	4,672

(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 ~~CMBS~~Mortgage Loan”) and a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village Waikiki Beach Resort (“HHV ~~CMBS~~Mortgage Loan”).

(2) Assumes the exercise of all extensions that are exercisable solely at our option. The mortgage loan for Hilton Denver City Center matures in 2042 but is callable by the lender ~~beginning~~ ~~August~~with six months of notice. As of March 31, 2022,. Park had not received notice from the lender. Additionally, in April 2022, our joint venture refinanced the mortgage loan secured by the DoubleTree Hotel Ontario Airport, which extended the maturity date to May 2027.

(3) In ~~June 2021,~~August 2019, the Company, our ~~joint venture repaid the $~~12 ~~million~~Operating Company and PK Domestic entered into a term loan ~~secured by the Doubletree Spokane with proceeds from a $~~14 ~~million loan with a maturity date of~~ ~~July 1, 2026~~facility (the “2019 Term Facility”). ~~Additionally, in January 2021, we ceased making debt service payments toward the $~~75 ~~million mortgage loan secured by the W Chicago City Center, and we have received a notice of an event of default. The default interest rate on the loan is~~ ~~8.25% and the stated rate is~~ ~~4.25%. While we hope to negotiate an amendment with the lender, there can be no assurances that an agreement will be reached.~~

~~(4)~~ In May 2020, we amended our credit and term loan facilities to add a LIBOR floor of 25 basis points. ~~Net proceeds from asset sales during the nine months ended September 30, 2021 and the 2029 Senior Secured Notes were used to repay the outstanding balance under the Revolver and a portion~~As of ~~the 2019 Term Facility. Refer to Note 3: “Dispositions and Acquisitions” for additional information.~~

~~(5)~~ ~~In September 2020,~~March 31, 2022, we ~~increased our aggregate commitments under the Revolver by $~~75 ~~million to $1.075~~ ~~billion and extended the maturity date with respect to~~had $901 million of ~~the aggregate commitments for~~ ~~two years~~ to ~~December 2023, including all $~~75 ~~million of the increased Revolver commitments. The maturity date for the remaining $174~~ ~~million of commitments~~available capacity under ~~the Revolver is~~ ~~December 2021~~our revolving credit facility ("Revolver").

~~(6)~~(4) In May and September 2020, our Operating Company, PK Domestic and PK Finance issued an aggregate of $650 million of senior secured notes due 2025 (“2025 Senior Secured Notes”) and an aggregate of $725 million of senior secured notes due 2028 (“2028 Senior Secured Notes”), ~~respectively (collectively with the~~respectively. Additionally, in May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $750
million of senior secured notes due 2029 (“2029 Senior ~~Secured Notes, the “Senior~~ Secured Notes”).

We are required to deposit with lenders certain cash reserves for restricted uses. As of ~~September 30, 2021~~March 31, 2022 and December 31, ~~2020,~~2021, our condensed consolidated balance sheets included $5663 million and $1060 million of restricted cash, respectively, related to our ~~CMBS and~~ mortgage loans.

~~2029 Senior Secured Notes~~Credit Facilities

~~In May 2021, our Operating Company, PK Domestic~~Revolver and ~~PK Finance issued an aggregate of $750~~ ~~million of 2029 Senior Secured Notes. Net proceeds were used to repay $564~~ ~~million of our outstanding balance under the Revolver, which may be redrawn, and $173~~ ~~million of the~~ 2019 Term ~~Facility.~~ ~~The 2029 Senior Secured Notes bear interest at a rate of~~ ~~4.875% per annum, payable semi-annually in arrears on May 15 and November 15 of each year, beginning November 15, 2021.~~ ~~The 2029 Senior Secured Notes will mature on~~ ~~May 15, 2029. We capitalized $~~13 ~~million of issuance costs during the nine months ended September 30, 2021.~~

Facility

~~We may redeem the 2029 Senior Secured Notes at any time prior to~~ ~~May 15, 2024, in whole or in part, at a redemption price equal to~~ ~~100% of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after May 15, 2024,~~In February 2022, we ~~may redeem the 2029 Senior Secured Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after~~ ~~May 15, 2026, we may redeem the 2029 Senior Secured Notes at~~ ~~100% of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before May 15, 2024, we may redeem up to~~ 40~~% of the 2029 Senior Secured Notes with the net cash proceeds from certain equity offerings at a redemption price of~~ ~~104.875% of the principal amount redeemed.~~

~~Indentures~~

The 2029 Senior Secured Notes are guaranteed by us and by the subsidiaries of our Operating Company that also guarantee indebtedness under our credit facilities, which guarantors also guarantee the obligations under the Company’s Senior Secured Notes on a first priority basis. The guarantees are full and unconditional and joint and several. The 2029 Senior Secured Notes are secured, subject to permitted liens, by a first priority security interest in all of the capital stock of certain wholly-owned subsidiaries of certain of the guarantors and PK Domestic, which collateral also secures the obligations underamended our credit and term loan facilities ~~on a first priority basis. The indenture governing~~to extend the ~~2029 Senior Secured Notes contains customary covenants that limit~~waiver period for the ~~issuers’ ability and, in certain instances, the ability~~testing of the ~~issuers’ subsidiaries,~~financial covenants to ~~borrow money, create liens on assets, make distributions~~the date the financial statements are delivered for the quarter ended September 30, 2022 (except for the minimum fixed charge coverage ratio, which waiver period for such covenant will end as of the date the financial statements are delivered for the quarter ended June 30, 2022), in each case, unless we elect an earlier date, and ~~pay dividends on or redeem or repurchase stock, make~~to adjust the required ratio levels of particular financial

covenants after such waiver periods. As part of the amendment process, we (i) extended the temporary periods for which calculation of certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies. ~~These~~financial covenants are ~~subject to a number~~annualized once quarterly testing of ~~exceptions and qualifications, including~~financial covenants resumes, (ii) extended the minimum liquidity covenant of $200 million through March 2023, (iii) obtained the ability to ~~declare or pay~~repurchase up to $250 million of shares as long as the Revolver balance is $0 (with the amount of any ~~cash dividend or make~~such repurchases increasing the minimum liquidity covenant, dollar for dollar, resulting in a minimum liquidity covenant amount as of March 31, 2022 of $261 million), (iv) increased the amount of non-recourse debt allowed to be incurred during the waiver period to $500 million from $350 million, (v) obtained the ability during the waiver period to voluntarily prepay certain mortgage debt maturing in 2022 and 2023, (vi) removed the limitation applied during the waiver period on capital expenditures within the portfolio, (vii) increased the ability during the waiver period to acquire investments to $1 billion from $200 million, with an option to expand to $1.5 billion with a corresponding increase of the minimum liquidity covenant to $300 million, and (viii) removed any ~~cash distribution~~restrictions on asset sales that applied during the waiver period. In addition, we amended the mandatory prepayment requirements that apply during the waiver period to, usamong other things, only require mandatory repayments from specified events if and to the extent necessary for us to fund a dividend or distribution by us that we believe is necessary to maintain our status as a REIT or to avoid payment of any tax for any calendar year that could be avoided by reason of such distribution, and the ~~ability to make certain restricted payments not to exceed~~Revolver balance exceeds $~~100~~600 million ~~plus~~ 95% of our cumulative Funds From Operations (as defined in the indenture), plus the aggregate net proceeds from (i) the sale of certain equity interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness(and no prepayment of the ~~Operating Company.~~ ~~In addition, the indenture requires our Operating Company to maintain total unencumbered assets as of each fiscal quarter of at least~~ ~~150% of total unsecured indebtedness, in each case calculated on a consolidated basis.~~2019 Term Facility being required).

Debt Maturities

The contractual maturities of our debt, assuming the exercise of all extensions that are exercisable solely at our option, as of ~~September 30, 2021~~March 31, 2022 were:


Year	(in millions)		(in millions)
2021	$	2
2022		98	$	62
2023		829		833
2024		85		85
2025		657		657
2026				1,562
Thereafter(1)		3,037		1,505
	$	4,708	$	4,704

(1) Assumes the exercise of all extensions that are exercisable solely at our option.

Note 8:6: Fair Value Measurements

We did not elect the fair value measurement option for our financial assets or liabilities. The fair values of our other financial instruments not included in the table below are estimated to be equal to their carrying amounts.

The fair value of our debt and the hierarchy level we used to estimate fair values are shown below:

September 30, 2021

December 31, 2020

Hierarchy
Level

Carrying
Amount

Fair Value

Carrying
Amount

Fair Value

(in millions)

Liabilities:

SF CMBS Loan

3

$
725

$
734

$
725

$
708

HHV CMBS Loan

3

1,275

1,282

1,275

1,195

2019 Term Facility

3

78

75

670

661

Revolver

3

0

0

601

596

2025 Senior Secured Notes

1

650

693

650

705

2028 Senior Secured Notes

1

725

769

725

774

2029 Senior Secured Notes

1

750

771

—

—

Mortgage loans

3

505

496

509

480

~~Note 9: Income Taxes~~

We are a REIT for U.S. federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate in a manner to qualify as a REIT. To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we distribute to our stockholders annually and the diversity of ownership of our stock. To the extent we continue to remain qualified as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute annually to our stockholders. Accordingly, 0 provision for U.S. federal income taxes has been included in our accompanying condensed consolidated financial statements for the three and nine months ended September 30, 2021 related to our REIT activities, other than taxes related to our built-in gain property (representing property held by us with an excess of fair value over tax basis on January 4, 2017).

We will be subject to U.S. federal income tax on taxable sales of built-in gain property through January 3, 2022. In addition, we are subject to non-U.S. income tax on foreign held REIT activities and certain sales of foreign investments. Further, our taxable REIT subsidiaries (“TRSs”) are generally subject to U.S. federal, state and local, and foreign income taxes (as applicable).

~~The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 and included several tax provisions that may impact us and our subsidiaries, including:~~



~~the ability for our TRSs to carry back net operating losses (“NOLs”) arising in 2020 to all post spin-off taxable years preceding the taxable year of the loss;~~



~~an increase of the business interest limitation under Internal Revenue Code (“Code”) section 163(j) from~~ 30 ~~percent to~~ 50 percent of adjusted taxable income for taxable years beginning in 2019 and 2020 and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation; and



a “technical correction” amending Code section 168(e)(3)(E) to add “qualified improvement property” to “15-year property” and assigning a class life of 20-years under section 168(g)(3)(B) to qualified improvement property under section 168(e)(3)(E)(vii).


			March 31, 2022				December 31, 2021
	Hierarchy Level		Carrying Amount		Fair Value		Carrying Amount		Fair Value
			(in millions)
Liabilities:
SF Mortgage Loan		3	$	725	$	718	$	725	$	733
HHV Mortgage Loan		3		1,275		1,218		1,275		1,282
2019 Term Facility		3		78		76		78		76
2025 Senior Secured Notes		1		650		679		650		688
2028 Senior Secured Notes		1		725		727		725		761
2029 Senior Secured Notes		1		750		705		750		771
Other mortgage loans		3		501		481		503		491

~~During the nine months ended September 30, 2021, we recognized a $~~2 ~~million income tax benefit, comprising a $~~3 ~~million state tax benefit from utilizing state NOLs, a $~~1 ~~million benefit from the derecognition of deferred tax liabilities and $~~2 ~~million of tax expense, primarily from adjustments to the benefit recognized in 2020 from utilizing the NOL carryback provisions of the CARES Act.~~

~~During the nine months ended September 30, 2020, we recognized $~~14 ~~million of income tax expense, which was comprised of $~~14 ~~million of built-in gains tax expense from assets sold during the period and $~~16 ~~million of non-U.S. income tax expense on the~~

1210

~~gain from the entity sold during the period, partially offset by a TRS income tax benefit of $~~20 ~~million from utilizing the NOL carryback provisions of the CARES Act.~~

Note ~~10:~~7: Share-Based Compensation

We issue equity-based awards to our employees pursuant to the 2017 Omnibus Incentive Plan (“2017 Employee Plan”) and our non-employee directors pursuant to the 2017 Stock Plan for Non-Employee Directors (as amended and restated from time to time, the “2017 Director Plan”). The 2017 Employee Plan provides that a maximum of 8,000,000 shares of our common stock may be issued, and as of ~~September 30, 2021,~~March 31, 2022, ~~2,915,404~~2,315,323 shares of common stock remain available for future issuance. ~~As amended and approved by our stockholders in April 2021, the~~The 2017 Director Plan provides that a maximum of 950,000 shares of our common stock may be issued, and as of ~~September 30, 2021,~~March 31, 2022, ~~498,153~~484,583 shares of common stock remain available for future issuance. For the three months ended ~~September 30,~~March 31, 2022 and 2021, ~~and 2020,~~ we recognized $54 million and $46 million of share-based compensation expense, ~~respectively, and $~~15 ~~million and $~~10 ~~million, respectively, for the nine months ended September 30, 2021 and 2020.~~respectively. As of ~~September 30, 2021,~~March 31, 2022, unrecognized compensation expense was $2229 million, which is expected to be recognized over a weighted-average period of ~~1.8~~ 2.0years. The total fair value of shares vested (calculated as the number of shares multiplied by the vesting date share price) during the ~~nine~~three months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ was $186 million and $1714 million, respectively.

Restricted Stock Awards

Restricted Stock Awards (“RSAs”) generally vest in annual installments between one and three years from each grant date. The following table provides a summary of RSAs for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:


	Number of Shares			Weighted-Average Grant Date Fair Value		Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at January 1, 2021		834,258		$	21.68
Unvested at January 1, 2022							789,322		$	22.52
Granted		426,629			20.54		367,611			18.52
Vested		(449,406	)		19.07		(286,843	)		23.73
Forfeited		(19,565	)		22.50		(10,567	)		22.14
Unvested at September 30, 2021		791,916		$	22.53
Unvested at March 31, 2022							859,523		$	20.41

Performance Stock Units

Performance Stock Units (“PSUs”) generally vest at the end of a three-year performance period and are subject to the achievement of a market condition based on a measure of our total shareholder return relative to the total shareholder return of the companies that comprise the FTSE Nareit Lodging Resorts Index (that have a market capitalization in excess of $1 billion as of the first day of the applicable performance period). The number of PSUs that may become vested ranges from zero to 200% of the number of PSUs granted to an employee, based on the level of achievement of the foregoing performance measure.

Additionally, in November ~~202~~0,2020, we granted special awards with vesting of these awards subject to the achievement of eight increasing levels of our average closing sales price per share, from $11.00 to $25.00, over a consecutive 20 trading day period (“Share Price Target”). One-eighth of PSUs will vest at each date a Share Price Target is achieved and any PSUs remaining after a four-year performance period will be forfeited. As of ~~September 30, 2021,~~March 31, 2022, 6 of the 8 Share Price Targets were achieved and thus 75% of the awards granted were vested.

The following table provides a summary of PSUs for the ~~nine~~three months ended ~~September 30, 2021:~~March 31, 2022:

Number of Shares

Weighted-Average
Grant Date
Fair Value

Unvested at January 1, 2021

1,078,555

$
18.70

Granted

327,110

27.17

Vested

(428,255
)

16.33

Forfeited

(5,642
)

20.29

Unvested at September 30, 2021

971,768

$
22.59


	Number of Shares			Weighted-Average Grant Date Fair Value
Unvested at January 1, 2022		972,074			22.59
Granted		391,845			21.93
Forfeited		(153,968	)		35.79
Unvested at March 31, 2022		1,209,951		$	20.69

The grant date fair values of the awards that are subject to the achievement of market conditions based on total shareholder return were determined using a Monte Carlo simulation valuation model with the following assumptions:

(1) ~~The weighted average expected volatility was~~ ~~60.0~~%.

~~(2)~~ Dividends are assumed to be reinvested in shares of our common stock and dividends will not be paid unless shares vest.

Note ~~11:~~8: Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share (“EPS”):


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(in millions, except per share amounts)												(in millions, except per share amounts)
Numerator:
Net loss attributable to stockholders	$	(86	)	$	(276	)	$	(392	)	$	(1,223	)
Earnings attributable to participating securities		0			0			0			0
Net loss attributable to stockholders, net of earnings allocated to participating securities	$	(86	)	$	(276	)	$	(392	)	$	(1,223	)	$	(57	)	$	(190	)
Denominator:
Weighted average shares outstanding – basic		236			235			236			236			235			235
Unvested restricted shares		0			0			0			0			0			1
Weighted average shares outstanding – diluted		236			235			236			236			235			236

Loss per share - Basic(1)	$	(0.36	)	$	(1.17	)	$	(1.66	)	$	(5.19	)	$	(0.24	)	$	(0.81	)
Loss per share - Diluted(1)	$	(0.36	)	$	(1.17	)	$	(1.66	)	$	(5.19	)	$	(0.24	)	$	(0.81	)

(1) Per share amounts are calculated based on unrounded ~~numbers and are calculated independently for each period presented.~~numbers.

Certain of our outstanding equity awards were excluded from the above calculation of EPS for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ because their effect would have been anti-dilutive.

Note ~~12:~~9: Business Segment Information

As of ~~September 30, 202~~1,March 31, 2022, we have 2 operating segments, our consolidated hotels and unconsolidated hotels. Our unconsolidated hotels operating segment does not meet the definition of a reportable ~~segment,~~segment; thus our consolidated hotels is our only reportable segment. We evaluate our consolidated hotels primarily based on hotel adjusted earnings (loss) before interest expense, taxes and depreciation and amortization (“EBITDA”). Hotel Adjusted EBITDA is calculated as EBITDA from hotel operations, 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;

•

Impairment losses and casualty gains or losses; and

•

Other items that we believe are not representative of our current or future operating performance.

The following table presents revenues for our consolidated hotels reconciled to our consolidated amounts and net loss to Hotel Adjusted EBITDA:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(in millions)												(in millions)
Revenues:
Total consolidated hotel revenue	$	408		$	95		$	876		$	714
Total consolidated hotel revenues													$	463		$	157
Other revenues		15			3			35			25			16			8
Total revenues	$	423		$	98		$	911		$	739		$	479		$	165

Net loss	$	(82	)	$	(276	)	$	(387	)	$	(1,226	)	$	(56	)	$	(191	)
Other revenues		(15	)		(3	)		(35	)		(25	)		(16	)		(8	)
Depreciation and amortization expense		68			75			213			225			69			74
Corporate general and administrative expense~~(1)~~		14			13			48			40			16			18
Impairment and casualty loss, net		2			2			7			696
Acquisition costs		0			9			0			10
Other operating expenses		14			6			34			31			16			7
Loss (gain) on sales of assets, net		11			1			5			(62	)
Interest income		0			0			0			(2	)
Interest expense		66			59			195			149			62			63
Equity in losses from investments in affiliates		0			7			6			16			0			4
Income tax (benefit) expense		(3	)		1			(2	)		14
Severance expense		0			24			0			26
Other loss, net		5			3			7			6
Income tax expense														0			1
Other gain, net														(5	)		0
Other items		4			3			(1	)		9			3			(4	)
Hotel Adjusted EBITDA	$	84		$	(76	)	$	90		$	(93	)	$	89		$	(36	)

~~(1)~~12

~~Excludes severance expense.~~

The following table presents total assets for our consolidated hotels, reconciled to total assets:


	September 30, 2021		December 31, 2020		March 31, 2022		December 31, 2021
	(in millions)				(in millions)
Consolidated hotels	$	9,775	$	10,568	$	9,683	$	9,724
All other		19		19		20		19
Total assets	$	9,794	$	10,587	$	9,703	$	9,743

Note ~~13:~~10: Commitments and Contingencies

As of ~~September 30, 2021,~~March 31, 2022, we had outstanding commitments under third-party contracts of approximately $~~116~~118 million for capital expenditures at our properties, of which $7870 million relates to the expansion project at the Bonnet Creek complex. The Bonnet Creek expansion project includes additional meeting space for the Signia by Hilton Orlando Bonnet Creek and the Waldorf Astoria Orlando. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

We are involved in litigation arising from the normal course of business, some of which includes claims for substantial sums, and may make certain indemnifications or guarantees to select buyers of our hotels as part of a sale process. We are also involved in claims and litigation that is not in the ordinary course of business in connection with the spin-off from Hilton. The spin-off agreements indemnify us from certain of these claims as well as require us to indemnify Hilton for other claims. In addition, losses related to certain contingent liabilities could be apportioned to us under the spin-off agreements. In connection with our obligation to indemnify Hilton under the spin-off agreements, we have reserved approximately $8 million as of ~~September 30, 2021~~March 31, 2022 related to litigation with respect to an audit by the Australian Tax Office (“ATO”) of Hilton related to the sale of the Hilton Sydney in June 2015. ~~In February 2021, we were required to make a payment to Hilton of approximately $~~11 ~~million representing our share of the deposit required by the ATO of Hilton to further defend against the claim and for certain out-of-pocket expenses incurred by Hilton.~~ This amount could change as the litigation of the ATO’s claim progresses.

15Note 11: Subsequent Events

In April 2022, we sold the 131-room Hampton Inn & Suites Memphis – Shady Grove for gross proceeds of $11.5 million or $88,000 per key.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

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, ~~2020.~~2021.

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 ~~the~~ expected ~~reopening dates for our hotels and~~ dates that our hotels will reopen, break even or achieve positive Hotel Adjusted EBITDA, the impact to our business and financial condition and that of our hotel management companies, measures being taken in response to COVID-19, the impact from macroeconomic factors (including inflation 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. Currently, one of the most significant factors is the adverse effect of COVID-19, including actions taken to contain the pandemic or mitigate its effects, the emergences of virus variants and resurgences, on our financial condition, results of operations, cash flows and performance, our hotel management companies and our hotels’ tenants, and the global economy and financial markets. COVID-19 has significantly affected our business, and the extent to which COVID-19 impacts us, our hotel managers, tenants and guests at our 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, the emergence of virus variants, the efficacy, availability and deployment of vaccinations and other treatments to combat COVID-19, including public adoption rates of COVID-19 vaccines, additional closures that may be mandated or advisable even after the reopening of certain of our 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. Moreover, investorsInvestors are cautioned to interpret many of the risks identified in the risk factors included in our Annual Report on Form 10-K for the year ended December 31, ~~2020~~2021 as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.

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 the 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, ~~2020,~~2021, 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~~resorts with significant underlying real estate value. We currently hold investments in entities that have ownership or leasehold interests in 5453 hotels, consisting of premium-branded hotels and resorts with approximately 32,000 rooms, of which over ~~86%~~87% are luxury and ~~upper~~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 in major urban and convention areas, such as New York City, Washington, D.C., Chicago, San Francisco, Boston, New Orleans and Denver; premier resorts in key leisure destinations, including Hawaii, Orlando, Key West and Miami Beach; and hotels adjacent to major gateway airports, such as Los Angeles International, Boston Logan International and Miami International, as well as hotels in select 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.

1614

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 ~~12:~~9: “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~~

During the third quarter of 2021, we sold two consolidated hotels, the Hotel Adagio, Autograph Collection, and the Le Meridien San Francisco. Net proceeds from those sales, along with the sale of two hotels on June 30, 2021 were used to repay $419 million of our term loan facility due in 2024 (“2019 Term Facility”) and to repay $13 million under our revolving credit facility (“Revolver”), which currently has no remaining balance outstanding.

COVID-19 Operational Update

The global outbreak of a novel strain of coronavirus and the disease it causes (“COVID-19”) ~~have~~ had ~~and continue to have~~ a significant effect on the lodging industry and our business. We cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 will have on our business. InBeginning in March ~~and April~~ 2020, travel restrictions and mandated closings of non-essential businesses were imposed, which resulted in temporary suspensions of operations at a majority of our hotels. We have reopened all our hotels ~~all~~ except ~~two~~the 1,024-room Parc 55 San Francisco – a Hilton Hotel, the reopening of which ~~have now reopened.~~has been accelerated to May 19, 2022, based on improving demand trends in the San Francisco market. Temporary closings of restaurants and hotels as well as travel restrictions across entire regions also contributed to severely reduced overall lodging demand. The effects of COVID-19 continue to have ~~a significant~~an adverse effect on the hospitality industry, including our business; however, the increase in vaccination rates across the country and the easing or removal of restrictions, quarantining, and “social distancing” mandates ~~have~~ resulted in increased travel and hospitality spending ~~during~~beginning in the second ~~and third quarters~~quarter of ~~2021 as compared to the same periods in 2020.~~2021. Despite ~~the~~a near-term reduction in demand due to concerns over the spread of the Omicron variant in January 2022, which resulted in additional group cancellations and cautious business travel sentiment, coupled with the seasonal decline in leisure travel following the holiday season and the delay in return of business travel, ~~coupled with concerns over the spread of the Delta variant,~~ we ~~expect~~saw a ~~broader~~broad based recovery beginning in March 2022 as leisure demand was robust and group demand strengthened. We expect leisure demand to ~~resume~~remain strong and group demand to accelerate during the ~~latter half~~remainder of ~~the fourth quarter of 2021 and into 2022 as leisure demand trends and group booking activity continue to improve.~~2022.

~~Beginning~~We believe the distribution of the COVID-19 vaccine during 2021 drove the improvement in ~~March 2020,~~traveler sentiment we experienced ~~a significant decline~~and resulted in an improvement in occupancy, Average Daily Rate (“ADR”) and Revenue per Available Room (“RevPAR”) ~~associated with~~during the ~~COVID-19 pandemic throughout our consolidated portfolio, which has resulted in a decline in our operating cash flow. As distribution~~second quarter of ~~the COVID-19 vaccine continues, we have seen improvement in traveler sentiment, and as a result, an improvement in occupancy, ADR and RevPAR during~~ 2021. Changes in our ~~2021~~2022 pro-forma metrics, which exclude results from properties disposed of and include results from properties acquired as of ~~November 4, 2021,~~March 31, 2022, as compared to the same periods in 2021 and 2019, and ~~2020, respectively, and pro-forma~~2022 occupancy are as follows:

Change in Pro-forma ADR

Change in Pro-forma Occupancy

Change in Pro-forma RevPAR

2021 vs. 2020

2021 vs. 2019

2021 vs. 2020

2021 vs. 2019

2021 vs. 2020

2021 vs. 2019

2021
Pro-forma Occupancy

Q1 2021

(28.9
)%

(30.6
)%

(35.0
)%
pts

(50.7
)%
pts

(69.3
)%

(76.2
)%

26.6
%

Q2 2021

44.8

(16.7
)

36.1

(43.4
)

897.0

(58.9
)

42.2

July 2021

45.3

—

42.1

(29.0
)

462.2

(33.7
)

56.8

August 2021

52.0

(5.7
)

29.3

(35.8
)

269.4

(45.1
)

49.7

September 2021

45.6

(16.6
)

24.8

(34.4
)

206.6

(51.8
)

47.2

Q3 2021

50.0

(7.0
)

32.2

(33.0
)

301.6

(43.4
)

51.3


	Change in Pro-forma ADR						Change in Pro-forma Occupancy								Change in Pro-forma RevPAR
	2022 vs. 2021			2022 vs. 2019			2022 vs. 2021				2022 vs. 2019				2022 vs. 2021			2022 vs. 2019			2022 Occupancy
Jan 2022		49.5	%		(10.7	)%		18.6	%	pts		(31.8	)%	pts		179.7	%		(50.3	)%		40.0	%
Feb 2022		45.8			2.0			27.6				(25.0	)			204.9			(30.8	)		52.9
Mar 2022		40.3			6.0			30.0				(19.4	)			168.2			(18.9	)		62.9
Q1 2022		44.2			0.1			25.3				(25.4	)			181.7			(32.8	)		51.9

We believe demand will remain ~~significantly~~somewhat reduced as long as mandatory travel restrictions ~~“social distancing”~~ and cost-saving or other measures, such as the postponing or cancelling of non-essential business travel, remain in place or if these restrictions tighten or demand for travel becomes depressed due to the emergence of virus variants. Although we were able to recommence operations at ~~most~~all except one of our previously suspended hotels ~~there remains considerable uncertainty as~~and further restrictions have been lifted following the spread of the Omicron variant, if demand does not fully recover, or if virus variants increase or travel restrictions tighten, we may be required to ~~both the time it will take to see travel and demand for lodging and travel-related experiences to fully recover.~~suspend operations at additional hotels. Further, uncertainty as to ~~the timing of~~ when ~~remaining restrictions~~demand will ~~be removed~~fully recover generally will make it more difficult to execute on our external growth ~~strategy~~.strategy. The uncertainties surrounding the COVID-19 pandemic recovery, including ~~the Delta variant,~~new variants, make it difficult to predict operating results for our hotels for the remainder of ~~2021,~~2022, thus there can be no assurances that we will not experience further ~~declines~~fluctuations in hotel revenues or earnings at our hotels.

We and our hotel managers have taken various actions to mitigate the effects of the COVID-19 pandemic, including temporarily suspending operations at a majority of our hotels beginning in March 2020, limiting capacity at our open hotels, deferring approximately $150 million of capital expenditures planned for 2020, reducing forecasted capital expenditures for maintenance projects to approximately $56 million for 2021 and suspending our dividend after the first quarter of 2020. Additionally, as a precautionary measure to increase liquidity and preserve financial flexibility, we fully drew on our Revolver in 2020 and completed three corporate bond offerings totaling $2.1 billion in 2020 and 2021 and five asset sales in 2021, the proceeds of which were used to fully repay the Revolver and our term loan due December 2021 ("2016 Term Loan"), as well as a majority of the 2019 Term Facility.

Since originally suspending operations, we have commenced the phased reopening of all except two of our hotels and the timing of reopening our remaining suspended hotels will depend primarily on government restrictions imposed or re-imposed, recommendations of health officials and recovery in demand. The ~~status of our hotels as of November 4, 2021 is as follows:~~

Status

Number of Hotels

Total Rooms

Consolidated Open

46

26,551

Consolidated Suspended

2

1,338

Total Consolidated

48

27,889

Unconsolidated Open(1)

6

4,036

Total Hotels

54

31,925

~~(1)~~ ~~The ground lease for the Embassy Suites Secaucus Meadowlands expired on October 31, 2021 and the property was turned over to the ground lessor on that date.~~

~~In addition, the~~ operating environment for us and our hotel managers has improved as government restrictions ~~are~~were lifted and demand for travel ~~returns.~~returned. Economic indicators such as GDP growth, corporate earnings, consumer confidence and employment are highly correlated with lodging demand and have generally returned to pre-pandemic levels. We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it, the emergence of virus variants, efficacy, availability ~~and deployment~~ of ~~vaccinations and other~~ treatments to combat COVID-19, including public adoption rates of COVID-19 vaccines, and the effect of actions taken in response (such as travel advisories and restrictions and social distancing), including the extent and duration of such actions.

The extent and duration of the effects of COVID-19 are not yet clear. Despite cost reduction initiatives, we do not expect to be able to fully, or even materially, offset revenue losses from the COVID-19 pandemic. In addition, as states and cities have begun to lift quarantines and other similar restrictions, the timing and approach differs in different locations and we cannot predict whether our reopened hotels will be forced to suspend operations again in the future or be subjected to operating restrictions following further outbreaks or variants of COVID-19.

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. 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. Occupancy measures the utilization of our hotels’ available capacity. ~~Management uses~~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 ADR levels as demand for rooms increases or decreases.

Average Daily Rate

ADR (which we also refer to as rate) 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

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. 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.

Comparable Hotels Data

Historically, we have presented certain data for our hotels on a comparable hotel basis as supplemental information for investors. We defined our comparable hotels as those that: (i) were active and operating in our portfolio since January 1st of the previous year; and (ii) have not sustained substantial property damage or business interruption, have not undergone large-scale capital projects or for which comparable results are not available. We presented comparable hotel results to help us and our investors evaluate the ongoing operating performance of our comparable hotels. However, given the significant effect of COVID-19 on most of our hotels and the lack of comparability to prior periods, we do not believe this supplemental information is useful to us or our investors at this time. Under “Results of Operations” below, we have provided information on the effects from dispositions and other factors to our results of operations for the three months ended March 31, 2022 as compared to the same period in 2021. Change from other factors primarily relates to the effects of COVID-19 and subsequent ongoing recovery.

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:

•

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 loss to Hotel Adjusted EBITDA:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(in millions)												(in millions)
Net loss	$	(82	)	$	(276	)	$	(387	)	$	(1,226	)	$	(56	)	$	(191	)
Depreciation and amortization expense		68			75			213			225			69			74
Interest income		—			—			—			(2	)
Interest expense		66			59			195			149			62			63
Income tax (benefit) expense		(3	)		1			(2	)		14
Income tax expense														—			1
Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates		3			2			8			11			1			1
EBITDA		52			(139	)		27			(829	)		76			(52	)
Loss (gain) on sales of assets, net		11			1			5			(62	)
Acquisition costs		—			9			—			10
Severance expense		—			24			—			26
Share-based compensation expense		5			4			15			10			4			6
Impairment and casualty loss, net		2			2			7			696
Other items		7			10			7			20			2			(3	)
Adjusted EBITDA		77			(89	)		61			(129	)		82			(49	)
Less: Adjusted EBITDA from investments in affiliates		(4	)		2			(4	)		2			(5	)		2
Add: All other(1)		11			11			33			34			12			11
Hotel Adjusted EBITDA	$	84		$	(76	)	$	90		$	(93	)	$	89		$	(36	)

(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; and

•

Other items that we believe are not representative of our current or future operating performance.

The following table provides a reconciliation of net loss attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders:


	Three Months Ended September 30,						Nine Months Ended September 30,						Three Months Ended March 31,
	2021			2020			2021			2020			2022			2021
	(in millions, except per share amounts)												(in millions, except per share amounts)
Net loss attributable to stockholders	$	(86	)	$	(276	)	$	(392	)	$	(1,223	)	$	(57	)	$	(190	)
Depreciation and amortization expense		68			75			213			225			69			74
Depreciation and amortization expense attributable to noncontrolling interests		(1	)		(1	)		(3	)		(3	)		(1	)		(1	)
Loss (gain) on sales of assets, net		11			1			5			(62	)
Gain on sale of investments in affiliates(1)		—			—			—			(1	)
Impairment loss		—			2			5			697
Equity investment adjustments:
Equity in losses from investments in affiliates		—			7			6			16			—			4
Pro rata FFO of investments in affiliates		3			(3	)		1			(6	)		2			(2	)
Nareit FFO attributable to stockholders		(5	)		(195	)		(165	)		(357	)		13			(115	)
Casualty loss (gain), net		2			—			2			(1	)
Severance expense		—			24			—			26
Acquisition costs		—			9			—			10
Share-based compensation expense		5			4			15			10			4			6
Other items(2)		3			11			2			48
Other items														1			(4	)
Adjusted FFO attributable to stockholders	$	5		$	(147	)	$	(146	)	$	(264	)	$	18		$	(113	)
Nareit FFO per share - Diluted(3)	$	(0.02	)	$	(0.83	)	$	(0.70	)	$	(1.52	)
Adjusted FFO per share - Diluted(3)	$	0.02		$	(0.62	)	$	(0.62	)	$	(1.12	)
Nareit FFO per share - Diluted(1)													$	0.05		$	(0.49	)
Adjusted FFO per share - Diluted(1)													$	0.08		$	(0.48	)

(1)~~Included in~~ ~~other loss, net~~.

~~(2)~~ ~~For the nine months ended September 30, 2020, includes $30 million of tax expense on hotels sold during the period.~~

~~(3)~~ Per share amounts are calculated based on unrounded numbers.

Results of Operations

The following items have had a significant effect on the year-over-year comparability of our operations and are illustrated further in the table of Hotel Revenues and Operating Expenses below:

•

Property Dispositions: ~~Between~~Since January 1, ~~2020 and September 30,~~ 2021, we disposed of ~~seven~~five consolidated hotels. As a result of these dispositions, our revenues and operating expenses decreased for the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 as compared to the same ~~periods~~period in ~~2020.~~2021. The results of operations during our period of ownership of these hotels are included in our consolidated results.

•

Ongoing COVID-19 Recovery: ~~Beginning~~Travel and hospitality spending began to improve beginning in ~~March 2020,~~the second quarter of 2021 as vaccination rates increased, and we experienced a significant decline in ADR, occupancy and RevPAR due to COVID-19. The economic contraction resulting from the spread of COVID-19 has and is expected to continue to significantly affect our business.reopened additional previously suspended hotels throughout 2021. Consequently, the results of our portfolio during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 will not be comparable to the same ~~periods~~period in ~~2020.~~2021.

Hotel Revenues and Operating Expenses


	Three Months Ended September 30,													Three Months Ended March 31,
	2021		2020		Change			Change from Property Dispositions			Change from Other Factors(1)			2022		2021		Change		Change from Property Dispositions			Change from Other Factors(1)
	(in millions)													(in millions)
Rooms revenue	$	274	$	70	$	204		$	2		$	202		$	292	$	106	$	186	$	(3	)	$	189
Food and beverage revenue		76		10		66			—			66			110		22		88		—			88
Ancillary hotel revenue		58		15		43			—			43			61		29		32		—			32
Rooms expense		76		30		46			1			45			85		35		50		(1	)		51
Food and beverage expense		63		18		45			—			45			87		21		66		—			66
Other departmental and support expense		119		64		55			(1	)		56			133		78		55		(3	)		58
Other property-level expense		51		84		(33	)		(2	)		(31	)		50		48		2		(2	)		4
Management fees expense		19		2		17			—			17			22		7		15		—			15

(1) Change from other factors primarily relates to the effects of COVID-19. The increase in revenues and expenses for the three months ended ~~September 30, 2021~~March 31, 2022 was primarily due to the reopening of ~~most of our~~additional hotels that were suspended during the same period in ~~2020~~2021 and improved occupancy due to an increase in ~~leisure travel~~demand as compared to the same period in ~~2020.~~

Nine Months Ended September 30,

2021

2020

Change

Change from
Property
Dispositions

Change
from Other
Factors(1)

(in millions)

Rooms revenue

$
587

$
453

$
134

$
(10
)

$
144

Food and beverage revenue

152

174

(22
)

(3
)

(19
)
Ancillary hotel revenue

137

87

50

(1
)

51

Rooms expense

170

162

8

(1
)

9

Food and beverage expense

126

155

(29
)

(3
)

(26
)
Other departmental and support expense

298

296

2

(5
)

7

Other property-level expense

151

200

(49
)

(2
)

(47
)
Management fees expense

40

27

13

(1
)

14

~~(1)~~ ~~Change from other factors primarily relates to the effects of COVID-19.~~2021.

Group, transient, contract and other rooms revenue for the three ~~and nine~~ months ended ~~September 30, 2021,~~March 31, 2022, as well as the change for each segment compared to the same ~~periods~~period in ~~2020~~2021 are as follows:


	Three Months Ended September 30,										Three Months Ended March 31,
	2021		2020		Change		Change from Property Dispositions		Change from Other Factors(1)		2022		2021		Change		Change from Property Dispositions			Change from Other Factors(1)
	(in millions)										(in millions)
Group rooms revenue	$	36	$	9	$	27	$	—	$	27	$	73	$	8	$	65	$	—		$	65
Transient rooms revenue		219		49		170		1		169		199		86		113		(2	)		115
Contract rooms revenue		14		10		4		—		4		14		11		3		—			3
Other rooms revenue		5		2		3		1		2		6		1		5		—			5
Rooms revenue	$	274	$	70	$	204	$	2	$	202	$	292	$	106	$	186	$	(2	)	$	188

(1) Change from other factors primarily relates to the effects of COVID-19. The increase in revenues for the three months ended ~~September 30, 2021~~March 31, 2022 was primarily due to the reopening of ~~most of our~~additional hotels that were suspended during the same period in ~~2020.~~2021 and improved occupancy due to an increase in demand as compared to the same period in 2021.

2219

Nine Months Ended September 30,

2021

2020

Change

Change from
Property
Dispositions

Change
from Other
Factors(1)

(in millions)

Group rooms revenue

$
59

$
129

$
(70
)

$
(4
)

$
(66
)
Transient rooms revenue

482

275

207

(6
)

213

Contract rooms revenue

36

38

(2
)

—

(2
)
Other rooms revenue

10

11

(1
)

—

(1
)
Rooms revenue

$
587

$
453

$
134

$
(10
)

$
144

~~(1)~~ ~~Change from other factors primarily relates to the effects of COVID-19.~~

Other revenue and Other expense

~~During the second half of 2020, we permanently closed operations at all three of our laundry facilities resulting~~The increases in ~~a decrease in both laundry~~other revenue and ~~laundry expense. The~~other expense are primarily due to increases in support services revenue and expense ~~are due to~~from the reopening of our hotels that have service arrangements with Hilton Grand Vacations ~~(“HGV”), which were suspended for a majority~~to full capacity following their suspension of operations during 2020.

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Percent Change

2021

2020

Percent Change

(in millions)

(in millions)

Support service revenue

$
15

$
3

400.0
%

35

23

52.2
%
Laundry revenue

—

—

—

—

2

(100.0
)
Total other revenue

$
15

$
3

400.0
%

$
35

$
25

40.0
%

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Percent Change

2021

2020

Percent Change

(in millions)

(in millions)

Support services expense

$
14

$
1

1300.0
%

$
34

$
21

61.9
%
Laundry expense

—

5

(100.0
)

—

10

(100.0
)
Total other expense

$
14

$
6

133.3
%

$
34

$
31

9.7
%

Corporate general and administrative

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Percent Change

2021

2020

Percent Change

(in millions)

(in millions)

General and administrative expenses

$
9

$
9

—
%

$
33

$
29

13.8
%
Share-based compensation expense

5

4

25.0

15

10

50.0

Disposition costs

—

—

—

—

1

(100.0
)
Severance expense

—

—

—

—

2

(100.0
)
Total corporate general and
administrative

$
14

$
13

7.7
%

$
48

$
42

14.3
%

~~Acquisition costs~~

During the nine months ended September 30, 2020, we incurred $10 million of acquisition costs, primarily as a result of $9 million of transfer tax in connection with the Merger Agreement with Chesapeake based on new information received during the period.

~~Impairment and casualty loss, net~~

During the nine months ended September 30, 2021, we recognized an impairment loss of $5 million related to one of our hotels classified as held for sale as of June 30, 2021. We also recognized $2 million of casualty losses as a result of damage caused by Hurricane Ida at one of our hotels.


	Three Months Ended March 31,
	2022		2021		Percent Change
	(in millions)
General and administrative expenses	$	12	$	12		—	%
Share-based compensation expense		4		6		(33.3	)
Total corporate general and administrative	$	16	$	18		(11.1	)%

During the nine months ended September 30, 2020, we recognized a net loss of $696 million primarily as a result of $607 million of impairment losses related to our goodwill and $90 million of impairment losses primarily related to one of our hotels, and our inability to recover the carrying value of the asset because of COVID-19.

~~(Loss) gain on sales of assets, net~~

During the three and nine months ended September 30, 2021, we recognized a net loss of $11 million and $5 million, respectively, primarily as a result of the sales of our consolidated hotels during the respective periods.

~~During the nine months ended September 30, 2020, we recognized a net gain of $62 million primarily as a result of the sale of two of our consolidated hotels.~~

Non-operating Income and Expenses

Interest expense

Interest expense ~~increased~~decreased during the three ~~and nine~~ months ended ~~September 30, 2021~~March 31, 2022 compared to the same ~~periods~~period in ~~2020 as a result the issuances of $2.1 billion of Senior Secured Notes during the second and third quarters of 2020 and May~~ 2021 ~~partially offset by a decrease in interest expense~~ as a result of the ~~full repayment of the 2016 Term Loan in September 2020,~~ partial repayment of ~~the~~ our unsecured delayed draw term loan facility ("2019 Term ~~Facility~~Facility") during the second and third quarters of 2021 and the full repayment of our revolving credit facility ("Revolver") during 2021, partially offset by the ~~Revolver during~~issuance of $750 million of 4.875% senior secured notes due 2029 ("2029 Senior Secured Notes") in May 2021. Interest expense associated with our debt for the three ~~and nine~~ months ended ~~September 30,~~March 31, 2022 and 2021 ~~and 2020~~ were as follows:


	Three Months Ended September 30,							Nine Months Ended September 30,							Three Months Ended March 31,
	2021		2020		Percent Change			2021		2020		Percent Change			2022		2021		Percent Change
	(in millions)							(in millions)							(in millions)
SF and HHV CMBS Loans(1)	$	21	$	21		—	%	$	63	$	63		—	%
Mortgage Loans		7		5		40.0			19		16		18.8
2016 Term Loan		—		4	NM(2)				—		15	NM(2)
SF and HHV Mortgage Loans(1)															$	21	$	21		—	%
Other Mortgage Loans																5		5		—
2019 Term Facility		2		5		(60.0	)		11		15		(26.7	)		1		5		(80.0	)
Revolver		1		6		(83.3	)		9		14		(35.7	)		1		5		(80.0	)
2025 Senior Secured Notes(3)		13		13		—			37		17		117.6			12		12		—
2028 Senior Secured Notes(3)		11		2		450.0			32		2		1,500.0			11		11		—
2029 Senior Secured Notes(3)		9		—	NM(2)				14		—	NM(2)				9		—	NM(2)
Other		2		3		(33.3	)		10		7		42.9			2		4		(50.0	)
Total interest expense	$	66	$	59		11.9	%	$	195	$	149		30.9	%	$	62	$	63		(1.6	)%

(2) Percentage change is not meaningful.

(3) In May and September 2020, 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”) issued an aggregate of $650 million of senior secured notes due 2025 (“2025 Senior Secured Notes”) and an aggregate of $725 million of senior secured notes due 2028 (“2028 Senior Secured Notes”), respectively. Additionally, in May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $750 million of senior secured notes due 2029 (“2029 Senior Secured Notes,” collectivelyrespectively (collectively with the ~~2025 Senior Secured Notes and 2028~~2029 Senior Secured Notes, the “Senior Secured Notes”).

~~Income tax expense~~

Three Months Ended September 30,

Nine Months Ended September 30,

2021

2020

Percent Change

2021

2020

Percent Change

(in millions)

(in millions)

Income tax (benefit) expense

$
(3
)

$
1

(400.0
)%

$
(2
)

$
14

(114.3
)%

During the nine months ended September 30, 2021, we recognized a $2 million income tax benefit, comprising a $3 million state tax benefit from utilizing state NOLs, a $1 million benefit from the derecognition of deferred tax liabilities and $2 million of tax expense, primarily from adjustments to the benefit recognized in 2020 from utilizing the NOL carryback provisions of the CARES Act.

Income tax expense for the nine months ended September 30, 2020 includes $30 million of income tax expense from hotels sold during the period, partially offset by a TRS income tax benefit of $20 million from utilizing the NOL carryback provisions of the CARES Act.

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 ~~September 30, 2021,~~March 31, 2022, we had total cash and cash equivalents of ~~$772~~$639 million and ~~$70~~$78 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. We currently have higher than historical balances in restricted cash due to certain of our mortgage loans that require deposits of excess cash with the lender when certain financial ratios are not met, which occurred as a result of the effect from COVID-19 on operating results at the associated hotels.

As a result of the economic uncertainty resulting from the effects of COVID-19, ~~including decreased occupancy, ADR and RevPAR at our hotels,~~ as described above under ~~“Recent Events”~~“COVID-19 Operational Update”, we expect our cash flows ~~for~~through at least the ~~remainder~~second quarter of ~~2021~~2022 to be ~~significantly~~ lower than prior to COVID-19. We ~~have taken several steps~~and our hotel managers took various actions to ~~preserve capital and increase liquidity,~~mitigate the effects of COVID-19, including drawing $1 billion from our Revolver in March 2020 (which we subsequently fully repaid), issuing $650 million of 2025 Senior Secured Notes in May 2020 (a portion of

which was used to partially repay amounts outstanding under our Revolver and our term loan due December 2021 ("2016 Term ~~Loan)~~Loan"), issuing $725 million of 2028 Senior Secured Notes in September 2020 (a portion of which was used to repay the 2016 Term Loan in full as well as a portion of the Revolver), issuing $750 million of 2029 Senior Secured Notes in May 2021 (a portion of which was used to partially repay the Revolver and the 2019 Term Facility), suspending our dividend following the payment of the first quarter 2020 dividend (which was recently reinstated for the first quarter of 2022), and implementing various cost saving initiatives at our hotels including temporary suspension of operations at certain hotels (all of which have reopened except one) and selected restaurants and other businesses and outlets and reductions in ~~forecasted~~ capital expenditures for maintenance projects to approximately $5644 million for 2021. ~~We will continue to assess when the deferred capital expenditures will resume or if any of the deferred expenditures will be cancelled.~~

In 2021, we sold five consolidated hotels, the W New Orleans – French Quarter, the Hotel Indigo San Diego Gaslamp Quarter, the Courtyard Washington Capitol Hill Navy Yard, the Hotel Adagio, Autograph Collection and the Le Meridien San Francisco. Net proceeds from the sales of these hotels were used to repay $37 million outstanding under the Revolver, which currently has no remaining balance outstanding, and to partially repay $419 million of the 2019 Term Facility.

We generated positive Hotel Adjusted EBITDA for the quarter ended ~~September 30, 2021.~~March 31, 2022, the fourth such consecutive quarter since the start of the pandemic. With ~~the~~$901 million of availability under our Revolver and existing cash and cash equivalents, ~~as a result of net proceeds from the offering of our Senior Secured Notes and the proceeds from the sales of two consolidated hotels in 2020 and the sale of five consolidated hotels in 2021,~~ we have sufficient liquidity to pay our ~~near-term~~debt maturities and to fund other ~~short-term~~ liquidity ~~obligations.~~obligations over the next year and beyond. Only 1% of our total outstanding debt is maturing in 2022. We are maintaining higher than historical cash levels due to the continued uncertainty surrounding COVID-19, and we intend to do so until markets stabilize and demand in the lodging industry significantly recovers. In addition, wemay also ~~may~~ take ~~other~~ 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. In 2020, we amended our credit facilities, which in addition to providing enhanced liquidity, ~~extending~~extended the maturity of the Revolver and ~~extending the waiver period for the testing of the financial covenants,~~ placed certain restrictions on the Company, including limitations on our ability to make dividends and distributions (except to the extent required to maintain REIT status, the ability to pay a $0.01 per share per fiscal quarter dividend and certain other agreed exceptions). In February 2022, we further amended our credit and term loan facilities, including extending the waiver period for the testing of the financial covenants, obtaining the ability to repurchase up to $250 million of shares as long as there is no outstanding balance on the Revolver (with the amount of any such repurchases increasing the minimum liquidity covenant, dollar for dollar, resulting in a minimum liquidity covenant amount as of March 31, 2022 of $261 million), and removing or decreasing certain restrictions on the Company related to capital expenditures, acquisitions and asset sales. Refer to Note 5: "Debt" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

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 scheduled principal payments on our outstanding indebtedness, capital expenditures for renovations and maintenance at our hotels, corporate general and administrative expenses and ~~when resumed,~~ 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 (to the extent not cancelled or deferred), and costs associated with potential acquisitions. Despite the impact of COVID-19 on the global economy and our business, we were able to access the debt capital markets during the past year to complete three separate offerings of our Senior Secured Notes.

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 $118 million for capital expenditures at our properties, of which $70 million relates to the expansion project at the Bonnet Creek complex. The Bonnet Creek expansion project includes additional meeting space for the Signia by Hilton Orlando Bonnet Creek and the Waldorf Astoria Orlando. 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. As a result of COVID-19, our hotel managers have temporarily delayed contributions to the FF&E reserve accounts and in addition, have allowed our hotels to utilize, as needed, their FF&E reserve for operating expenses at the respective hotels, as long as the hotels remain in compliance with debt agreements.

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 ~~2019,~~2022, our Board of Directors authorized and approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a ~~two-year~~24-month period, ~~which ended~~ending in February ~~2021. We have not renewed the stock repurchase program at this time.~~2024. Stock repurchases ~~were~~would be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that ~~complied~~would comply with applicable securities ~~laws.~~laws and subject to compliance with existing debt agreements (which currently limits the repurchase of common stock to $250 million). The timing of any future stock repurchases and the number of shares to be repurchased ~~were dependent~~will depend upon prevailing market conditions and other factors. During the three months ended March 31, ~~2020,~~2022, we repurchased ~~4.6~~approximately 3.4 million shares of our common stock for a total purchase price of ~~$66~~$61 million. ~~No additional common~~As of March 31, 2022, $239 million remained available for stock ~~was repurchased during 2020 or the first two months of 2021.~~repurchases.

Sources and Uses of Our Cash and Cash Equivalents

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

Nine Months Ended September 30,

2021

2020

Percent Change

(in millions)

Net cash used in operating activities

$
(95
)

$
(274
)

65.3
%
Net cash provided by investing activities

425

136

212.5
%
Net cash (used in) provided by financing activities

(469
)

921

NM(1)


	Three Months Ended March 31,
	2022			2021			Percent Change
	(in millions)
Net cash provided by (used in) operating activities	$	44		$	(71	)		162.0	%
Net cash used in investing activities		(21	)		(3	)		600.0	%
Net cash used in financing activities		(69	)		(7	)	NM(1)

(1) Percentage change is not meaningful.

Operating Activities

Cash flow from operating activities are primarily generated from the operating income generated at our hotels.

The ~~$179~~$115 million ~~decrease~~increase in net cash ~~used in~~provided by operating activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 compared to the ~~nine~~three months ended ~~September 30, 2020~~March 31, 2021 was primarily due to an increase in cash from operations as a result of the increase in occupancy as our hotels continue to recover from the effects of COVID-19, partially offset by an increase in cash paid for taxes of approximately $27 million, primarily associated with built-in gains from an asset sold in 2020, and an increase in cash paid for interest of $25 million.COVID-19.

Investing Activities

The ~~$425~~$18 million increase in net cash ~~provided by~~used in investing activities for the ~~nine~~three months ended ~~September 30,~~March 31, 2022 compared to the three months ended March 31, 2021 was primarily ~~attributable~~due to ~~$454~~a $16 million ~~of net proceeds from the sale of five of our consolidated hotels, partially offset by $28 million~~increase in capital ~~expenditures.~~

~~The $136~~expenditures, of which $6 million ~~in net cash provided by investing activities for the nine months ended September 30, 2020 was primarily attributable~~related to the ~~$207 million in net proceeds received from~~expansion project at the ~~sale of hotels, partially offset by $70 million in capital expenditures.~~Bonnet Creek complex.

Financing Activities

The ~~$469~~$62 million increase in net cash used in financing activities for the ~~nine~~three months ended ~~September 30, 2021~~March 31, 2022 was primarily attributable to $1.2 billion of debt repayments and $15 million of debt issuance costs, partially offset by the issuance of $750 million of 2029 Senior Secured Notes and the $14 million mortgage loan secured by the Doubletree Spokane.

The $921 million in net cash provided by financing activities for the nine months ended September 30, 2020 was primarily attributable to borrowings of $1 billion from our Revolver as a result of COVID-19, the issuance of our $650 million 2025 Senior Secured Notes and $725 million of 2028 Senior Secured Notes, partially offset by $1.1 billion of debt repayments, $241 million in dividends paid and the repurchase of ~~4.5~~3.4 million shares of our common stock for ~~$66~~$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 gain, and after utilization of any NOL carryforward to our stockholders on an annual basis. To avoid paying tax on our income, we intend to make distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our stockholders. Therefore, as a general matter, before consideration of the use of any NOL 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. ~~However, as a precautionary measure in light of COVID-19, after~~After the payment of the first quarter dividend in 2020, we suspended our quarterly dividend as a precautionary measure in light of COVID-19; in March 2022, our Board of Directors approved and reinstated our quarterly cash dividend.

26We declared the following dividends to holders of our common stock during 2022:


Record Date	Payment Date	Dividend per Share
March 31, 2022	April 15, 2022	$	0.01

Debt

As of ~~September 30, 2021,~~March 31, 2022, our total indebtedness was approximately $4.7 billion, including approximately $2.1 billion of our Senior Secured Notes, as disclosed above, and excluding approximately $225 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 7:5: “Debt” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.

~~Off-Balance Sheet Arrangements~~

~~Our off-balance sheet arrangements as of September 30, 2021 included construction contract commitments of approximately $116 million~~for capital expenditures at our properties, of which $78 million relates to the expansion project at the Bonnet Creek complex. The Bonnet Creek expansion project includes additional meeting space for the Signia by Hilton Orlando Bonnet Creek and the Waldorf Astoria Orlando. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract.

Critical Accounting Policies and 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 policies and 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, ~~2020,~~2021, filed with the Securities and Exchange Commission on February ~~26, 2021.~~18, 2022. There have been no material changes to our critical accounting policies or the methods or assumptions we apply.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

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. We continue to have exposure to such risks to the extent they are not hedged.

Item 4. Controls and Procedures.

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 ~~September 30, 2021,~~March 31, 2022, 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.

2723

PART II. OTHER INFORMATION

Item 1. Legal Proceedings.

We are involved in various claims and lawsuits arising in the ordinary course of business, some of which include claims for substantial sums, including proceedings involving tort and other general liability claims, employee claims and consumer protection claims. Most occurrences involving liability, claims of negligence and employees are covered by insurance with solvent insurance carriers. For those matters not covered by insurance, which include commercial matters, we recognize a liability when we believe the loss is probable and can be reasonably estimated. The ultimate results of claims and litigation cannot be predicted with certainty. We believe we have adequate reserves against such matters. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material adverse effect on our consolidated financial position, results of operations or liquidity. However, depending on the amount and timing, an unfavorable resolution of some or all of these matters could materially affect our future results of operations in a particular period.

Item 1A. Risk Factors.

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, ~~2020.~~2021.

Item 2. Unregistered Sales of Equity ~~Securities.~~Securities and Use of Proceeds.

2(a): Unregistered Sales of Equity Securities and Use of Proceeds

None.

2(b): Use of Proceeds from Registered Securities

None.

2(c): Purchases of Equity Securities

During the ~~nine~~three months ended ~~September 30, 2021,~~March 31, 2022, repurchases made pursuant to our repurchase program were as follows:

Record Date

Total number of
shares
purchased(1)

Weighted average
price paid
per share(2)

Total number of
shares purchased
as part of publicly
announced plans
or programs

Maximum number
(or approximate
dollar value) of
common shares
that may yet be
purchased under
the plans or
programs(3)
(in millions)

January 1, 2021 through January 31, 2021

3

$
17.15

—

$
234

February 1, 2021 through February 28, 2021

95,565

$
20.91

—

$
234

March 1, 2021 through March 31, 2021

392

$
21.15

—

$
—

April 1, 2021 through April 30, 2021

230

$
21.82

—

$
—

May 1, 2021 through May 31, 2021

58

$
22.31

—

$
—

June 1, 2021 through June 30, 2021

50

$
20.52

—

$
—

July 1, 2021 through July 31, 2021

168

$
20.33

—

$
—

August 1, 2021 through August 31, 2021

31

$
17.63

—

$
—

September 1, 2021 through September 30, 2021

6,659

$
19.42

—

$
—

103,156

—


Period	Total number of shares purchased(1)		Weighted average price paid per share(2)		Total number of shares purchased as part of publicly announced plans or programs		Maximum number (or approximate dollar value) of common shares that may yet be purchased under the plans or programs(3) (in millions)
January 1, 2022 through January 31, 2022		—	$	—		—	N/A
February 1, 2022 through February 28, 2022		106,694	$	19.38		—	$	300
March 1, 2022 through March 31, 2022		3,409,949	$	17.99		3,409,949	$	239
Total		3,516,643				3,409,949

(1) The number of shares purchased represents shares of common stock repurchased under the previously announced stock repurchase program as well as shares of common stock surrendered by certain of our employees to satisfy their federal and state tax obligations associated with the vesting of restricted common stock.

(2) The weighted average price paid per share for shares of common stock surrendered by certain employees is based on the closing price of our common stock on the trading date immediately prior to the date of delivery of the shares. The weighted average price paid per share for shares repurchased excludes commissions paid.

(3) The stock repurchase program was authorized inon February ~~2019~~25, 2022 allowing for the repurchase of up to $300 million of ~~the Company’s~~our common stock ~~expired~~and expiring on February ~~28, 2021.~~23, 2024.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

None.

2925

Item 6. Exhibits


Exhibit Number		Description
2.1		Distribution Agreement by and among Hilton Worldwide Holdings Inc., Park Hotels & Resorts Inc., Hilton Grand Vacations Inc. and Hilton Domestic Operating Company Inc., dated as of January 2, 2017 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, filed on January 4, 2017).

2.2		Agreement and Plan of Merger by and among Park Hotels & Resorts Inc., PK Domestic Property LLC, PK Domestic Sub LLC, and Chesapeake Lodging Trust, dated as of May 5, 2019 (incorporated by reference to Exhibit 2.1 to our Current Report on Form 8-K, filed on May 6, 2019).

3.1		Amended and Restated Certificate of Incorporation of Park Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on April 30, 2019).

3.2		Amended and Restated By-laws of Park Hotels & Resorts Inc. (incorporated by reference to Exhibit 3.1 to our Current Report on Form 8-K, filed on February 26, 2019).

10.1		Park Hotels & Resorts Inc. Executive Long-Term Incentive Program (amended and restated as of February 24, 2022)(incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on February 25, 2022).

10.2		Fifth Amendment to Credit Agreement, dated as of February 16, 2022, among Park Intermediate Holdings LLC and PK Domestic Property LLC, as Borrowers, Park Hotels & Resorts Inc. the lenders party thereto and Wells Fargo Bank, National Association, as Administrative Agent (incorporated by reference to Exhibit 10.1 to our Current Report on Form 8-K, filed on February 17, 2022).

10.3		Third Amendment to Loan Agreement, dated as of February 16, 2022, among Park Intermediate Holdings LLC and PK Domestic Property LLC, as Borrowers, Park Hotels & Resorts Inc., the lenders party thereto and Bank of America, N.A., as Administrative Agent (incorporated by reference to Exhibit 10.2 to our Current Report on Form 8-K, filed on February 17, 2022).

10.4*		Form of CEO Amended and Restated Performance Stock Unit Agreement.

10.5*		Form of Executive Amended and Restated Performance Stock Unit Award Agreement.

31.1*		Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*		Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

32.2*		Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, furnished herewith.

101.INS*		Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH*		Inline XBRL Taxonomy Extension Schema Document.

101.CAL*		Inline XBRL Taxonomy Extension Calculation Linkbase Document.

101.DEF*		Inline XBRL Taxonomy Extension Definition Linkbase Document.

101.LAB*		Inline XBRL Taxonomy Extension Label Linkbase Document.

101.PRE*		Inline XBRL Taxonomy Extension Presentation Linkbase Document.

104*		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

*		Filed herewith

3026

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.


	Park Hotels & Resorts Inc.

Date: ~~November 4, 2021~~May 2, 2022	By:	/s/ Thomas J. Baltimore Jr.
		Thomas J. Baltimore, Jr.
		Chairman of the Board, President and Chief Executive Officer (Principal Executive Officer)

Date: ~~November 4, 2021~~May 2, 2022	By:	/s/ Sean M. Dell’Orto
		Sean M. Dell’Orto
		Executive Vice President and Chief Financial Officer (Principal Financial Officer)

Date: ~~November 4, 2021~~May 2, 2022	By:	/s/ Darren W. Robb
		Darren W. Robb
		Senior Vice President and Chief Accounting Officer (Principal Accounting Officer)

3127


Status	Number of Hotels		Total Rooms
Consolidated Open		46		26,551
Consolidated Suspended		2		1,338
Total Consolidated		48		27,889
Unconsolidated Open(1)		6		4,036
Total Hotels		54		31,925

Expected volatility~~(1)~~

~~60.0~~57.5

Dividend yield~~(2)~~(1)

Risk-free rate

~~0.2~~1.7

Expected term