UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_______________________________________________
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☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For quarterly period ended June 30, 20192020
OR
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☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
COMMISSION FILE NO. 1-38012
Playa Hotels & Resorts N.V.
(Exact name of registrant as specified in its charter)
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The | Netherlands | | 98-1346104
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(State or other jurisdiction of incorporation or organization) | | (IRS Employer Identification Number) |
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Prins Bernhardplein 200 | | |
1097 JB | Amsterdam,
| the | Netherlands | | Not Applicable |
(Address of Principal Executive Offices) | | (Zip Code) |
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+31 20 571 12 02
(Registrant's Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
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Title of each Class | Trading Symbol(s) | Name of Each Exchange on Which Registered |
Ordinary Shares, €0.10 par value | PLYA | NASDAQ |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past ninety (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.
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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 Act). Yes ☐ No ☒
As of August 1, 2019,July 31, 2020, there were 129,976,527134,493,942 shares of the registrant’s ordinary shares, €0.10 par value, outstanding.
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Playa Hotels & Resorts N.V. TABLE OF CONTENTS |
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| | Page |
Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Playa Hotels & Resorts N.V.
Condensed Consolidated Balance Sheets
($ in thousands, except share data)
| | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
ASSETS | | | | | | |
Cash and cash equivalents | $ | 104,510 |
| | $ | 116,353 |
| $ | 251,022 |
| | $ | 20,931 |
|
Restricted cash | | 27,919 |
| | — |
|
Trade and other receivables, net | 60,722 |
| | 64,770 |
| 26,867 |
| | 71,250 |
|
Accounts receivable from related parties | 4,926 |
| | 6,430 |
| 2,933 |
| | 5,401 |
|
Inventories | 15,625 |
| | 15,390 |
| 14,239 |
| | 16,649 |
|
Prepayments and other assets | 38,824 |
| | 32,617 |
| 45,963 |
| | 44,691 |
|
Property and equipment, net | 1,857,996 |
| | 1,808,412 |
| 1,805,242 |
| | 1,929,914 |
|
Goodwill | 80,044 |
| | 83,656 |
| |
Goodwill, net | | 62,166 |
| | 78,339 |
|
Other intangible assets | 7,067 |
| | 6,103 |
| 8,555 |
| | 8,408 |
|
Deferred tax assets | 15,967 |
| | 1,427 |
| 22,358 |
| | 21,381 |
|
Total assets | $ | 2,185,681 |
| | $ | 2,135,158 |
| $ | 2,267,264 |
| | $ | 2,196,964 |
|
LIABILITIES AND SHAREHOLDERS' EQUITY | | | | | | |
Trade and other payables | $ | 159,662 |
| | $ | 159,600 |
| $ | 121,238 |
| | $ | 181,603 |
|
Payables to related parties | 8,699 |
| | 4,320 |
| 9,260 |
| | 7,620 |
|
Income tax payable | 915 |
| | 1,899 |
| 1,813 |
| | 3,252 |
|
Debt | 985,018 |
| | 989,387 |
| 1,251,877 |
| | 1,040,658 |
|
Derivative financial instruments | 34,240 |
| | 12,476 |
| 55,477 |
| | 31,932 |
|
Other liabilities | 30,636 |
| | 21,602 |
| 30,696 |
| | 24,307 |
|
Deferred tax liabilities | 102,620 |
| | 106,033 |
| 86,345 |
| | 97,941 |
|
Total liabilities | 1,321,790 |
| | 1,295,317 |
| 1,556,706 |
| | 1,387,313 |
|
Commitments and contingencies (see Note 8) |
| |
| |
Commitments and contingencies (see Note 7) | |
| |
|
Shareholders' equity | | | | | | |
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 130,885,269 shares issued and 130,327,895 shares outstanding as of June 30, 2019, and 130,494,734 shares issued and 130,440,126 shares outstanding as of December 31, 2018) | 14,205 |
| | 14,161 |
| |
Treasury shares (at cost, 557,374 as of June 30, 2019 and 54,608 shares as of December 31, 2018) | (4,316 | ) | | (394 | ) | |
Ordinary shares (par value €0.10; 500,000,000 shares authorized, 136,684,273 shares issued and 134,485,477 shares outstanding as of June 30, 2020, and 130,967,671 shares issued and 129,121,576 shares outstanding as of December 31, 2019) | | 14,861 |
| | 14,215 |
|
Treasury shares (at cost, 2,198,796 shares as of June 30, 2020 and 1,846,095 shares as of December 31, 2019) | | (16,642 | ) | | (14,088 | ) |
Paid-in capital | 997,015 |
| | 992,297 |
| 1,025,942 |
| | 1,001,088 |
|
Accumulated other comprehensive loss | (24,476 | ) | | (3,658 | ) | (36,667 | ) | | (24,642 | ) |
Accumulated deficit | (118,537 | ) | | (162,565 | ) | (276,936 | ) | | (166,922 | ) |
Total shareholders' equity | 863,891 |
| | 839,841 |
| 710,558 |
| | 809,651 |
|
Total liabilities and shareholders' equity | $ | 2,185,681 |
| | $ | 2,135,158 |
| $ | 2,267,264 |
| | $ | 2,196,964 |
|
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Operations
($ in thousands)thousands, except share data)
(unaudited)
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2019 | | 2018 | | 2019 | | 2018 | | 2020 | | 2019 | | 2020 | | 2019 |
Revenue: | | | | | | | | | |
Revenue | | | | | | | | | |
Package | | $ | 136,095 |
| | $ | 124,286 |
| | $ | 305,887 |
| | $ | 278,994 |
| | $ | 302 |
| | $ | 136,095 |
| | $ | 153,357 |
| | $ | 305,887 |
|
Non-package | | 24,428 |
| | 21,153 |
| | 48,910 |
| | 42,952 |
| | 240 |
| | 24,428 |
| | 22,818 |
| | 48,910 |
|
Management fees | | 551 |
| | 55 |
| | 1,485 |
| | 351 |
| | (18 | ) | | 551 |
| | 627 |
| | 1,485 |
|
Cost reimbursements | | 2,949 |
| | 78 |
| | 3,537 |
| | 122 |
| | 458 |
| | 2,949 |
| | 1,408 |
| | 3,537 |
|
Total revenue | | 164,023 |
| | 145,572 |
| | 359,819 |
| | 322,419 |
| | 982 |
| | 164,023 |
| | 178,210 |
| | 359,819 |
|
Direct and selling, general and administrative expenses: | | | | | | | | | |
Direct and selling, general and administrative expenses | | | | | | | | | |
Direct | | 92,582 |
| | 78,113 |
| | 186,325 |
| | 159,169 |
| | 20,380 |
| | 92,582 |
| | 118,278 |
| | 186,325 |
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Selling, general and administrative | | 32,048 |
| | 32,780 |
| | 63,876 |
| | 59,253 |
| | 19,739 |
| | 32,048 |
| | 53,571 |
| | 63,876 |
|
Pre-opening | | 202 |
| | — |
| | 291 |
| | — |
| | — |
| | 202 |
| | — |
| | 291 |
|
Depreciation and amortization | | 25,908 |
| | 15,882 |
| | 48,219 |
| | 31,571 |
| | 22,400 |
| | 25,908 |
| | 47,359 |
| | 48,219 |
|
Reimbursed costs | | 2,949 |
| | 78 |
| | 3,537 |
| | 122 |
| | 458 |
| | 2,949 |
| | 1,408 |
| | 3,537 |
|
Impairment loss | | | 25,268 |
| | — |
| | 41,441 |
| | — |
|
Loss on sale of assets | | | 1,729 |
| | — |
| | 1,729 |
| | — |
|
Gain on insurance proceeds | | — |
| | — |
| | — |
| | (1,521 | ) | | (2,950 | ) | | — |
| | (2,950 | ) | | — |
|
Direct and selling, general and administrative expenses |
| 153,689 |
| | 126,853 |
| | 302,248 |
| | 248,594 |
| | 87,024 |
| | 153,689 |
| | 260,836 |
| | 302,248 |
|
Operating income | | 10,334 |
| | 18,719 |
| | 57,571 |
| | 73,825 |
| |
Operating (loss) income | | | (86,042 | ) | | 10,334 |
| | (82,626 | ) | | 57,571 |
|
Interest expense | | (10,666 | ) | | (5,632 | ) | | (24,860 | ) | | (27,514 | ) | | (20,916 | ) | | (10,666 | ) | | (41,871 | ) | | (24,860 | ) |
Other income (expense) | | 364 |
| | 378 |
| | (238 | ) | | (1,446 | ) | | 4,853 |
| | 364 |
| | 947 |
| | (238 | ) |
Net income before tax | | 32 |
| | 13,465 |
| | 32,473 |
| | 44,865 |
| |
Income tax benefit (provision) | | 1,008 |
| | 3,356 |
| | 11,555 |
| | (6,227 | ) | |
Net income | | $ | 1,040 |
| | $ | 16,821 |
| | $ | 44,028 |
| | $ | 38,638 |
| |
Earnings per share - Basic | | $ | 0.01 |
| | $ | 0.14 |
| | $ | 0.34 |
| | $ | 0.34 |
| |
Earnings per share - Diluted | | $ | 0.01 |
| | $ | 0.14 |
| | $ | 0.34 |
| | $ | 0.34 |
| |
Net (loss) income before tax | | | (102,105 | ) | | 32 |
| | (123,550 | ) | | 32,473 |
|
Income tax benefit | | | 14,647 |
| | 1,008 |
| | 13,536 |
| | 11,555 |
|
Net (loss) income | | | $ | (87,458 | ) | | $ | 1,040 |
| | $ | (110,014 | ) | | $ | 44,028 |
|
| | | | | | | | | |
Earnings per share | | | | | | | | | |
(Losses) earnings per share - Basic | | | $ | (0.67 | ) | | $ | 0.01 |
| | $ | (0.85 | ) | | $ | 0.34 |
|
(Losses) earnings per share - Diluted | | | $ | (0.67 | ) | | $ | 0.01 |
| | $ | (0.85 | ) | | $ | 0.34 |
|
Weighted average number of shares outstanding during the period - Basic | | 130,421,695 |
| | 116,987,887 |
| | 130,480,549 |
| | 113,685,219 |
| | 130,466,383 |
| | 130,421,695 |
| | 129,876,545 |
| | 130,480,549 |
|
Weighted average number of shares outstanding during the period - Diluted | | 130,815,177 |
| | 117,325,223 |
| | 130,789,467 |
| | 113,981,763 |
| | 130,466,383 |
| | 130,815,177 |
| | 129,876,545 |
| | 130,789,467 |
|
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Comprehensive (Loss) Income
($ in thousands)
(unaudited)
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2019 | | 2018 | | 2019 | | 2018 |
Net income | | $ | 1,040 |
| | $ | 16,821 |
| | $ | 44,028 |
| | $ | 38,638 |
|
Other comprehensive (loss) income, net of taxes | | | | | | | | |
Unrealized loss on interest rate swaps | | (14,784 | ) | | — |
| | (20,642 | ) | | — |
|
Pension obligation (loss) gain | | (25 | ) | | 18 |
| | (176 | ) | | (63 | ) |
Total other comprehensive (loss) income | | (14,809 | ) | | 18 |
| | (20,818 | ) | | (63 | ) |
Comprehensive (loss) income | | $ | (13,769 | ) | | $ | 16,839 |
| | $ | 23,210 |
| | $ | 38,575 |
|
|
| | | | | | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, |
| | 2020 | | 2019 | | 2020 | | 2019 |
Net (loss) income | | $ | (87,458 | ) | | $ | 1,040 |
| | $ | (110,014 | ) | | $ | 44,028 |
|
Other comprehensive income (loss), net of taxes | | | | | | | | |
Unrealized gain (loss) on interest rate swaps | | 2,926 |
| | (14,784 | ) | | (12,122 | ) | | (20,642 | ) |
Pension obligation gain (loss) | | 152 |
| | (25 | ) | | 97 |
| | (176 | ) |
Total other comprehensive income (loss) | | 3,078 |
| | (14,809 | ) | | (12,025 | ) | | (20,818 | ) |
Comprehensive (loss) income | | $ | (84,380 | ) | | $ | (13,769 | ) | | $ | (122,039 | ) | | $ | 23,210 |
|
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Shareholders' Equity
($ in thousands, except share data)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | | | | | | | |
Balance at December 31, 2017 | 110,297,697 |
| | $ | 11,803 |
| | 7,367 |
| | $ | (80 | ) | | $ | 773,194 |
| | $ | (3,826 | ) | | $ | (181,542 | ) | | $ | 599,549 |
|
Net income | | | | | | | | | | | | | 21,817 |
| | 21,817 |
|
Other comprehensive loss | | | | | | | | | | | (81 | ) | | | | (81 | ) |
Share-based compensation | 48,699 |
| | 6 |
| | | | | | 1,780 |
| | | | | | 1,786 |
|
Balance at March 31, 2018 | 110,346,396 |
| | $ | 11,809 |
| | 7,367 |
| | $ | (80 | ) | | $ | 774,974 |
| | $ | (3,907 | ) | | $ | (159,725 | ) | | $ | 623,071 |
|
Net income | | | | | | | | | | | | | 16,821 |
| | 16,821 |
|
Other comprehensive income | | | | | | | | | | | 18 |
| | | | 18 |
|
Shares issued in business combination (see Note 4) | 20,000,000 |
| | 2,336 |
| | | | | | 213,064 |
| | | | | | 215,400 |
|
Share-based compensation | 132,597 |
| | 15 |
| | | | | | 2,089 |
| | | | | | 2,104 |
|
Balance at June 30, 2018 | 130,478,993 |
| | $ | 14,160 |
| | 7,367 |
| | $ | (80 | ) | | $ | 990,127 |
| | $ | (3,889 | ) | | $ | (142,904 | ) | | $ | 857,414 |
|
| | | Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total | Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | | | | | | | | Shares | | Amount | | Shares | | Amount | | | | | | | | |
Balance at December 31, 2018 | 130,440,126 |
| | $ | 14,161 |
| | 54,608 |
| | $ | (394 | ) | | $ | 992,297 |
| | $ | (3,658 | ) | | $ | (162,565 | ) | | $ | 839,841 |
| 130,440,126 |
| | $ | 14,161 |
| | 54,608 |
| | $ | (394 | ) | | $ | 992,297 |
| | $ | (3,658 | ) | | $ | (162,565 | ) | | $ | 839,841 |
|
Net income | | | | | | | | | | | | | 42,988 |
| | 42,988 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 42,988 |
| | 42,988 |
|
Other comprehensive loss | | | | | | | | | | | (6,009 | ) | | | | (6,009 | ) | — |
| | — |
| | — |
| | — |
| | — |
| | (6,009 | ) | | — |
| | (6,009 | ) |
Share-based compensation | 249,044 |
| | 29 |
| | | | | | 2,719 |
| | | | | | 2,748 |
| 249,044 |
| | 29 |
| | — |
| | — |
| | 2,719 |
| | — |
| | — |
| | 2,748 |
|
Repurchase of ordinary shares | (198,179 | ) | | | | 198,179 |
| | (1,522 | ) | | | | | | | | (1,522 | ) | (198,179 | ) | | — |
| | 198,179 |
| | (1,522 | ) | | — |
| | — |
| | — |
| | (1,522 | ) |
Balance at March 31, 2019 | 130,490,991 |
| | $ | 14,190 |
| | 252,787 |
| | $ | (1,916 | ) | | $ | 995,016 |
| | $ | (9,667 | ) | | $ | (119,577 | ) | | $ | 878,046 |
| 130,490,991 |
| | $ | 14,190 |
| | 252,787 |
| | $ | (1,916 | ) | | $ | 995,016 |
| | $ | (9,667 | ) | | $ | (119,577 | ) | | $ | 878,046 |
|
Net income | | | | | | | | | | | | | 1,040 |
| | 1,040 |
| — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | 1,040 |
| | 1,040 |
|
Other comprehensive loss | | | | | | | | | | | (14,809 | ) | | | | (14,809 | ) | — |
| | — |
| | — |
| | — |
| | — |
| | (14,809 | ) | | — |
| | (14,809 | ) |
Share-based compensation | 141,491 |
| | 15 |
| | | | | | 1,999 |
| | | | | | 2,014 |
| 141,491 |
| | 15 |
| | — |
| | — |
| | 1,999 |
| | — |
| | — |
| | 2,014 |
|
Repurchase of ordinary shares | (304,587 | ) | | | | 304,587 |
| | (2,400 | ) | | | | | | | | (2,400 | ) | (304,587 | ) | | — |
| | 304,587 |
| | (2,400 | ) | | — |
| | — |
| | — |
| | (2,400 | ) |
Balance at June 30, 2019 | 130,327,895 |
| | $ | 14,205 |
| | 557,374 |
| | $ | (4,316 | ) | | $ | 997,015 |
| | $ | (24,476 | ) | | $ | (118,537 | ) | | $ | 863,891 |
| 130,327,895 |
| | $ | 14,205 |
| | 557,374 |
| | $ | (4,316 | ) | | $ | 997,015 |
| | $ | (24,476 | ) | | $ | (118,537 | ) | | $ | 863,891 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Ordinary Shares | | Treasury Shares | | Paid-In Capital | | Accumulated Other Comprehensive Loss | | Accumulated Deficit | | Total |
| Shares | | Amount | | Shares | | Amount | | | | | | | | |
Balance at December 31, 2019 | 129,121,576 |
| | $ | 14,215 |
| | 1,846,095 |
| | $ | (14,088 | ) | | $ | 1,001,088 |
| | $ | (24,642 | ) | | $ | (166,922 | ) | | $ | 809,651 |
|
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (22,556 | ) | | (22,556 | ) |
Other comprehensive loss | — |
| | — |
| | — |
| | — |
| | — |
| | (15,103 | ) | | — |
| | (15,103 | ) |
Share-based compensation, net of tax withholdings | 493,226 |
| | 55 |
| | 4,500 |
| | (34 | ) | | 3,168 |
| | — |
| | — |
| | 3,189 |
|
Repurchase of ordinary shares | (340,109 | ) | | — |
| | 340,109 |
| | (2,500 | ) | | — |
| | — |
| | — |
| | (2,500 | ) |
Balance at March 31, 2020 | 129,274,693 |
| | $ | 14,270 |
| | 2,190,704 |
| | $ | (16,622 | ) | | $ | 1,004,256 |
| | $ | (39,745 | ) | | $ | (189,478 | ) | | $ | 772,681 |
|
Net loss | — |
| | — |
| | — |
| | — |
| | — |
| | — |
| | (87,458 | ) | | (87,458 | ) |
Other comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 3,078 |
| | — |
| | 3,078 |
|
Share-based compensation, net of tax withholdings | 332,735 |
| | 38 |
| | 8,092 |
| | (20 | ) | | 2,681 |
| | — |
| | — |
| | 2,699 |
|
Equity issuance, net (see Note 8) | 4,878,049 |
| | 553 |
| | — |
| | — |
| | 19,005 |
| | — |
| | — |
| | 19,558 |
|
Balance at June 30, 2020 | 134,485,477 |
| | $ | 14,861 |
| | 2,198,796 |
| | $ | (16,642 | ) | | $ | 1,025,942 |
| | $ | (36,667 | ) | | $ | (276,936 | ) | | $ | 710,558 |
|
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows
($ in thousands)
(unaudited)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
CASH FLOWS FROM OPERATING ACTIVITIES: | | | |
Net income | $ | 44,028 |
| | $ | 38,638 |
|
Adjustments to reconcile net income to net cash provided by operating activities: | | | |
Depreciation and amortization | 48,219 |
| | 31,571 |
|
Amortization of debt discount and issuance costs | 681 |
| | 827 |
|
Share-based compensation | 4,762 |
| | 3,890 |
|
Loss on derivative financial instruments | 1,122 |
| | 3,720 |
|
Deferred income taxes | (14,341 | ) | | — |
|
Amortization of key money | (110 | ) | | — |
|
Other | 628 |
| | 592 |
|
Changes in assets and liabilities: | | | |
Trade and other receivables, net | 1,743 |
| | (2,893 | ) |
Accounts receivable from related parties | 1,504 |
| | (1,595 | ) |
Inventories | (224 | ) | | (372 | ) |
Prepayments and other assets | (4,845 | ) | | 1,300 |
|
Trade and other payables | (5,512 | ) | | (9,098 | ) |
Payables to related parties | 4,379 |
| | 784 |
|
Income tax payable | (984 | ) | | 777 |
|
Other liabilities | 5,026 |
| | 299 |
|
Net cash provided by operating activities | 86,076 |
| | 68,440 |
|
INVESTING ACTIVITIES: | | | |
Capital expenditures | (92,038 | ) | | (40,058 | ) |
Acquisition of Sagicor business, net of cash acquired | — |
| | (93,128 | ) |
Receipt of key money | 2,500 |
| | — |
|
Purchase of intangibles | (1,424 | ) | | (1,318 | ) |
Proceeds from disposal of property and equipment | 6 |
| | — |
|
Property damage insurance proceeds | 2,009 |
| | — |
|
Net cash used in investing activities | (88,947 | ) | | (134,504 | ) |
FINANCING ACTIVITIES: | | | |
Proceeds from debt issuance | — |
| | 99,499 |
|
Repayment of Term Loan | (5,050 | ) | | (4,800 | ) |
Repurchase of ordinary shares | (3,922 | ) | | — |
|
Net cash (used in) provided by financing activities | (8,972 | ) | | 94,699 |
|
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS | (11,843 | ) | | 28,635 |
|
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | $ | 116,353 |
| | $ | 117,229 |
|
CASH AND CASH EQUIVALENTS, END OF THE PERIOD | $ | 104,510 |
| | $ | 145,864 |
|
|
| | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
CASH FLOWS FROM OPERATING ACTIVITIES | | | |
Net (loss) income | $ | (110,014 | ) | | $ | 44,028 |
|
Adjustments to reconcile net income to net cash provided by operating activities | | | |
Depreciation and amortization | 47,359 |
| | 48,219 |
|
Amortization of debt discount and issuance costs | 679 |
| | 681 |
|
Share-based compensation | 5,942 |
| | 4,762 |
|
Loss on derivative financial instruments | 11,423 |
| | 1,122 |
|
Impairment loss | 41,441 |
| | — |
|
Deferred income taxes | (12,573 | ) | | (14,341 | ) |
Loss on sale of assets | 1,729 |
| | — |
|
Amortization of key money | (439 | ) | | (110 | ) |
Other | (154 | ) | | 628 |
|
Changes in assets and liabilities: | | | |
Trade and other receivables, net | 44,462 |
| | 1,743 |
|
Accounts receivable from related parties | 2,855 |
| | 1,504 |
|
Inventories | 950 |
| | (224 | ) |
Prepayments and other assets | 470 |
| | (4,845 | ) |
Trade and other payables | (61,207 | ) | | (5,512 | ) |
Payables to related parties | 1,640 |
| | 4,379 |
|
Income tax payable | (1,439 | ) | | (984 | ) |
Other liabilities | (1,520 | ) | | 5,026 |
|
Net cash (used in) provided by operating activities | (28,396 | ) | | 86,076 |
|
INVESTING ACTIVITIES | | | |
Capital expenditures | (7,414 | ) | | (92,038 | ) |
Receipt of key money | 8,500 |
| | 2,500 |
|
Purchase of intangibles | (349 | ) | | (1,424 | ) |
Proceeds from the sale of assets, net | 58,125 |
| | 6 |
|
Property damage insurance proceeds | — |
| | 2,009 |
|
Net cash provided by (used in) investing activities | 58,862 |
| | (88,947 | ) |
FINANCING ACTIVITIES | | | |
Proceeds from debt issuances, net of discount | 199,600 |
| | — |
|
Issuance costs of debt | (8,677 | ) | | — |
|
Proceeds from ordinary shares, net of issuance costs | 19,558 |
| | — |
|
Repayments of debt | (5,050 | ) | | (5,050 | ) |
Proceeds from borrowings on revolving credit facility | 40,000 |
| | — |
|
Repayments of borrowings on revolving credit facility | (15,333 | ) | | — |
|
Repurchase of ordinary shares | (2,500 | ) | | (3,922 | ) |
Repurchase of ordinary shares for tax withholdings | (54 | ) | | — |
|
Net cash provided by (used in) financing activities | 227,544 |
| | (8,972 | ) |
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS | 258,010 |
| | (11,843 | ) |
CASH AND CASH EQUIVALENTS, BEGINNING OF THE PERIOD | $ | 20,931 |
| | $ | 116,353 |
|
CASH AND CASH EQUIVALENTS, END OF THE PERIOD | $ | 278,941 |
| | $ | 104,510 |
|
RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH | | | |
Cash and cash equivalents | $ | 251,022 |
| | $ | 104,510 |
|
Restricted cash | 27,919 |
| | — |
|
TOTAL CASH, CASH EQUIVALENTS AND RESTRICTED CASH | $ | 278,941 |
| | $ | 104,510 |
|
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Condensed Consolidated Statements of Cash Flows (Continued)
($ in thousands)
(unaudited)
|
| | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | |
Cash paid for interest, net of interest capitalized | $ | 22,616 |
| | $ | 28,154 |
|
Cash paid for income taxes | $ | 4,990 |
| | $ | 5,572 |
|
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES | | | |
Non-cash issuance of shares in business combination (see Note 4) | $ | — |
| | $ | 215,400 |
|
Capital expenditures incurred but not yet paid | $ | 5,813 |
| | $ | 290 |
|
Intangible assets capitalized but not yet paid | $ | 474 |
| | $ | 393 |
|
Interest capitalized but not yet paid | $ | 95 |
| | $ | — |
|
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | 1,393 |
| | $ | — |
|
Par value of vested restricted share awards | $ | 44 |
| | $ | 21 |
|
|
| | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | | | |
Cash paid for interest, net of interest capitalized | $ | 28,919 |
| | $ | 22,616 |
|
Cash paid for income taxes, net | $ | 2,040 |
| | $ | 4,990 |
|
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES |
Capital expenditures incurred but not yet paid | $ | 1,590 |
| | $ | 5,813 |
|
Intangible assets capitalized but not yet paid | $ | 208 |
| | $ | 474 |
|
Interest capitalized but not yet paid | $ | — |
| | $ | 95 |
|
Right-of-use assets obtained in exchange for new operating lease liabilities | $ | — |
| | $ | 1,393 |
|
Par value of vested restricted share awards | $ | 93 |
| | $ | 44 |
|
The accompanying Notes form an integral part of the Condensed Consolidated Financial Statements.
Playa Hotels & Resorts N.V.
Notes to the Condensed Consolidated Financial Statements
(unaudited)
Note 1. Organization, operations and basis of presentation
Background
Playa Hotels & Resorts N.V. (“Playa” or the “Company”) is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations. We own and/or manage a portfolio of 21 resorts located in Mexico, the Dominican Republic and Jamaica. Unless otherwise indicated or the context requires otherwise, references in our condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) to “we,” “our,” “us” and similar expressions refer to Playa and its subsidiaries.
COVID-19 impact
Due to the spread of the coronavirus (“COVID-19”) global pandemic, and in response to related governmental restrictions and advisories, reductions in scheduled commercial airline service, and potential health risks to our employees and guests, we temporarily suspended operations at all of our resorts from late March through June 2020. Our resorts began reopening in July, in stages, based on incremental easing of government restrictions and advisories and increases in scheduled commercial airline service. On July 1, 2020, we reopened 8 out of our 21 resorts and subsequently opened another 4 resorts. Currently, 12 out of our 21 resorts have reopened. We also implemented additional safety measures at our resorts to mitigate the potential health risks of COVID-19.
Although we began operations in July, we cannot predict when our business will return to normalized levels because we cannot predict when all effects of the pandemic will subside. The longer and more severe the pandemic, the greater the material adverse effect the pandemic will have on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our debt.
Liquidity and ability to continue as a going concern
As COVID-19 has had a significant adverse impact on our business and financial condition, we took several actions to help remedy our liquidity situation, which include the following:
we temporarily suspended operations in late March and subsequently began opening our resorts, in stages, beginning in July;
closed on the sale of equity (see Note 8) and issuance of additional debt (see Note 11) as part of our capital raise efforts;
amended our Senior Secured Credit Facility to waive the existing financial maintenance covenants until the fiscal quarter ended September 30, 2021 (see Note 11);
sold 2 of our resorts operated under the Jewel brand for cash consideration (see Note 4);
significantly reduced staffing levels at the properties and at our corporate offices;
imposed compensation cuts throughout the entirety of our corporate offices;
adjusted our marketing spend;
canceled all non-essential corporate travel;
deferred all non-critical capital expenditures for the remainder of the year; and
continue to pursue the potential sale of certain of our non-core resorts.
Due to the measures taken, we expect to be in compliance with all financial maintenance covenants and have sufficient liquidity to meet our obligations for at least twelve months from the date of this report. Accordingly, we believe that our plans to improve our liquidity situation have been effectively implemented and the conditions that previously raised substantial doubt about our ability to continue as a going concern have been mitigated.
Basis of preparation, presentation and measurement
Our Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) for interim financial information. Certain information and disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted. Accordingly, these unaudited interim Condensed Consolidated Financial Statements should be read in conjunction with our Consolidated Financial Statements as of and for the year ended December 31, 2018,2019, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission (the “SEC”) on February 28, 201927, 2020 (the “Annual Report”).
In our opinion, the unaudited interim Condensed Consolidated Financial Statements have been prepared on the same basis as the annual Consolidated Financial Statements and include all adjustments, consisting of only normal recurring adjustments, necessary for fair presentation. Results for all comparative prior periods have been reclassified to conform to the current period presentation.
The results of operations for the three and six months ended June 30, 20192020 are not necessarily indicative of the results of operations to be expected for the full year ended December 31, 2019.2020, particularly given the impact of the COVID-19 pandemic noted above. All dollar amounts (other than per share amounts) in the following disclosures are in thousands of United States dollars, unless otherwise indicated.
Note 2. Significant accounting policies
Derivative financial instrumentsAssets held for sale
We use derivative financial instruments, primarily interest rate swap contracts,classify a hotel as held for sale in the period during which we have made the decision to hedge our exposuredispose of the hotel, a binding agreement to interest rate risk. Such derivative financial instrumentspurchase the property has been signed under which the buyer has committed an amount of nonrefundable cash and no significant financing or other contingencies exist which could cause the transaction to not be completed in a timely manner. If these criteria are initially recorded at fair value onmet, we perform the date on which a derivative contract is entered into and are subsequently remeasured to fair value at period end. As of March 20, 2019, we elected to adopt hedge accounting and designate our existing interest rate swaps as cash flow hedges. Changes infollowing steps: recognize an impairment loss if the fair value is lower than the carrying amount of a derivative contract thatthe hotel and related assets; cease recording depreciation expense; and classify the assets and related liabilities as held for sale on the balance sheet. Any asset impairment is qualified, designated and highly effective as a cash flow hedge are recorded within impairment loss in total other comprehensive (loss) income in our Condensed Consolidated Statements of Comprehensive (Loss) Income and reclassified into interest expense in ourthe Condensed Consolidated Statements of Operations in the same period or periods during which the hedged transaction affects earnings. If a derivative contract does not meet this criteria, then the change in fair value is recognized in earnings..
Standards adopted |
| | | | | | |
Standard | | Description | | Date of Adoption | | Effect on the Financial Statements or Other Significant Matters |
Accounting StandardsStandard Update (“ASU”(“ASU”) No. 2016-02, 2016-13,Leases Financial Instruments-Credit Losses (Topic 842)326): Measurement of Credit Losses on Financial Instruments (as amended by ASU No. 2018-19)
| | This standard introduces a lessee model that brings most leasesamends current guidance on the balance sheet. This will increase a lessee’s reported assets and liabilities—in some cases very significantly. Lessor accounting remains substantially similar toimpairment of financial instruments by adding an impairment model (known as the current U.S. GAAP.expected credit loss (CECL) model) that is based on expected losses rather than incurred losses. Under the new guidance, an entity recognizes, as an allowance, its estimate of expected credit losses. | | January 20192020 | | WeOn January 1, 2020, we adopted ASU 2016-02No. 2016-13. We determine our credit losses by applying an expected loss rate to the outstanding balance of accounts receivable for each of our reportable segments (refer to Note 15) and our corporate entities. The expected loss rates for our reportable segments and corporate entities were determined primarily using historical credit losses, which are not expected to differ from what is currently expected over the transition method outlined inlife of our trade receivables.
The adoption of ASU No. 2018-11,2016-13 was immaterial to our Condensed Consolidated Financial Statements for the three months ended March 31, 2020. |
Standards not yet adopted |
| | | | | | |
Standard | | Description | | Date of Adoption | | Effect on the Financial Statements or Other Significant Matters |
ASU No. 2019-12, LeasesIncome Taxes (Topic 842)740): Targeted ImprovementsSimplifying the Accounting for Income Taxes, resulting | | The standard simplifies the accounting for income taxes, eliminates certain exceptions within ASC 740, Income Taxes, and clarifies certain aspects of the current guidance to promote consistency among reporting entities. | | January 2021 | | We are in no cumulative adjustmentthe process of evaluating the impact of ASU No. 2019-12. We expect the adoption of this standard to accumulated deficit asresult in changes to deferred tax liabilities and deferred income tax expense for our lease portfolio consists solely of operating leases. Referresorts located in the Dominican Republic, which are subject to Note 9 for further discussion.hybrid tax regimes.
|
ASU No. 2018-02, 2020-04,Income Statement-Reporting Comprehensive Income Reference Rate Reform (Topic 220)848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting
| | This standard provides guidance regarding the treatment of stranded income tax effectsThe amendments in accumulatedthis update provide optional expedients and exceptions for applying generally accepted accounting principles (GAAP) to contracts, hedging relationships, and other comprehensive income resulting from the Tax Cuts and Jobs Act of 2017. Entities can make an election to reclassify these stranded income tax effects from accumulated other comprehensive income to retained earnings. transactions affected by reference rate reform if certain criteria are met.
| | January 20192022 | | We adoptedare currently evaluating the impact of ASU 2018-02 and concluded thatNo. 2020-04 on the effect on our Condensed Consolidated Financial Statements was immaterial. The tax effects presented in accumulated other comprehensive loss relateStatements. We may elect to our employee benefit plan and have been historically immaterial.early adopt the standard prior to the discontinuation of LIBOR rates as of December 31, 2021. |
Note 3. Revenue
The following tables present our revenues disaggregated by geographic segment (refer to discussion of our reportable segments in Note 19)15) ($ in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2020 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | (165 | ) | | $ | (90 | ) | | $ | (178 | ) | | $ | 735 |
| | $ | — |
| | $ | 302 |
|
Non-package revenue | 187 |
| | 15 |
| | 190 |
| | (172 | ) | | 20 |
| | 240 |
|
Management fees | — |
| | — |
| | — |
| | — |
| | (18 | ) | | (18 | ) |
Cost reimbursements | — |
| | — |
| | — |
| | 414 |
| | 44 |
| | 458 |
|
Total revenue | $ | 22 |
|
| $ | (75 | ) |
| $ | 12 |
|
| $ | 977 |
|
| $ | 46 |
|
| $ | 982 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, 2019 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 53,460 |
| | $ | 19,770 |
| | $ | 18,226 |
| | $ | 44,639 |
| | $ | — |
| | $ | 136,095 |
|
Non-package revenue | 8,400 |
| | 3,155 |
| | 4,394 |
| | 8,465 |
| | 14 |
| | 24,428 |
|
Management fees | — |
| | — |
| | — |
| | — |
| | 551 |
| | 551 |
|
Cost reimbursements | — |
| | — |
| | — |
| | 2,588 |
| | 361 |
| | 2,949 |
|
Total revenue | $ | 61,860 |
|
| $ | 22,925 |
|
| $ | 22,620 |
|
| $ | 55,692 |
|
| $ | 926 |
|
| $ | 164,023 |
|
| | | Three Months Ended June 30, 2018 | Six Months Ended June 30, 2020 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total | Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 57,812 |
| | $ | 17,183 |
| | $ | 25,661 |
| | $ | 23,629 |
| | $ | 1 |
| | $ | 124,286 |
| $ | 56,562 |
| | $ | 18,634 |
| | $ | 31,189 |
| | $ | 46,972 |
| | $ | — |
| | $ | 153,357 |
|
Non-package revenue | 7,864 |
| | 3,127 |
| | 5,835 |
| | 4,336 |
| | (9 | ) | | 21,153 |
| 7,734 |
| | 3,101 |
| | 4,455 |
| | 7,494 |
| | 34 |
| | 22,818 |
|
Management fees | — |
| | — |
| | — |
| | — |
| | 55 |
| | 55 |
| — |
| | — |
| | — |
| | — |
| | 627 |
| | 627 |
|
Cost reimbursements | — |
| | — |
| | — |
| | — |
| | 78 |
| | 78 |
| — |
| | — |
| | — |
| | 1,010 |
| | 398 |
| | 1,408 |
|
Total revenue | $ | 65,676 |
| | $ | 20,310 |
| | $ | 31,496 |
| | $ | 27,965 |
| | $ | 125 |
| | $ | 145,572 |
| $ | 64,296 |
| | $ | 21,735 |
| | $ | 35,644 |
| | $ | 55,476 |
| | $ | 1,059 |
| | $ | 178,210 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2019 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 117,761 |
| | $ | 42,493 |
| | $ | 46,750 |
| | $ | 98,883 |
| | $ | — |
| | $ | 305,887 |
|
Non-package revenue | 16,239 |
| | 6,801 |
| | 8,994 |
| | 16,859 |
| | 17 |
| | 48,910 |
|
Management fees | — |
| | — |
| | — |
| | — |
| | 1,485 |
| | 1,485 |
|
Cost reimbursements | — |
| | — |
| | — |
| | 2,588 |
| | 949 |
| | 3,537 |
|
Total revenue | $ | 134,000 |
| | $ | 49,294 |
| | $ | 55,744 |
| | $ | 118,330 |
| | $ | 2,451 |
| | $ | 359,819 |
|
|
| | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, 2018 |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Other | | Total |
Package revenue | $ | 130,866 |
| | $ | 42,209 |
| | $ | 61,049 |
| | $ | 44,528 |
| | $ | 342 |
| | $ | 278,994 |
|
Non-package revenue | 16,094 |
| | 8,169 |
| | 10,864 |
| | 7,824 |
| | 1 |
| | 42,952 |
|
Management fees | — |
| | — |
| | — |
| | — |
| | 351 |
| | 351 |
|
Cost reimbursements | — |
| | — |
| | — |
| | — |
| | 122 |
| | 122 |
|
Total revenue | $ | 146,960 |
| | $ | 50,378 |
| | $ | 71,913 |
| | $ | 52,352 |
| | $ | 816 |
| | $ | 322,419 |
|
Contract assets and liabilities
We do not have any material contract assets as of June 30, 20192020 and December 31, 20182019 other than trade and other receivables net on our Condensed Consolidated Balance Sheet. Our receivables are primarily the result of contracts with customers, which are reduced by an allowance for doubtful accounts that reflects our estimate of amounts that will not be collected.
We record contract liabilities when cash payments are received or due in advance of guests staying at our resorts, which are presented as advance deposits (see Note 18)14) within trade and other payables on our Condensed Consolidated Balance Sheet. Our advanced deposits are generally recognized as revenue within one year.
Note 4. Business combinations
Business combination with the Sagicor Parties
On February 26, 2018, we entered into a Share Exchange Implementation Agreement with JCSD Trustee Services Limited, X Fund Properties Limited, Sagicor Pooled Investment Funds Limited, and Sagicor Real Estate X Fund Limited (collectively, the “Sagicor Parties”), as amended by that certain First Amendment to Share Exchange Implementation Agreement dated May 31, 2018 (as amended, the “Contribution Agreement”). Pursuant to the Contribution Agreement, the Sagicor Parties agreed to contribute a portfolio of the following assets (the “SagicorAssets”) to a subsidiary of Playa in exchange for consideration consisting of a combination of our ordinary shares and cash:
The Hilton Rose Hall Resort & Spa;
The Jewel Runaway Bay Beach & Golf Resort;
The Jewel Dunn’s River Beach Resort & Spa;
The Jewel Paradise Cove Beach Resort & Spa;
The 88 units comprising one of the towers in the multi-tower condominium and spa at the Jewel Grande Montego Bay
Resort & Spa;
Developable land sites adjacent to the Jewel Grande Montego Bay Resort & Spa and the Hilton Rose Hall Resort & Spa;
The management contract for the units owned by the Sagicor Parties at the Jewel Grande Montego Bay Resort & Spa; and
All of the Sagicor Parties’ rights to “The Jewel” hotel brand.
On June 1, 2018 (the “Acquisition Date”), we consummated our acquisition of the SagicorAssets for total consideration, after prorations and working capital adjustments, of $308.5 million. We accounted for the acquisition as a business combination in accordance with Accounting Standards Codification (“ASC”) 805, Business Combinations, and allocated the purchase price to the fair values of assets acquired and liabilities assumed. The business combination with the Sagicor Parties allows us to expand our portfolio of resorts in the all-inclusive segment of the lodging industry, capitalize on opportunities for growth and create significant operational synergies.
The following table summarizes the fair value of each class of consideration transferred to the Sagicor Parties on the Acquisition Date ($ in thousands, except share data):
|
| | | | |
Cash consideration, net of cash acquired of $0.1 million | | $ | 93,128 |
|
Ordinary shares (20,000,000 shares at the Acquisition Date closing price of $10.77 per share, €0.10 par value) | | 215,400 |
|
Total purchase consideration | | $ | 308,528 |
|
Fair values of assets acquired and liabilities assumed
The following table presents our estimates of fair values of the assets that we acquired and the liabilities that we assumed on the Acquisition Date as previously disclosed in our Annual Report and as finalized during the three months ended June 30, 2019 ($ in thousands):
|
| | | | | | | | | | | | |
| | June 1, 2018 (as previously reported) | | Adjustments | | June 1, 2018 (as finalized) |
Total purchase consideration | | $ | 308,528 |
| | $ | — |
| | $ | 308,528 |
|
Net assets acquired | | | | | | |
Working capital | | (1,665 | ) | | — |
| | (1,665 | ) |
Property and equipment | | 304,299 |
| | — |
| | 304,299 |
|
Identifiable intangible assets and liabilities | | (449 | ) | | — |
| | (449 | ) |
Deferred income taxes | | (25,582 | ) | | 3,612 |
| | (21,970 | ) |
Goodwill | | 31,925 |
| | (3,612 | ) | | 28,313 |
|
Total net assets acquired | | $ | 308,528 |
| | $ | — |
| | $ | 308,528 |
|
Property and equipment
Property and equipment primarily consists of the all-inclusive resorts and adjacent developable land sites. We estimated the value of the acquired property and equipment using a combination of the income and market approaches, which are primarily based on significant Level 2 and Level 3 assumptions (as described in Note 16), such as estimates of future income growth, capitalization rates, discount rates, and capital expenditure needs of the SagicorAssets.
Identified intangible assets and liabilities
The following table presents our estimates of the fair values of the identified intangible assets and liabilities and their related estimated useful lives ($ in thousands):
|
| | | | | | | | |
| | Balance Sheet Classification | | Estimated Fair Value | | Weighted-Average Amortization Period (in years) |
Management contract | | Other intangible assets | | $ | 1,900 |
| | 20 |
Unfavorable ground lease liability | | Other liabilities | | (2,349 | ) | | 22 |
Total identifiable intangibles acquired | | | | $ | (449 | ) | | |
We estimated the value of the management contract using the multi-period excess earnings valuation method, which is a variation of the income valuation approach. This method estimates an intangible asset’s value based on the present value of its incremental after-tax cash flows. This valuation approach utilizes Level 3 inputs (as described in Note 16).
Deferred income taxes
Deferred income taxes primarily relate to the fair value of non-current assets and liabilities acquired from the Sagicor Parties, including property and equipment and intangible liabilities. We calculated deferred income taxes based on the statutory rate in the jurisdiction of the legal entities where the acquired non-current assets and liabilities are recorded. Deferred tax assets, net of a $0.7 million valuation allowance, were $0.2 million and deferred tax liabilities were $22.2 million related to the acquisition.
Goodwill
The excess of the purchase consideration over the aggregate fair values of assets acquired and liabilities assumed was recorded as goodwill. The goodwill recognized is attributable primarily to expected synergies and future growth opportunities of our combined operations and is not deductible for income tax purposes. Goodwill related to the business combination was recognized at the Jamaica reportable segment (refer to discussion of our reportable segments in Note 19).
Pro forma results of operations
The following unaudited pro forma results of operations were prepared as though the business combination was completed on January 1, 2017. This unaudited pro forma financial information does not necessarily reflect the results of operations of Playa that actually would have resulted had the acquisition of the Sagicor Assets occurred at the date indicated, nor does it project the results of operations of Playa for any future date or period ($ in thousands, except per share amounts):
|
| | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2018 | | 2018 |
Pro forma revenue | $ | 163,270 |
| | $ | 372,183 |
|
Pro forma net income | $ | 19,911 |
| | $ | 50,319 |
|
Pro forma earnings per share - Basic | $ | 0.15 |
| | $ | 0.39 |
|
Pro forma earnings per share - Diluted | $ | 0.15 |
| | $ | 0.39 |
|
The unaudited pro forma financial information for the three and six months ended June 30, 2018 includes adjustments for:
Depreciation and amortization expense resulting from the estimated fair values of acquired property and equipment and identifiable definite-lived intangible assets and liabilities, respectively;
| |
• | Elimination of the SagicorAssets' management fees and interest expense;
|
Interest expense resulting from the issuance of an $100.0 million term loan add-on;
Related income tax effects; and
Weighted-average number of shares outstanding.
For the six months ended June 30, 2018, we incurred approximately $2.0 million in transaction costs related to the acquisition and approximately $1.3 million in transaction costs related to the issuance of the $100.0 million term loan add-on. These costs are recorded within selling, general and administrative expenses in the Condensed Consolidated Statement of Operations.
Sagicor Assets' results of operations
The following table presents the results of the SagicorAssets' operations, which are recorded within our Jamaica reportable segment, included in our Condensed Consolidated Statement of Operations for the period from the Acquisition Date through June 30, 2018 ($ in thousands):
|
| | | | |
| | June 2, 2018 - June 30, 2018 |
Revenue | | $ | 8,662 |
|
Net income | | $ | 2,692 |
|
Note 5.4. Property and equipment
The balance of property and equipment, net is as follows ($ in thousands): | | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Property and equipment, gross | | | | |
Land, buildings and improvements | $ | 1,789,973 |
| | $ | 1,787,727 |
| $ | 1,909,979 |
| | $ | 1,976,214 |
|
Fixtures and machinery | 71,535 |
| | 69,396 |
| 80,909 |
| | 81,437 |
|
Furniture and other fixed assets | 197,119 |
| | 195,036 |
| 229,751 |
| | 228,533 |
|
Construction in progress | 194,494 |
| | 106,520 |
| 14,850 |
| | 42,083 |
|
Total property and equipment, gross | 2,253,121 |
| | 2,158,679 |
| 2,235,489 |
| | 2,328,267 |
|
Accumulated depreciation | (395,125 | ) | | (350,267 | ) | (430,247 | ) | | (398,353 | ) |
Total property and equipment, net | $ | 1,857,996 |
| | $ | 1,808,412 |
| $ | 1,805,242 |
| | $ | 1,929,914 |
|
Depreciation expense for property and equipment was $47.7$46.7 million and $31.0$47.7 million for the six months ended June 30, 20192020 and 2018,2019, respectively, and $25.6$22.0 million and $15.6$25.6 million for the three months ended June 30, 2020 and 2019, and 2018, respectively.
For the six months ended June 30, 2020 and 2019, and 2018, $5.0$0 million and $2.1$5.0 million of interest expense was capitalized on qualifying assets, respectively. For the three months ended June 30, 2020 and 2019, and 2018, $2.9$0 million and $1.4$2.9 million of interest expense was capitalized on qualifying assets, respectively. Interest expense was capitalized using the weighted-average interest rate of the debt.
Sale of assets
On May 22, 2020, we completed the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark, which were reported within our Jamaica reportable segment, for $60.0 million in cash consideration. Upon classification as held for sale, we recorded an impairment loss of $25.3 million based on the sale price of the properties, which is considered an observable input other than quoted prices (Level 2) in the U.S. GAAP fair value hierarchy. The impairment is recorded within impairment loss in the Condensed Consolidated Statements of Operations. Upon closing, we received total cash consideration of $58.7 million, after customary closing costs, and recognized a $1.8 million loss within loss on sale of assets in the Condensed Consolidated Statements of Operations.
Consistent with terms of our Existing Credit Agreement (as defined in Note 11), a portion of the net proceeds, after deducting incremental expenses and capital expenditures incurred across our portfolio for 18 months following the sale, will be used to prepay our Term Loan in the fourth quarter of 2021.
Lessor contracts
We rent certain real estate to third parties for office and retail space within our hotels. Our lessor contracts are considered operating leases and generally have a contractual term of one to three years. The following table presents our rental income for the three and six months ended June 30, 2020 and 2019 ($ in thousands):
|
| | | | | | | | | | |
Leases | | Financial Statement Classification | | Three Months Ended June 30, 2020 | | Three Months Ended June 30, 2019 |
Operating lease income (1) | | Non-package revenue | | $ | — |
| | $ | 1,245 |
|
|
| | | | | | | | | | |
Leases | | Financial Statement Classification | | Six Months Ended June 30, 2020 | | Six Months Ended June 30, 2019 |
Operating lease income (1) | | Non-package revenue | | $ | 1,146 |
| | $ | 2,716 |
|
________
(1) Includes variable lease revenue, which is typically calculated as a percentage of our tenant's net sales.
Note 6.5. Income taxes
We are domiciled in The Netherlands and are taxed in The Netherlands with our other Dutch subsidiaries. Dutch companies are subject to Dutch corporate income tax at a general tax rate of 25%.
During the first quarter of 2019, we implemented a new transfer pricing policy, where the intercompany pricing mechanics between
our entities are based on the return on operating assets per applicable guidelines defined by the Organization for Economic Cooperation and Development. As a result, certain of our hotel entities that were previously in loss positions are nowwere expected to be profitable, which resulted in the release of their valuation allowances.
The adverse economic effects of the COVID-19 pandemic (see Note 1) have caused us to reassess our tax positions. Due to the current environment, including the temporary suspension of operations at our hotels, we concluded that the transfer pricing method will not apply for the immediate future, but will resume once operations are normalized.
On March 27, 2020, the United States House of Representatives passed the Coronavirus Aid, Relief, and Economic Security Act (The CARES Act), also known as the Third COVID-19 Supplemental Relief Bill, and the President of the United States signed the legislation into law. We analyzed The CARES Act and do not expect the provisions of the legislation to have a significant impact on our effective tax rate or our income tax impact of the new policy has been reflected in thepayable and deferred income tax computationpositions as of June 30, 2020.
For the three months ended June 30, 2020, our income tax benefit was $14.6 million, compared to a $1.0 million income tax benefit for the three months ended June 30, 2019. The increase in our income tax benefit of $13.6 million was driven primarily by an $8.1 million increased tax benefit due to lower pre-tax book income from our tax paying entities, a $1.2 million increase in the discrete tax benefit associated with future tax liabilities of certain Dominican Republic entities and sixa $5.8 million tax benefit associated with the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark. The increased income tax benefit was partially offset by an $0.8 million increase in tax expense associated with foreign exchange rate fluctuations and a non-recurring $0.7 million tax benefit from the valuation allowance release during the three months ended June 30, 2019.
For the six months ended June 30, 2019,2020, our income tax benefit was $11.6$13.5 million, compared to a $6.2an $11.6 million income tax provisionbenefit for the six months ended June 30, 2018.2019. The increase in our income tax benefit of $17.8$1.9 million was driven primarily by the net impact of our valuation allowance release of $14.3a $10.0 million from the newly implemented transfer pricing policy, a decrease of $7.0 millionincreased tax benefit due to lower pre-tax book income from theour tax paying entities, and a $2.5$4.5 million increase in the discrete tax benefit associated with future tax liabilities of certain Dominican Republic entities, and a $5.8 million tax benefit associated with the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark. The increased income tax benefit was partially offset by a $3.2 million increase in income tax expense from an immaterial correction of a prior year error, a non-recurring $14.3 million tax benefit from the valuation allowance release during the six months ended June 30, 2019 and an $0.8 million increase in tax expense associated with foreign exchange rate fluctuations.
For the three months ended June 30, 2019,
NaN of our incomeDominican Republic entities, Playa Romana Mar B.V. and Playa Dominican Resorts B.V., which hold our Hilton La Romana All-Inclusive Resort and Hyatt Ziva and Hyatt Zilara Cap Cana resorts, respectively, were granted 15-year tax benefit was $1.0 million, compared to a $3.4 million tax benefit for the three months ended June 30, 2018. The decrease in our income tax benefit of $2.4 million was driven primarilyexemptions by the net impact of an additional tax expense of $6.1 million associated with foreign exchange rate fluctuations and a reduction in tax expense of $4.2 million due to lower pre-tax book income from the tax paying entities.
On August 2, 2019, we received a formal resolution notice from the Ministry of Finance of the Dominican Republic.Republic beginning in 2019. The resolution granted our Playa Romana Mar B.V. Dominican Republic branch a 15-year tax exemption starting fromstatus of Inversiones Vilazul, S.A.S., which holds our Dreams Punta Cana resort, expired on December 31, 2019. There is no income tax impact because we had previously concluded this entity to be an asset tax payer and had not recorded any income tax expense to date.
Note 76. Related party transactions
Relationship with Hyatt
Hyatt Hotels Corporation (“Hyatt”) is considered a related party due to its ownership of our ordinary shares by its affiliated entities and representation on our Board of Directors. We pay Hyatt fees associated with the franchise agreements of our resorts operating under the all-ages Hyatt Ziva and adults-only Hyatt Zilara brands and receive reimbursements for guests that pay for their stay using the World of Hyatt® guest loyalty program.
Relationship with Sagicor
In connection with the acquisition of the Sagicor Assets, we issued 20,000,000 ordinary shares of our common stock to affiliates of Sagicor Group Jamaica Limited (“Sagicor”). Sagicor is considered a related party due to theits ownership of our ordinary shares by its affiliated entities and representation on our Board of Directors.
We pay Sagicor for insurance coverage for some of our Jamaica employees and properties. As of December 31, 2018, we were also owed $4.8 million from Sagicor related to advance deposits and credit card collections which were paid to Sagicor, rather than us, following the acquisition. As of June 30, 2019, this amount has been substantially received.
Sagicor is also a part owner of the Jewel Grande Montego Bay Resort & Spa and compensates us as manager of the property.
Relationship with Sabre
We have a service agreement with Sabre Hospitality Solutions (“Sabre”), a division of Sabre GLBL Inc., for use of a central reservation and direct booking system. Sabre also provides call center services. Sabre is considered a related party as a member of our Board of Directors serves on the board of Sabre Corporation, the parent company of Sabre GLBL Inc.
Lease with our Chief Executive Officer
One of our offices is owned by our Chief Executive Officer and we sublease the space at that location from a third party.
Transactions with related parties
Transactions between us and related parties during the three and six months ended June 30, 20192020 and 20182019 were as follows ($ in thousands):
| | | | Three Months Ended June 30, | | Six Months Ended June 30, | | Three Months Ended June 30, | | Six Months Ended June 30, |
Related Party | | Transaction | | 2019 | | 2018 | | 2019 | | 2018 | | Transaction | | 2020 | | 2019 | | 2020 | | 2019 |
Hyatt | | Franchise fees (1) | | $ | 4,902 |
| | $ | 4,594 |
| | $ | 9,538 |
| | $ | 9,045 |
| | Franchise fees (1) | | $ | 1,048 |
| | $ | 4,902 |
| | $ | 6,564 |
| | $ | 9,538 |
|
Sagicor | | Insurance premiums (1) | | $ | 380 |
| | $ | — |
| | $ | 1,131 |
| | $ | — |
| | Insurance premiums (1) | | $ | 119 |
| | $ | 380 |
| | $ | 533 |
| | $ | 1,131 |
|
Sagicor | | Cost reimbursements | | $ | 2,807 |
| | $ | — |
| | $ | 2,807 |
| | $ | — |
| | Cost reimbursements | | $ | 442 |
| | $ | 2,807 |
| | $ | 1,164 |
| | $ | 2,807 |
|
Sabre | | | Booking and call center services (2) | | $ | 60 |
| | $ | — |
| | $ | 274 |
| | $ | — |
|
Chief Executive Officer | | Lease expense (2) | | $ | 206 |
| | $ | 255 |
| | $ | 352 |
| | $ | 472 |
| | Lease expense (2) | | $ | 196 |
| | $ | 206 |
| | $ | 378 |
| | $ | 352 |
|
________
| |
(1) | Included in direct expense in the Condensed Consolidated Statements of Operations with the exception of certain immaterial fees associated with the Hyatt franchise agreements, which are included in selling, general, and administrative expense. |
| |
(2) | Included in selling, general, and administrative expense in the Condensed Consolidated Statements of Operations. |
Note 8.7. Commitments and contingencies
We are involved in various claims and lawsuits arising in the normal course of business, including proceedings involving tort and other general liability claims, and workers’ compensation and other employee claims. Most occurrences involving liability and claims of negligence are covered by insurance with solvent insurance carriers. We recognize a liability when we believe the loss is probable and reasonably estimable. We currently believe that the ultimate outcome of such lawsuits and proceedings will not, individually or in the aggregate, have a material effect on our Condensed Consolidated Financial Statements.
The Dutch corporate income tax act provides the option of a fiscal unity, which is a consolidated tax regime wherein the profits and losses of group companies can be offset against each other. Our Dutch companies file as a fiscal unity, with the exception of Playa Romana B.V., Playa Romana Mar B.V. and Playa Hotels & Resorts N.V. Playa Resorts Holding B.V. is the head of our Dutch fiscal unity and is jointly and severally liable for the tax liabilities of the fiscal unity as a whole.
Note 9. Leases
On January 1, 2019, we adopted ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), as described in Note 2, using the transition method outlined in ASU No. 2018-11, Leases (Topic 842): Targeted Improvements. The adoption of ASU 2016-02 resulted in no cumulative adjustment to accumulated deficit as our lease portfolio consists solely of operating leases. The comparative periods presented in our Condensed Consolidated Financial Statements are presented in accordance with ASC 840, Leases and do not reflect the impact of ASU 2016-02. On the date of adoption, January 1, 2019, we recorded right-of-use assets of $5.0 million and lease liabilities of $5.3 million related to our portfolio of operating leases (see Note 18 for balances as of June 30, 2019).
We elected the following practical expedients, as provided under the applicable transition guidance:
| |
• | Package of practical expedients, which, among other things, allows us to carry forward our prior lease classifications under ASC 840, Leases.
|
Recognized lease payments on a straight-line basis over the lease term for all leases with a term of 12 months or less and were not classified on the balance sheet.
Our administrative offices, located in Virginia, Florida and Cancún, are leased under various lease agreements that extend for varying periods through 2025, with the option to extend our Cancún and Florida office leases through 2026 and 2030, respectively. The extension options are reasonably certain to be exercised and included in the amounts recorded. Our administrative offices contain lease components (e.g., fixed rent payments) and non-lease components (e.g., common-area maintenance, shared service costs, real estate taxes and insurance costs), which we account for separately. The lease components and non-lease components associated with our administrative offices represent the majority of our lease expense and variable lease expense, respectively.
Our minimum future rents payable under non-cancelable operating leases with third parties and related parties as of June 30, 2019 were as follows ($ in thousands): |
| | | | |
| | As of June 30, 2019 |
Remainder of 2019 | | $ | 481 |
|
2020 | | 991 |
|
2021 | | 1,036 |
|
2022 | | 1,074 |
|
2023 | | 786 |
|
2024 | | 652 |
|
Thereafter | | 2,928 |
|
Total minimum future lease payments | | 7,948 |
|
Less: imputed interest | | (1,373 | ) |
Total | | $ | 6,575 |
|
Our minimum future rents, at December 31, 2018, payable under non-cancelable operating leases with third parties and related parties were as follows ($ in thousands):
|
| | | | |
| | As of December 31, 2018 |
2019 | | $ | 1,199 |
|
2020 | | 1,031 |
|
2021 | | 1,016 |
|
2022 | | 1,044 |
|
2023 | | 745 |
|
Thereafter | | 3,394 |
|
Total | | $ | 8,429 |
|
The following table presents the components of lease expense for the three and six months ended June 30, 2019 and supplemental cash flow information for the six months ended June 30, 2019 ($ in thousands): |
| | | | | | | | |
| | Three Months Ended June 30, 2019 | | Six Months Ended June 30, 2019 |
Lease expense (1)(2) | | $ | 826 |
| | $ | 1,306 |
|
| | | | |
Cash paid for amounts included in the measurement of lease liabilities: | | |
Operating cash flows from operating leases | | $ | 307 |
|
________(1) Includes variable lease and short term lease expenses, which are considered individually immaterial. Our lease expense is reported in direct expense and selling, general and administrative expense in the Condensed Consolidated Statements of Operations depending on the nature of the lease.
(2) Lease expense under ASC 840, Leases, related to our non-cancelable operating leases, including variable lease cost, was $0.6 million and $1.1 million for the three and six months ended June 30, 2018, respectively.
The following table presents other relevant information related to our leases for the six months ended June 30, 2019: |
| | | |
Weighted-average remaining lease term | | 8.34 years |
|
Weighted-average discount rate (1)
| | 4.54 | % |
________
(1) The discount rates applied to each lease reflects our estimated incremental borrowing rate.
We rent certain real estate to third parties for office and retail space within our hotels. Our lessor contracts are considered operating leases and generally have a contractual term of one to three years. The following table presents our rental income for the three and six months ended June 30, 2019 ($ in thousands):
|
| | | | | | | | | | |
Leases | | Financial Statement Classification | | Three Months Ended June 30, 2019 | | Six Months Ended June 30, 2019 |
Operating lease income (1) | | Non-package revenue | | $ | 1,245 |
| | $ | 2,716 |
|
________
(1) Includes variable lease revenue, which is typically calculated as a percentage of our tenant's net sales.
Note 10.8. Ordinary shares
On December 14, 2018, our Board of Directors authorized the repurchase of up to $100.0 million of our outstanding ordinary shares as market conditions and Playa'sour liquidity warrant. The repurchase program is subject to certain limitations under Dutch law, including existing, repurchase authorization granted by our shareholders. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the three and six months ended June 30, 2019,2020, we purchased 304,587 and 502,766did 0t purchase any ordinary shares respectively, under the repurchase program. The
On June 12, 2020, we issued 4,878,049 ordinary shares repurchased were recordedwith a par value of €0.10 per share, in a private placement exempt from registration under the Securities Act of 1933, as treasury shares on the Condensed Consolidated Balance Sheet as of June 30, 2019.amended, in connection with our capital raising efforts. We received $19.6 million in cash consideration, after customary closing costs.
As of June 30, 2019,2020, our ordinary share capital consisted of 130,327,895134,485,477 ordinary shares outstanding, which have a par value of €0.10 per share. In addition, 2,796,5573,505,051 restricted shares and performance share awards and 18,02822,656 restricted share units were outstanding under the 2017 Plan (as defined in Note 12)9). The holders of restricted shares and performance share awards are entitled to vote, but not dispose of, such shares until they vest. The holders of restricted share units are neither entitled to vote nor dispose of such shares until they vest.
Note 11. Warrants
We previously issued 3,000,000 warrants (the “Earnout Warrants”) which entitle the holders to acquire one ordinary share for each Earnout Warrant for an exercise price of €0.10 per ordinary share in the event that the price per share underlying the Earnout Warrants on the NASDAQ is greater than $13.00 for a period of more than 20 days out of 30 consecutive trading days within the five years after March 11, 2017. The Earnout Warrants expire on March 11, 2022 or earlier upon redemption or liquidation in accordance with their term.
As of June 30, 2019, there were 2,987,770 Earnout Warrants outstanding.
Note 12.9. Share-based compensation
We adopted theour 2017 Omnibus Incentive Plan (the “2017 Plan”) to attract and retain independent directors, executive officers and other key employees and service providers. The 2017 Plan was approved by our Board of Directors and shareholders on March 10, 2017 and was amended on May 16, 2019 to increase the number of ordinary shares authorized and available for grant from 4,000,000 shares to 12,000,000 shares. The Compensation Committee of our Board of Directors may award share options, share appreciation rights, restricted shares, share units, unrestricted shares, dividend equivalent rights, performance shares and other performance-based awards, other equity-based awards, and cash bonus awards under the 2017 Plan. As of June 30, 2019,2020, there were 8,070,4886,226,580 shares available for future grants under the 2017 Plan.
Restricted share awards
Restricted share awards consist of restricted shares and restricted share units that are granted to eligible employees, executives, and board members and consist of ordinary shares (or the right to receive ordinary shares) subject to restrictions and to a risk of forfeiture. Restricted shares issued to our employees and executives generally vest over a period of three or five years. Restricted share units generally vest over a period of three years. For restricted share awards with a three-year vesting period, one-third of the award vests on each of the first three anniversaries of the grant date of the award. For restricted share awards with a five-year vesting period, 25% of the award vests on the third anniversary of the grant date of the award, 25% vests on the fourth anniversary of the grant date of the award and 50% vests on the fifth anniversary of the grant date of the award. Restricted share awards issued to our directors for their services as directors generally vest immediately on the grant date of the award.
The vesting of restricted share awards is subject to the holder’s continued employment through the applicable vesting date. Unvested restricted share awards will be forfeited if the employee’s or the executive’s employment terminates during the vesting period,
provided that unvested restricted share awards will accelerate upon certain terminations of employment as set forth in the applicable award agreements.
The holders of restricted shares have the right to vote the restricted shares and receive all dividends declared and paid on such shares, provided that dividends paid on unvested restricted shares will be subject to the same conditions and restrictions applicable to the underlying restricted shares. The holders of restricted share units have no right to vote the underlying shares and may be entitled to be credited with dividend equivalents in respect of each cash dividend declared and paid by Playa, in an amount per share unit equal to the per-share dividend paid on our ordinary shares, which dividend equivalents will be deemed to have been reinvested in additional restricted share units that are subject to the same terms and conditions applicable to the underlying restricted share units to which they relate.
Compensation expense for restricted share awards is measured based upon the fair market value of our ordinary shares at the date of grant and recognized on a straight-line basis over the vesting period.
.
A summary of our restricted share awards from January 1, 20192020 to June 30, 20192020 is as follows:
| | | Number of Shares | | Weighted-Average Grant Date Fair Value | Number of Shares | | Weighted-Average Grant Date Fair Value |
Unvested balance at January 1, 2019 | 1,718,684 |
| | $ | 10.19 |
| |
Unvested balance at January 1, 2020 | | 2,157,336 |
| | $ | 9.03 |
|
Granted | 783,228 |
| | 7.08 |
| 1,076,619 |
| | 7.92 |
|
Vested | (390,535 | ) | | 9.52 |
| (838,553 | ) | | 8.97 |
|
Forfeited | (77,837 | ) | | 9.16 |
| (68,409 | ) | | 8.95 |
|
Unvested balance at June 30, 2019 | 2,033,540 |
| | $ | 9.16 |
| |
Unvested balance at June 30, 2020 | | 2,326,993 |
| | $ | 8.54 |
|
The fair value of vested restricted share awards during the six months ended June 30, 2019 and 2018 was $2.9 million and $1.9 million, respectively. The fair value of vested restricted share awards during the three months ended June 30, 2019 and 2018 was $1.1 million and $1.4 million, respectively. As of June 30, 2019 and 2018, the unrecognized compensation cost related to restricted share awards was $13.2 million and $13.2 million, respectively, and is expected to be recognized over a weighted-average period of 2.2 years and 3.1 years, respectively.
Compensation expense related to restricted share awards was $4.1 million and $2.8 million for the six months ended June 30, 2019 and 2018, respectively, and $1.7 million and $1.2 million for the three months ended June 30, 2019 and 2018, respectively. Compensation expense is recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
Performance share awards
Performance share awards consist of ordinary shares that may become earned and vested based on the achievement of performance targets adopted by our Compensation Committee. The actual number of ordinary shares that ultimately vest will range from 0% to 150% of the target award and will be determined at the end of the three-year performance period based on two performance criteria as defined in the applicable award agreements for the period of performance.
Any ordinary shares that ultimately vest based on the achievement of the applicable performance criteria will be deemed to be vested on the date on which our Compensation Committee certifies the level of achievement of such performance criteria. Except in connection with certain qualifying terminations of employment, as set forth in the applicable award agreements, the awards require continued service through the certification date. The holders of these awards have voting rights equivalent to the target level of ordinary shares granted to the holder and any dividends declared on such shares will be accumulated and paid within 30 days after and to the extent the target ordinary shares vest.
The grant date fair value of the portion of the award based on the compounded annual growth rate of our total shareholder return was estimated using a Monte-Carlo model. The table below summarizes the key inputs used in the Monte-Carlo simulation to determine the grant date fair value of the total shareholder return performance awards ($ in thousands):
| | Performance Award Grant Date | | Percentage of Total Award | | Grant Date Fair Value by Component | | Volatility (1) | | Interest Rate (2) | | Dividend Yield | | Percentage of Total Award | | Grant Date Fair Value by Component | | Volatility (1) | | Interest Rate (2) | | Dividend Yield |
May 26, 2017 | | | | | | | | | | | |
January 2, 2020 | | | | | | | | | | | |
Total Shareholder Return | | 50 | % | | $ | 770 |
| | 27.02 | % | | 1.39 | % | | — | % | | 50 | % | | $ | 1,334 |
| | 24.87 | % | | 1.58 | % | | — | % |
Adjusted EBITDA Comparison | | 50 | % | | $ | 1,350 |
| | — | % | | — | % | | — | % | | 50 | % | | $ | 2,187 |
| | — | % | | — | % | | — | % |
January 2, 2018 | | | | | | | | | | | |
Total Shareholder Return | | 50 | % | | $ | 860 |
| | 26.13 | % | | 2.00 | % | | — | % | |
Adjusted EBITDA Comparison | | 50 | % | | $ | 1,475 |
| | — | % | | — | % | | — | % | |
January 2, 2019 | | | | | | | | | | | |
Total Shareholder Return | | 50 | % | | $ | 537 |
| | 27.78 | % | | 2.46 | % | | — | % | |
Adjusted EBITDA Comparison | | 50 | % | | $ | 900 |
| | — | % | | — | % | | — | % | |
________
(1) Expected volatility was determined based on the historical share prices in our industry.
(2) The risk-free rate was based on U.S. Treasury zero coupon issues with a remaining term equal to the remaining term of the measurement period.
In the table above, the total shareholder return component is a market condition as defined by ASC 718, Compensation—Stock Compensation, and compensation expense related to this component is recognized on a straight-line basis over the vesting period. The grant date fair value of the portion of the awards based on the compounded annual growth rate of our Adjusted EBITDA (as defined in Note 19) was based on the closing stock price of our ordinary shares on such date. The Adjusted EBITDA component is a performance condition as defined by ASC 718, and, therefore, compensation expense related to this component is reassessed at each reporting date based on our estimate of the probable level of achievement, and the accrual of compensation expense is adjusted as appropriate.
A summary of our performance share awards from January 1, 20192020 to June 30, 20192020 is as follows:
|
| | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
Unvested balance at January 1, 2019 | 523,545 |
| | $ | 8.26 |
|
Granted | 257,500 |
| | 5.58 |
|
Unvested balance at June 30, 2019 | 781,045 |
| | $ | 7.38 |
|
|
| | | | | | |
| Number of Shares | | Weighted-Average Grant Date Fair Value |
Unvested balance at January 1, 2020 | 913,407 |
| | $ | 7.22 |
|
Granted | 552,395 |
| | 6.38 |
|
Forfeited | (265,088 | ) | | 7.99 |
|
Unvested balance at June 30, 2020 | 1,200,714 |
| | $ | 6.66 |
|
As of June 30, 2019 and 2018, the unrecognized compensation cost related to the performance share awards was $2.1 million and $3.2 million, respectively, and is expected to be recognized over a weighted-average period of 2.0 years and 2.1 years, respectively.
Compensation expense related to the performance share awards was $0.6 million and $1.1 million for the six months ended June 30, 2019 and 2018, respectively, and $0.2 million and $1.0 million for the three months ended June 30, 2019 and 2018, respectively. Compensation expense is recorded within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.
Note 13.10. Earnings per share
The calculations of basicBasic and diluted earnings or losses per share (“EPS”) are as follows ($ in thousands, except share data): |
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
Numerator: | | | | | | | |
Net income | $ | 1,040 |
| | $ | 16,821 |
| | $ | 44,028 |
| | $ | 38,638 |
|
Denominator: | | | | | | | |
Denominator for basic EPS - weighted-average shares | 130,421,695 |
| | 116,987,887 |
| | 130,480,549 |
| | 113,685,219 |
|
Effect of dilutive securities: | | | | | | | |
Unvested restricted share awards | 393,482 |
| | 337,336 |
| | 308,918 |
| | 296,544 |
|
Denominator for diluted EPS - adjusted weighted-average shares | 130,815,177 |
| | 117,325,223 |
| | 130,789,467 |
| | 113,981,763 |
|
| | | | | | | |
EPS - Basic | $ | 0.01 |
| | $ | 0.14 |
| | $ | 0.34 |
| | $ | 0.34 |
|
EPS - Diluted | $ | 0.01 |
| | $ | 0.14 |
| | $ | 0.34 |
| | $ | 0.34 |
|
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2020 | | 2019 | | 2020 | | 2019 |
Numerator | | | | | | | |
Net (loss) income | $ | (87,458 | ) | | $ | 1,040 |
| | $ | (110,014 | ) | | $ | 44,028 |
|
Denominator | | | | | | | |
Denominator for basic EPS - weighted-average number of shares outstanding | 130,466,383 |
| | 130,421,695 |
| | 129,876,545 |
| | 130,480,549 |
|
Effect of dilutive securities | | | | | | | |
Unvested restricted share awards | — |
| | 393,482 |
| | — |
| | 308,918 |
|
Denominator for diluted EPS - adjusted weighted-average number of shares outstanding | 130,466,383 |
| | 130,815,177 |
| | 129,876,545 |
| | 130,789,467 |
|
| | | | | | | |
EPS - Basic | $ | (0.67 | ) | | $ | 0.01 |
| | $ | (0.85 | ) | | $ | 0.34 |
|
EPS - Diluted | $ | (0.67 | ) | | $ | 0.01 |
| | $ | (0.85 | ) | | $ | 0.34 |
|
For the three and six months ended June 30, 2019 and 2018, 781,045 and 538,9512020, 1,200,714 shares of unvested performance-based equity awards respectively,were not included in the computation of diluted EPS after assumed conversions as the performance criteria were not met as of the end of the respective reporting period. For the three and six months ended June 30, 2019, 781,045 shares of unvested performance-based equity awards were not included in the computation of diluted EPS after assumed conversions as the performance criteria were not met as of the end of the respective reporting period.
For the three and six months ended June 30, 2020, 2,326,993 shares of unvested restricted share awards were not included in the computation of diluted EPS as their effect would have been anti-dilutive. For the three and six months ended June 30, 2019, 273,811 and 312,424 shares of unvested restricted share awards, respectively, were not included in the computation of diluted EPS as their effect would have been anti-dilutive.
For the three and six months ended June 30, 2020 and 2019, and 2018, outstanding Earnout Warrantsearnout warrants to acquire a total of 2,987,770 and 3,000,000 ordinary shares respectively, were not included in the computation of diluted EPS after assumed conversions because the warrants were not exercisable as of the end of the respective reporting period.
Note 14. Debt
Note 11. Debt
Our debt consists of the following ($ in thousands):
|
| | | | | | | |
| As of June 30, | | As of December 31, |
| 2019 | | 2018 |
Debt obligations | | | |
Term Loan(1) | $ | 991,498 |
| | $ | 996,548 |
|
Revolving Credit Facility(2) | — |
| | — |
|
Total debt obligations | 991,498 |
| | 996,548 |
|
Unamortized discount and debt issuance costs | | | |
Discount on Term Loan | (2,426 | ) | | (2,681 | ) |
Unamortized debt issuance costs on Term Loan | (4,054 | ) | | (4,480 | ) |
Total unamortized discount and debt issuance costs | (6,480 | ) | | (7,161 | ) |
Total debt | $ | 985,018 |
| | $ | 989,387 |
|
|
| | | | | | | | | | | |
| | | | | Outstanding Balance as of |
| Interest Rate | | Maturity Date | | June 30, 2020 | | December 31, 2019 |
Revolving Credit Facilities | | | | | | | |
Revolving Credit Facility (1) | LIBOR + 3.00% | | April 27, 2022 | | $ | 84,667 |
| | $ | 60,000 |
|
| | | | | | | |
Senior Secured Credit Facilities | | | | | | | |
Term Loan (2) | LIBOR + 2.75% | | April 27, 2024 | | $ | 981,398 |
| | $ | 986,448 |
|
Term A1 Loan | 11.4777% | | April 27, 2024 | | 35,000 |
| | — |
|
Term A2 Loan | 11.4777% | | April 27, 2024 | | 31,000 |
| | — |
|
Term A3 Loan (3) | LIBOR + 3.00% | | April 27, 2024 | | 28,000 |
| | — |
|
Total Term Loans (at stated value) | | | | | 1,075,398 |
| | 986,448 |
|
Unamortized discount | | | | | (1,914 | ) | | (2,168 | ) |
Unamortized debt issuance costs | | | | | (6,975 | ) | | (3,622 | ) |
Total Term Loans, net | | | | | $ | 1,066,509 |
| | $ | 980,658 |
|
| | | | | | | |
Property Loan | | | | | | | |
Property Loan (at stated value) | 9.25% | | July 1, 2025 | | $ | 110,000 |
| | $ | — |
|
Unamortized discount | | | | | (4,400 | ) | | — |
|
Unamortized debt issuance costs | | | | | (4,899 | ) | | — |
|
Total Property Loan, net | | | | | $ | 100,701 |
| | $ | — |
|
| | |
| | | | |
Total debt, net | | | | | $ | 1,251,877 |
| | $ | 1,040,658 |
|
________
| |
(1) | Borrowings under the Term LoanUndrawn balances bear interest at floating rates equalbetween 0.5% to one-month0.25% depending on certain leverage ratios. We had available balances of $0 million and $40.0 million as of June 30, 2020 and December 31, 2019, respectively. The weighted-average interest rate on the outstanding balance of our Revolving Credit Facility was 3.18% and 4.72% as of June 30, 2020 and December 31, 2019, respectively.
|
| |
(2) | One-month London Interbank Offered Rate (“LIBOR”) plus 2.75% (where the applicable LIBOR rate hasis subject to a 1.0% floor).floor. The interest rate was 5.15%3.75% and 5.27%4.55% as of June 30, 20192020 and December 31, 2018,2019, respectively. Effective March 29, 2018, we entered into twoOur 2 interest rate swaps to fix LIBOR at 2.85% on $800.0 million of our Term Loan (see Note 15)12). |
| |
(2)(3)
| LIBOR rate is subject to a 1.0% floor. The commitment fee on the $100.0 million undrawn balance of our Revolving Credit Facility bore interest of 0.5%rate was 4.00% as of June 30, 2019 and December 31, 2018. The commitment fee may range from 0.5% to 0.25% depending on certain leverage ratios. For any drawn balances, the Revolving Credit Facility bears interest at one-month LIBOR plus 3.0%.2020. |
Financial maintenance covenantsFourth Amendment to Amended and Restated Credit Agreement
Our Senior Secured Credit Facility requires us to meet a springing leverage ratio financial maintenance covenant, but only if the aggregate amount outstanding on our Revolving Credit Facility exceeds 35% of the aggregate revolving credit commitments as defined in our Senior Secured Credit Facility. On March 19, 2019,June 12, 2020, we entered into the ThirdFourth Amendment to the Amended & Restated Credit Agreement (the “Third“Fourth Amendment”, and collectively with the unamended terms of the Senior Secured Credit Facility, the “Existing Credit Agreement”). The terms of the Senior Secured Credit Facility remain in effect except for the following terms modified by the Fourth Amendment:
| |
i. | replace the total net leverage ratio requirement of the financial covenant with a minimum liquidity test until September 30, 2021 (the “Relief Period”); |
| |
ii. | modify the financial covenant for certain test dates after the Relief Period; and |
| |
iii. | add certain restrictions on, among other things, the incurrence of additional debt and making of investments, dispositions and restricted payments during the Relief Period. |
Additional Credit Facility
On June 12, 2020, we entered into an additional senior secured credit facility with an average interest rate of 9.25% that matures on April 27, 2024 and ranks pari passu with the Existing Credit Agreement (the “Additional Credit Facility”). The Additional Credit Facility consists of the following term loans:
| |
i. | $35.0 million term loan at fixed rate of 11.4777% (the “Term A1 Loan”); |
| |
ii. | $31.0 million term loan at fixed rate of 11.4777% (the “Term A2 Loan”); and |
| |
iii. | $28.0 million term loan at our option of either a base rate plus a margin of 2.00% or LIBOR plus 3.00% (the “Term A3 Loan”). Term A3 Loan is a Eurocurrency loan subject to a 1.0% LIBOR floor consistent with the Existing Credit Agreement. |
We intend to use the proceeds from the Additional Credit Facility for general corporate purposes. The obligations under the Additional Credit Facility are collateralized in a manner that is substantially identical to the Existing Credit Agreement.
Prior to the maturity date, the Additional Credit Facility does not require principal payments, but does include mandatory prepayment requirements for the Term A3 Loan that are consistent with the Existing Credit Agreement. Mandatory prepayments are required for certain asset sales, casualty events and condemnation events (the “Triggering Events”) that are not reinvested in our business where our total net leverage ratio is above 4.00x. We may not voluntarily prepay any portion of the Additional Credit Facility prior to excludeJune 2023 without paying a make-whole premium equal to 100% of the lesserinterest that would have otherwise accrued from the date of $50.0 million andsuch payment through June 2022 plus 50% of the aggregate amountinterest that otherwise would have accrued from June 2022 to June 2023. Subsequent to June 2023, we may prepay any portion of revolving credit commitments borrowed inthe Additional Credit Facility without penalty.
In connection with the Additional Credit Facility, we terminated the remaining $15.0 million of unused capacity of our Revolving Credit Facility under the Existing Credit Agreement. The Additional Credit Facility contains covenants, including a springing financial maintenance covenant, identical to those contained in the Existing Credit Agreement.
Property Loan Agreement
On June 12, 2020, we entered into a property loan agreement in the amount of $110.0 million that has a fixed interest rate of 9.25% and matures on July 1, 2025 (the “Property Loan”). Prior to maturity, the Property Loan does not require principal payments. The Property Loan is collateralized by the mortgages of our Hyatt Ziva Cap Cana and Hyatt Zilara Cap Cana development project fromproperties located in the calculationDominican Republic and the Hilton Rose Hall Resort & Spa located in Jamaica (collectively the “Properties”). We intend to use the proceeds of the springing leverageProperty Loan to finance the operation and management of the Properties and for general corporate purposes.
During the term of the Property Loan, we are required to deposit certain cash reserves including reserves for operating expenses, debt service and certain property improvement plan required work. We will continue to fund the reserves until the Properties achieve a debt service coverage ratio of 1.50x for the period July 1, 2019 through2 consecutive calendar quarters. These reserves are presented as restricted cash on our Condensed Consolidated Balance Sheet, which had a balance of $27.9 million as of June 30, 2020. On July 1, 2020, the springing leverage ratio will be calculated based on the provisions in the Senior Secured Credit Facility as if the Third Amendment had not taken place.
Financial maintenance covenants
We were in compliance with all applicable covenants as of June 30, 2019.2020. See a summary of our applicable covenants and restrictions below:
|
| | |
Debt | | Covenant Terms |
Existing Credit Agreement | | We are required to maintain a minimum liquidity balance of $60.0 million through the Relief Period.
If we have more than 35% drawn on the Revolving Credit Facility for periods subsequent to June 30, 2021, we will be subject to the following total net leverage ratio requirements:
▪ 6.50x for the period ended September 30, 2021;▪ 6.00x for the period ended December 31, 2021; and▪ 4.75x for periods thereafter. |
Term A1 Loan | | Same terms as the Existing Credit Agreement. |
Term A2 Loan | | No applicable debt covenants. |
Term A3 Loan | | No applicable debt covenants. |
Property Loan | | No applicable debt covenants other than the requirement to maintain a cash reserve until the Properties achieve a debt service coverage ratio of 1.50x for two consecutive quarters. |
Note 15.12. Derivative financial instruments
Interest rate swaps
Effective March 29, 2018, we entered into two2 interest rate swaps to mitigate the interest rate risk inherent to our floating rate debt, including the Revolving Credit Facility and Term Loan.debt. The interest rate swaps are not for trading purposes and have fixed notional values of $200.0 million and $600.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate, which results in us fixing LIBOR at 2.85% on $800.0 million of our Term Loan. The interest rate swaps mature on March 31, 2023.
As ofOn March 20, 2019, we elected to adopt hedge accounting and designate our interest rate swaps as cash flow hedges. Prior to our adoption of hedge accounting, the change in fair value of our interest rate swaps was recognized through interest expense in the Condensed Consolidated Statements of Operations. Following the adoption, the change in the fair value of our interest rate swaps that qualifies as effective cash flow hedges iswas recorded through other comprehensive loss (“OCI”) in the Condensed Consolidated Statements of Comprehensive (Loss) Income. Unrealized gains and losses in accumulated other comprehensive loss (“AOCI”) are reclassified to interest expense as interest payments are made on our variable rate debt. On February 29, 2020, our interest rate swaps were ineffective due to the decrease in interest rates and all subsequent changes in fair value were recognized through interest expense in the Condensed Consolidated Statements of Operations.
The following tables present the effect of our interest rate swaps, net of tax, in the Condensed Consolidated Statements of Comprehensive (Loss) Income and Condensed Consolidated Statements of Operations for the three and six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | Derivative Liabilities Designated as Hedging Instruments | | 2019 | | 2018 | |
| | | 2020 | | 2019 |
AOCI from our cash flow hedges as of January 1 | | $ | — |
| | $ | — |
| | $ | 20,164 |
| | $ | — |
|
Change in fair value | | 5,834 |
| | — |
| | 16,956 |
| | 5,834 |
|
Reclassification from AOCI to interest expense (1) | | 24 |
| | — |
| | (1,908 | ) | | 24 |
|
OCI related to our cash flow hedges for the three months ended March 31 | | 5,858 |
| | — |
| | 15,048 |
| | 5,858 |
|
Change in fair value | | 14,648 |
| | — |
| | — |
| | 14,648 |
|
Reclassification from AOCI to interest expense (1) | | 136 |
| | — |
| | (2,926 | ) | | 136 |
|
OCI related to our cash flow hedges for the three months ended June 30 | | 14,784 |
| | — |
| | (2,926 | ) | | 14,784 |
|
AOCI from our cash flow hedges as of June 30 | | $ | 20,642 |
| | $ | — |
| | $ | 32,286 |
| | $ | 20,642 |
|
________
(1) As of June 30, 2019,2020, the total amount expected to be reclassified from AOCI to interest expense during the next twelve months is $4.2$11.7 million.
| | Derivative Liabilities Not Designated as Hedging Instruments | | Financial Statement Classification | | Three Months Ended June 30, | | Six Months Ended June 30, | |
| | 2019 | | 2018 | | 2019 | | 2018 | |
Derivative Liabilities for Ineffective Hedges | | | Financial Statement Classification | | Three Months Ended June 30, | | Six Months Ended June 30, |
| | | 2020 | | 2019 | | 2020 | | 2019 |
Interest rate swaps (1) | | Interest expense | | $ | — |
| | $ | (5,398 | ) | | $ | 2,715 |
| | $ | 5,627 |
| | Interest expense | | $ | 9,774 |
| | $ | — |
| | $ | 18,503 |
| | $ | 2,715 |
|
________
(1) Includes the change in fair value of our interest rate swaps and the cash interest paid for the monthly settlements of the derivative prior to our hedge designation date of March 20, 2019.derivative.
The following tables present the effect of our interest rate swaps in the Condensed Consolidated Balance Sheet as of June 30, 20192020 and December 31, 20182019 ($ in thousands):
| | Derivative Liabilities Designated as Hedging Instruments | | Financial Statement Classification | | As of June 30, | | As of December 31, | |
| | 2019 | | 2018 | |
Derivative Liabilities for Effective Hedges | | | Financial Statement Classification | | As of June 30, | | As of December 31, |
| | | 2020 | | 2019 |
Interest rate swaps | | Derivative financial instruments | | $ | 34,240 |
| | $ | — |
| | Derivative financial instruments | | $ | — |
| | $ | 31,932 |
|
| | Derivative Liabilities Not Designated as Hedging Instruments | | Financial Statement Classification | | As of June 30, | | As of December 31, | |
| | 2019 | | 2018 | |
Derivative Liabilities for Ineffective Hedges | | | Financial Statement Classification | | As of June 30, | | As of December 31, |
| | | 2020 | | 2019 |
Interest rate swaps | | Derivative financial instruments | | $ | — |
| | $ | 12,476 |
| | Derivative financial instruments | | $ | 55,477 |
| | $ | — |
|
Derivative financial instruments expose us to credit risk in the event of non-performance by the counterparty under the terms of the interest rate swaps. We incorporate these counterparty credit risks in our fair value measurements (see Note 16)13) and believe we minimize this credit risk by transacting with major creditworthy financial institutions.
Note 1613. Fair value of financial instruments
The objective of a fair value measurement is to estimate the price at which an orderly transaction to sell the asset or to transfer the liability would take place between market participants at the measurement date under current market conditions. U.S. GAAP establishes a hierarchical disclosure framework, which prioritizes and ranks the level of observability of inputs used in measuring fair value as follows:
Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.
Level 2: Unadjusted quoted prices for similar assets or liabilities in active markets, or unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.
Level 3: Inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.
We believe the carrying value of our financial instruments, excluding our debt, approximate their fair values as of June 30, 20192020 and December 31, 2018.2019. We did not have any Level 3 instruments during any of the above periods.
periods presented in our Condensed Consolidated Financial Statements.
The following table presents our fair value hierarchy for our financial liabilities measured at fair value on a recurring basis as of June 30, 20192020 and December 31, 20182019 ($ in thousands): | | | | June 30, 2019 | | Level 1 | | Level 2 | | Level 3 | | June 30, 2020 | | Level 1 | | Level 2 | | Level 3 |
Fair value measurements on a recurring basis: | | | | | | | | | |
Fair value measurements on a recurring basis | | | | | | | | | |
Interest rate swap | | $ | 34,240 |
| | $ | — |
| | $ | 34,240 |
| | $ | — |
| | $ | 55,477 |
| | $ | — |
| | $ | 55,477 |
| | $ | — |
|
| | | | December 31, 2018 | | Level 1 | | Level 2 | | Level 3 | | December 31, 2019 | | Level 1 | | Level 2 | | Level 3 |
Fair value measurements on a recurring basis: | | | | | | | | | |
Fair value measurements on a recurring basis | | | | | | | | | |
Interest rate swap | | $ | 12,476 |
| | $ | — |
| | $ | 12,476 |
| | $ | — |
| | $ | 31,932 |
| | $ | — |
| | $ | 31,932 |
| | $ | — |
|
The following tables present our fair value hierarchy for our financial liabilities not measured at fair value as of June 30, 20192020 and December 31, 20182019 ($ in thousands):
|
| | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of June 30, 2019 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value: | | | | | | | | |
Debt: | | | | | | | | |
Term Loan | | $ | 985,018 |
| | $ | — |
| | $ | — |
| | $ | 949,392 |
|
Revolving Credit Facility | | — |
| | — |
| | — |
| | — |
|
Total | | $ | 985,018 |
| | $ | — |
| | $ | — |
| | $ | 949,392 |
|
|
| | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of June 30, 2020 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value | | | | | | | | |
Term Loan | | $ | 976,286 |
| | $ | — |
| | $ | — |
| | $ | 876,693 |
|
Revolving Credit Facility | | 84,667 |
| | — |
| | — |
| | 84,802 |
|
Term A1 Loan | | 33,593 |
| | — |
| | — |
| | 35,201 |
|
Term A2 Loan | | 29,754 |
| | — |
| | — |
| | 31,178 |
|
Term A3 Loan | | 26,876 |
| | — |
| | — |
| | 29,040 |
|
Property Loan | | 100,701 |
| | — |
| | — |
| | 110,176 |
|
Total liabilities | | $ | 1,251,877 |
| | $ | — |
| | $ | — |
| | $ | 1,167,090 |
|
|
| | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of December 31, 2018 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value: | | | | | | | | |
Debt: | | | | | | | | |
Term Loan | | $ | 989,387 |
| | $ | — |
| | $ | — |
| | $ | 927,025 |
|
Revolving Credit Facility | | — |
| | — |
| | — |
| | — |
|
Total | | $ | 989,387 |
| | $ | — |
| | $ | — |
| | $ | 927,025 |
|
|
| | | | | | | | | | | | | | | | |
| | Carrying Value | | Fair Value |
| | As of December 31, 2019 | | Level 1 | | Level 2 | | Level 3 |
Financial liabilities not recorded at fair value | | | | | | | | |
Term Loan | | $ | 980,658 |
| | $ | — |
| | $ | — |
| | $ | 983,214 |
|
Revolving Credit Facility | | 60,000 |
| | — |
| | — |
| | 60,000 |
|
Total liabilities | | $ | 1,040,658 |
| | $ | — |
| | $ | — |
| | $ | 1,043,214 |
|
The following table summarizes the valuation techniques used to estimate the fair value of our financial instruments measured at fair value on a recurring basis and our financial instruments not measured at fair value:
|
| | |
| | Valuation Technique |
Financial instruments recorded at fair value:value | | |
Interest rate swaps | | The fair value of the interest rate swaps is estimated based on the expected future cash flows by incorporating the notional amount of the swaps, the contractual period to maturity, and observable market-based inputs, including interest rate curves. The fair value also incorporates credit valuation adjustments to appropriately reflect nonperformance risk. The fair value of our interest rate swaps is largely dependent on forecasted LIBOR as of the measurement date. If, in subsequent periods, forecasted LIBOR exceeds 2.85% we will recognize a gain and future cash inflows. Conversely, if forecasted LIBOR falls below 2.85% in subsequent periods we will recognize a loss and future cash outflows. |
Financial instruments not recorded at fair value:value | | |
Term Loans and Property Loan | | The fair value of our Term Loans and Property Loan isare estimated using cash flow projections over the remaining contractual period by applying market forward rates and discounting back at the appropriate discount rate. |
Revolving Credit Facility | | The valuation technique of our Revolving Credit Facility is consistent with our Term Loan.Loans. The fair value of the Revolving Credit Facility generally approximates its carrying value as the expected term is significantly shorter in duration. |
Note 17. Employee benefit plan
In accordance with labor law regulations in Mexico, certain employees are legally entitled to receive severance that is commensurate with the tenure they had with us at the time of termination. There were no plan assets as of June 30, 2019 or December 31, 2018 as contributions are made only to the extent benefits are paid.
The following table presents the components of net periodic pension cost (benefit) for the three and six months ended June 30, 2019 and 2018 ($ in thousands):
|
| | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 |
Service cost | $ | 193 |
| | $ | 176 |
| | $ | 379 |
| | $ | 350 |
|
Interest cost | 123 |
| | 89 |
| | 244 |
| | 176 |
|
Effect of foreign exchange rates | 200 |
| | (320 | ) | | 184 |
| | 25 |
|
Amortization of prior service cost | 1 |
| | (77 | ) | | 1 |
| | (52 | ) |
Amortization of gain | (4 | ) | | (4 | ) | | (10 | ) | | (10 | ) |
Compensation-non-retirement post employment benefits | 3 |
| | 14 |
| | (73 | ) | | 18 |
|
Curtailment gain | (74 | ) | | — |
| | (171 | ) | | — |
|
Net periodic pension cost (benefit) | $ | 442 |
|
| $ | (122 | ) | | $ | 554 |
| | $ | 507 |
|
The service cost component of net periodic pension cost (benefit) is recorded within direct expense in the Condensed Consolidated Statements of Operations. The non-service cost components of net periodic pension cost (benefit) are recorded within other income (expense) for all periods presented.
Note 18.14. Other balance sheet items
Trade and other receivables, net
The following summarizes the balances of trade and other receivables, net as of June 30, 20192020 and December 31, 20182019 ($ in thousands): | | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Gross trade and other receivables (1) | $ | 61,575 |
| | $ | 65,363 |
| $ | 27,447 |
| | $ | 73,015 |
|
Allowance for doubtful accounts(2) | (853 | ) | | (593 | ) | (580 | ) | | (1,765 | ) |
Total trade and other receivables, net(3) | $ | 60,722 |
| | $ | 64,770 |
| $ | 26,867 |
| | $ | 71,250 |
|
________
| |
(1) | Includes $2.0$3.0 million in receivables related to property damagebusiness interruption insurance claims as of December 31, 2018.June 30, 2020. There were no0 such receivables as of June 30,December 31, 2019. |
| |
(2) | We recognized an additional $0.8 million in bad debt expense during the year ended December 31, 2019 as a result of the bankruptcy of Thomas Cook, one of our travel partners. |
| |
(3) | The opening balance as of January 1, 2019 was $64.8 million. |
We have not experienced any significant write-offs to our accounts receivable during the three and six months ended June 30, 20192020 and 2018.2019.
Prepayments and other assets
The following summarizes the balances of prepayments and other assets as of June 30, 20192020 and December 31, 20182019 ($ in thousands):
| | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Advances to suppliers | $ | 6,618 |
| | $ | 9,447 |
| $ | 9,479 |
| | $ | 7,865 |
|
Prepaid income taxes | 8,809 |
| | 7,538 |
| 11,352 |
| | 12,412 |
|
Prepaid other taxes (1) | 11,929 |
| | 10,240 |
| 11,829 |
| | 11,156 |
|
Right of use assets (2) | 6,086 |
| | — |
| 5,285 |
| | 5,673 |
|
Contract deposit (3)(2) | 2,700 |
| | 2,700 |
| 2,700 |
| | 2,700 |
|
Other assets | 2,682 |
| | 2,692 |
| 5,318 |
| | 4,885 |
|
Total prepayments and other assets | $ | 38,824 |
| | $ | 32,617 |
| $ | 45,963 |
| | $ | 44,691 |
|
________
(1) Includes recoverable value-added tax, and general consumption tax and other sales tax accumulated by our Mexico, Jamaica, Netherlands and Jamaica entities, respectively.Dominican Republic entities.
(2) Represents right of use assets recognized in connection with our adoption of ASU 2016-02 on January 1, 2019 (see Note 9).
(3) Represents a cash deposit related to the Sanctuary Cap Cana management contract. We are in the process of negotiating final terms for the purchase of a 30% interest, and theThe deposit will be used towards thisa purchase of a partial interest in Sanctuary Cap Cana if we are able to agree on terms. If the purchase is not completed, this amount, together with an additional $0.8 million due, will be treated as key money.
Goodwill
The gross carrying values and accumulated impairment losses of goodwill by reportable segment (refer to discussion of our reportable segments in Note 19)15) as of June 30, 20192020 and December 31, 20182019 are as follows ($ in thousands): |
| | | | | | | | | | | | | | | | | | | |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Total |
Balance at December 31, 2019 | | | | | | | | | |
Gross carrying value | $ | 51,731 |
| | $ | — |
| | $ | — |
| | $ | 32,776 |
| | $ | 84,507 |
|
Accumulated impairment losses | (6,168 | ) | | — |
| | — |
| | — |
| | (6,168 | ) |
Net carrying value | 45,563 |
| | — |
| | — |
| | 32,776 |
| | 78,339 |
|
| | | | | | | | | |
Activity during the year | | | | | | | | | |
Impairment losses | — |
| | — |
| | — |
| | (16,173 | ) | | (16,173 | ) |
| | | | | | | | | |
Balance at June 30, 2020 | | | | | | | | | |
Gross carrying value | 51,731 |
| | — |
| | — |
| | 32,776 |
| | 84,507 |
|
Accumulated impairment losses | (6,168 | ) | | — |
| | — |
| | (16,173 | ) | | (22,341 | ) |
Net carrying value | $ | 45,563 |
| | $ | — |
| | $ | — |
| | $ | 16,603 |
| | $ | 62,166 |
|
|
| | | | | | | | | | | | | | | | | | | |
| Yucatán Peninsula | | Pacific Coast | | Dominican Republic | | Jamaica | | Total |
Gross carrying value as of December 31, 2018 | $ | 51,731 |
| | $ | — |
| | $ | — |
| | $ | 31,925 |
| | $ | 83,656 |
|
Accumulated impairment losses | — |
| | — |
| | — |
| | — |
| | — |
|
Net carrying value as of December 31, 2018 | 51,731 |
| | — |
| | — |
| | 31,925 |
| | 83,656 |
|
| | | | | | | | | |
Adjustments (1) | — |
| | — |
| | — |
| | (3,612 | ) | | (3,612 | ) |
| | | | | | | | | |
Gross carrying value as of June 30, 2019 | 51,731 |
| | — |
| | — |
| | 28,313 |
| | 80,044 |
|
Accumulated impairment losses | — |
| | — |
| | — |
| | — |
| | — |
|
Net carrying value as of June 30, 2019 | $ | 51,731 |
| | $ | — |
| | $ | — |
| | $ | 28,313 |
| | $ | 80,044 |
|
________
(1) Represents adjustments toAs a result of COVID-19 and the temporary suspension of operations at our goodwill fromresorts (see Note 1), the business combination with the Sagicor Partiesforecasted future cash flows of our reporting units materially decreased during the measurement period (see Note 4).first and second quarter of 2020. We performed an interim quantitative impairment analysis as of March 31, 2020 and recognized $16.2 million of goodwill impairment losses at the following reporting units within impairment loss in the Condensed Consolidated Statements of Operations for the three months ended March 31, 2020 as we determined that their carrying values exceeded their fair value ($ in thousands): |
| | | | | | |
Reporting Unit | | Reportable Segment | | Impairment Loss |
Jewel Runaway Bay Beach Resort & Waterpark | | Jamaica | | $ | 6,946 |
|
Jewel Dunn’s River Beach Resort & Spa | | Jamaica | | $ | 5,126 |
|
Jewel Paradise Cove Beach Resort & Spa | | Jamaica | | $ | 4,101 |
|
We recognized 0 additional goodwill impairment losses on our reporting units based on our interim quantitative impairment analysis as of June 30, 2020.
Other intangible assets
Other intangible assets as of June 30, 20192020 and December 31, 20182019 consisted of the following ($ in thousands):
| | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Gross carrying value: | | | | |
Casino licenses (1) | $ | 858 |
| | $ | 858 |
| |
Management contract (2) | 1,900 |
| | 1,900 |
| |
Enterprise resource planning system (3) | 3,417 |
| | 2,246 |
| |
Gross carrying value | | | | |
Casino and other licenses (1) | | $ | 875 |
| | $ | 875 |
|
Management contract | | 1,900 |
| | 1,900 |
|
Enterprise resource planning system (2) | | 5,544 |
| | 5,187 |
|
Other | 3,208 |
| | 3,027 |
| 3,802 |
| | 3,346 |
|
Total gross carrying value | 9,383 |
| | 8,031 |
| 12,121 |
| | 11,308 |
|
| | | | | | |
Accumulated amortization: | | | | |
Management contract (2) | (95 | ) | | (48 | ) | |
Enterprise resource planning system (3) | (191 | ) | | (67 | ) | |
Accumulated amortization | | | | |
Management contract | | (190 | ) | | (143 | ) |
Enterprise resource planning system (2) | | (763 | ) | | (437 | ) |
Other | (2,030 | ) | | (1,813 | ) | (2,613 | ) | | (2,320 | ) |
Total accumulated amortization | (2,316 | ) | | (1,928 | ) | (3,566 | ) | | (2,900 | ) |
| | | | | | |
Net carrying value: | | | | |
Casino licenses (1) | 858 |
| | 858 |
| |
Net carrying value | | | | |
Casino and other licenses (1) | | 875 |
| | 875 |
|
Management contract (2) | 1,805 |
| | 1,852 |
| 1,710 |
| | 1,757 |
|
Enterprise resource planning system (3)(2) | 3,226 |
| | 2,179 |
| 4,781 |
| | 4,750 |
|
Other | 1,178 |
| | 1,214 |
| 1,189 |
| | 1,026 |
|
Total net carrying value | $ | 7,067 |
| | $ | 6,103 |
| $ | 8,555 |
| | $ | 8,408 |
|
________
(1) Our casino licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization.________
(2) Represents the fair value of a management contract acquired in the business combination with the Sagicor Parties (see Note 4).
(3) Represents software development costs incurred to develop and implement SAP as our integrated enterprise resource planning (“ERP”) system, of which $0.7 million were placed into service in February 2019 and are being amortized over a weighted-average amortization period of 7 years. | |
(1) | Our casino licenses have indefinite lives. Accordingly, there is no associated amortization expense or accumulated amortization. |
| |
(2) | Represents software development costs incurred to develop and implement SAP as our integrated enterprise resource planning (“ERP”) system, of which $1.3 million and $2.6 million was placed into service in 2020 and 2019, respectively and are being amortized over a weighted-average amortization period of 7 years. |
Amortization expense for intangible assets was $0.5$0.7 million and $0.6$0.5 million for the six months ended June 30, 20192020 and 2018,2019, respectively, and $0.3$0.4 million and $0.3 million for the three months ended June 30, 20192020 and 2018,2019, respectively.
Trade and other payables
The following summarizes the balances of trade and other payables as of June 30, 20192020 and December 31, 20182019 ($ in thousands):
| | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Trade payables | $ | 27,906 |
| | $ | 24,452 |
| $ | 22,724 |
| | $ | 45,299 |
|
Advance deposits(1) | 38,724 |
| | 57,339 |
| 25,377 |
| | 53,769 |
|
Withholding and other taxes payable | 48,902 |
| | 45,274 |
| 42,074 |
| | 46,983 |
|
Interest payable | 426 |
| | 147 |
| 870 |
| | 125 |
|
Payroll and related accruals | 13,532 |
| | 14,251 |
| 13,110 |
| | 14,547 |
|
Accrued expenses and other payables | 30,172 |
| | 18,137 |
| 17,083 |
| | 20,880 |
|
Total trade and other payables | $ | 159,662 |
| | $ | 159,600 |
| $ | 121,238 |
| | $ | 181,603 |
|
________
| |
(1) | The opening balance as of January 1, 2019 was $57.3 million. |
Other liabilities
The following summarizes the balances of other liabilities as of June 30, 20192020 and December 31, 20182019 ($ in thousands):
| | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Pension obligation(2) | $ | 5,582 |
| | $ | 5,123 |
| $ | 5,524 |
| | $ | 6,764 |
|
Cap Cana land purchase obligation | 10,625 |
| | 10,625 |
| |
Lease liabilities (1) | 6,575 |
| | — |
| |
Unfavorable ground lease liability (2) | 2,240 |
| | 2,294 |
| |
Lease liabilities | | 5,850 |
| | 6,208 |
|
Unfavorable ground lease liability | | 2,170 |
| | 2,187 |
|
Key money (3) | 4,390 |
| | 1,994 |
| 16,257 |
| | 8,225 |
|
Other | 1,224 |
| | 1,566 |
| 895 |
| | 923 |
|
Total other liabilities | $ | 30,636 |
| | $ | 21,602 |
| $ | 30,696 |
| | $ | 24,307 |
|
________
(1) Represents lease liabilities recognizedFor the six months ended June 30, 2020 and 2019, the service cost component of net periodic pension cost was $0.4 million and $0.4 million, respectively. For the three months ended June 30, 2020 and 2019, the service cost component of net periodic pension cost was $0.2 million and $0.2 million, respectively. These costs are recorded within direct expense in connection with our adoptionthe Condensed Consolidated Statements of ASU 2016-02 on January 1, 2019 (see Note 9)Operations.
(2) RepresentsFor the amortized balancesix months ended June 30, 2020 and 2019, the non-service cost components of net periodic pension benefit or cost were $1.3 million and $0.2 million, respectively. For the unfavorable ground lease intangible acquiredthree months ended June 30, 2020 and 2019, the non-service cost components of net periodic pension benefit or cost were $0.7 million and $0.2 million, respectively. These costs are recorded within other income (expense) in the business combination with the Sagicor Parties (see Note 4)Condensed Consolidated Statements of Operations.
(3) Represents the amortizedunamortized balance of key money received, which is recordedamortized as a reduction to franchise fees within direct expenses in the Condensed Consolidated Statements of Operations. We received $1.5$8.5 million and $6.5 million in May2020 and 2019, and $1.0 million in March 2019.respectively.
Note 1915. Segment information
We consider each one of our owned resorts to be an operating segment, none of which meets the threshold for a reportable segment. We also allocate resources and assess operating performance based on individual resorts. Our operating segments meet the aggregation criteria and thus, we present four4 separate reportable segments by geography: (i) Yucatán Peninsula, (ii) Pacific Coast, (iii) Dominican Republic and (iv) Jamaica. For the three and six months ended June 30, 20192020 and 2018,2019, we have excluded the immaterial amounts of management fees, cost reimbursements and other from our segment reporting.
Our operating segments are components of the business which are managed discretely and for which discrete financial information is reviewed regularly by our Chief Executive Officer, Chief Financial Officer and Chief Operating Officer, all of whom represent our chief operating decision maker (“CODM”). Financial information for each reportable segment is reviewed by the CODM to assess performance and make decisions regarding the allocation of resources.
The performance of our business is evaluated primarily on adjusted earnings before interest expense, income tax benefit, (provision), and depreciation and amortization expense (“Adjusted EBITDA”), which should not be considered an alternative to net (loss) income or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. The performance of our segments is evaluated on Adjusted EBITDA before corporate expenses and management fee income (“Owned Resort EBITDA”).
We define Adjusted EBITDA as net (loss) income, determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax benefit, (provision), and depreciation and amortization expense, further adjusted to exclude the following items: (a) impairment loss; (b) other income (expense); (b)(c) pre-opening expenses; (c)(d) share-based compensation; (d)(e) other tax expense; (e)(f) transaction expenses; (f)(g) loss on sale of assets; and (h) severance expense; and (g) Jamaica delayed opening accrual reversal.expenses.
There are limitations to using financial measures such as Adjusted EBITDA and Owned Resort EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, Adjusted EBITDA should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business and investors should carefully consider our U.S. GAAP results presented in our Condensed Consolidated Financial Statements.
The following table presents segment owned net revenue and a reconciliation to total revenue for the three and six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 | | 2020 | | 2019 |
Owned net revenue: | | | | | | | | |
Yucatàn Peninsula | $ | 59,772 |
| | $ | 63,667 |
| | $ | 129,985 |
| | $ | 142,938 |
| |
Owned net revenue | | | | | | | | |
Yucatán Peninsula | | $ | 21 |
| | $ | 59,772 |
| | $ | 62,338 |
| | $ | 129,985 |
|
Pacific Coast | 22,087 |
| | 19,815 |
| | 47,657 |
| | 48,870 |
| (74 | ) | | 22,087 |
| | 21,081 |
| | 47,657 |
|
Dominican Republic | 22,566 |
| | 31,495 |
| | 55,641 |
| | 71,913 |
| 11 |
| | 22,566 |
| | 35,607 |
| | 55,641 |
|
Jamaica | 50,464 |
| | 26,730 |
| | 109,611 |
| | 50,490 |
| 564 |
| | 50,464 |
| | 52,000 |
| | 109,611 |
|
Segment owned net revenue (1) | 154,889 |
|
| 141,707 |
| | 342,894 |
| | 314,211 |
| 522 |
| | 154,889 |
| | 171,026 |
| | 342,894 |
|
Other | 14 |
| | (9 | ) | | 16 |
| | 343 |
| 20 |
| | 14 |
| | 35 |
| | 16 |
|
Management fees | 551 |
| | 55 |
| | 1,485 |
| | 351 |
| (18 | ) | | 551 |
| | 627 |
| | 1,485 |
|
Cost reimbursements | 2,949 |
| | 78 |
| | 3,537 |
| | 122 |
| 458 |
| | 2,949 |
| | 1,408 |
| | 3,537 |
|
Compulsory tips | 5,620 |
| | 3,741 |
| | 11,887 |
| | 7,392 |
| — |
| | 5,620 |
| | 5,114 |
| | 11,887 |
|
Total revenue | $ | 164,023 |
| | $ | 145,572 |
| | $ | 359,819 |
| | $ | 322,419 |
| $ | 982 |
| | $ | 164,023 |
| | $ | 178,210 |
| | $ | 359,819 |
|
________
(1) Segment owned net revenue represents total revenue less compulsory tips paid to employees, cost reimbursements, management fees and other miscellaneous revenue not derived from segment operations.
The following table presents segment Owned Resort EBITDA, Adjusted EBITDA and a reconciliation to net (loss) income for the three and six months ended June 30, 20192020 and 20182019 ($ in thousands):
| |
| Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 | | 2020 | | 2019 |
Owned Resort EBITDA: | | | | | | | | |
Yucatàn Peninsula | $ | 21,151 |
| | $ | 25,726 |
| | $ | 53,310 |
| | $ | 65,330 |
| |
Owned Resort EBITDA | | | | | | | | |
Yucatán Peninsula | | $ | (8,004 | ) | | $ | 21,151 |
| | $ | 16,931 |
| | $ | 53,310 |
|
Pacific Coast | 8,569 |
| | 6,550 |
| | 20,956 |
| | 20,458 |
| (2,816 | ) | | 8,569 |
| | 6,056 |
| | 20,956 |
|
Dominican Republic | 5,043 |
| | 9,586 |
| | 18,506 |
| | 28,013 |
| (4,881 | ) | | 5,043 |
| | 2,908 |
| | 18,506 |
|
Jamaica | 14,631 |
| | 8,089 |
| | 38,979 |
| | 18,733 |
| (8,097 | ) | | 14,631 |
| | 10,976 |
| | 38,979 |
|
Segment Owned Resort EBITDA | 49,394 |
|
| 49,951 |
| | 131,751 |
| | 132,534 |
| (23,798 | ) | | 49,394 |
| | 36,871 |
| | 131,751 |
|
Other corporate - unallocated | (9,887 | ) | | (8,689 | ) | | (18,393 | ) | | (17,009 | ) | |
Other corporate | | (7,606 | ) | | (9,887 | ) | | (18,577 | ) | | (18,393 | ) |
Management fees | 551 |
| | 55 |
| | 1,485 |
| | 351 |
| (18 | ) | | 551 |
| | 627 |
| | 1,485 |
|
Total Adjusted EBITDA | 40,058 |
|
| 41,317 |
| | 114,843 |
| | 115,876 |
| (31,422 | ) | | 40,058 |
| | 18,921 |
| | 114,843 |
|
Add: | | | | | | | | |
Interest expense | (10,666 | ) | | (5,632 | ) | | (24,860 | ) | | (27,514 | ) | (20,916 | ) | | (10,666 | ) | | (41,871 | ) | | (24,860 | ) |
Depreciation and amortization | (25,908 | ) | | (15,882 | ) | | (48,219 | ) | | (31,571 | ) | (22,400 | ) | | (25,908 | ) | | (47,359 | ) | | (48,219 | ) |
Impairment loss | | (25,268 | ) | | — |
| | (41,441 | ) | | — |
|
Loss on sale of assets | | (1,729 | ) | | — |
| | (1,729 | ) | | — |
|
Other income (expense) | 364 |
| | 378 |
| | (238 | ) | | (1,446 | ) | 4,853 |
| | 364 |
| | 947 |
| | (238 | ) |
Pre-opening expenses | (202 | ) | | — |
| | (291 | ) | | — |
| — |
| | (202 | ) | | — |
| | (291 | ) |
Share-based compensation | (2,014 | ) | | (2,104 | ) | | (4,762 | ) | | (3,890 | ) | (2,719 | ) | | (2,014 | ) | | (5,942 | ) | | (4,762 | ) |
Other tax expense | (443 | ) | | (427 | ) | | (802 | ) | | (858 | ) | (231 | ) | | (443 | ) | | (468 | ) | | (802 | ) |
Transaction expenses | (1,273 | ) | | (3,887 | ) | | (3,240 | ) | | (6,231 | ) | (289 | ) | | (1,273 | ) | | (875 | ) | | (3,240 | ) |
Severance expense | (133 | ) | | — |
| | (133 | ) | | — |
| (1,246 | ) | | (133 | ) | | (2,444 | ) | | (133 | ) |
Jamaica delayed opening accrual reversal | — |
| | — |
| | — |
| | 342 |
| |
Non-service cost components of net periodic pension cost (benefit) (1) | 249 |
| | (298 | ) | | 175 |
| | 157 |
| |
Net income before tax | 32 |
|
| 13,465 |
| | 32,473 |
| | 44,865 |
| |
Income tax benefit (provision) | 1,008 |
| | 3,356 |
| | 11,555 |
| | (6,227 | ) | |
Net income | $ | 1,040 |
|
| $ | 16,821 |
| | $ | 44,028 |
| | $ | 38,638 |
| |
Non-service cost components of net periodic pension (benefit) cost (1) | | (738 | ) | | 249 |
| | (1,289 | ) | | 175 |
|
Net (loss) income before tax | | (102,105 | ) | | 32 |
| | (123,550 | ) | | 32,473 |
|
Income tax benefit | | 14,647 |
| | 1,008 |
| | 13,536 |
| | 11,555 |
|
Net (loss) income | | $ | (87,458 | ) | | $ | 1,040 |
| | $ | (110,014 | ) | | $ | 44,028 |
|
________
| |
(1) | Represents the non-service cost components of net periodic pension (benefit) cost (benefit) recorded within other income (expense) in the Condensed Consolidated Statements of Operations. We include these costs (benefits) in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations. |
The following table presents segment property and equipment, gross and a reconciliation to total property and equipment, net as of June 30, 20192020 and December 31, 20182019 ($ in thousands):
| | | As of June 30, | | As of December 31, | As of June 30, | | As of December 31, |
| 2019 | | 2018 | 2020 | | 2019 |
Segment property and equipment, gross: | | | | |
Yucatàn Peninsula | $ | 870,296 |
| | $ | 861,380 |
| |
Segment property and equipment, gross | | | | |
Yucatán Peninsula | | $ | 864,815 |
| | $ | 865,900 |
|
Pacific Coast | 285,952 |
| | 285,936 |
| 287,850 |
| | 288,358 |
|
Dominican Republic | 579,358 |
| | 501,624 |
| 672,769 |
| | 667,120 |
|
Jamaica | 502,968 |
| | 500,550 |
| 405,322 |
| | 499,569 |
|
Total segment property and equipment, gross | 2,238,574 |
| | 2,149,490 |
| 2,230,756 |
| | 2,320,947 |
|
Other corporate | 14,547 |
| | 9,189 |
| 4,733 |
| | 7,320 |
|
Accumulated depreciation | (395,125 | ) | | (350,267 | ) | (430,247 | ) | | (398,353 | ) |
Total property and equipment, net | $ | 1,857,996 |
| | $ | 1,808,412 |
| $ | 1,805,242 |
| | $ | 1,929,914 |
|
The following table presents segment capital expenditures and a reconciliation to total capital expenditures for the six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Six Months Ended June 30, | Six Months Ended June 30, |
| 2019 | | 2018 | 2020 | | 2019 |
Segment capital expenditures: | | | | |
Yucatàn Peninsula | $ | 10,055 |
| | $ | 6,602 |
| |
Segment capital expenditures | | | | |
Yucatán Peninsula | | $ | 2,348 |
| | $ | 10,055 |
|
Pacific Coast | 395 |
| | 1,401 |
| 230 |
| | 395 |
|
Dominican Republic | 79,515 |
| | 28,146 |
| 4,286 |
| | 79,515 |
|
Jamaica | 2,507 |
| | 1,919 |
| 1,809 |
| | 2,507 |
|
Total segment capital expenditures (1) | 92,472 |
| | 38,068 |
| 8,673 |
| | 92,472 |
|
Other corporate | 5,379 |
| | 2,280 |
| 331 |
| | 5,379 |
|
Total capital expenditures (1) | $ | 97,851 |
| | $ | 40,348 |
| $ | 9,004 |
| | $ | 97,851 |
|
________
| |
(1) | Includes capital expenditures incurred, but not yet paid. |
Note 20.16. Subsequent events
In preparing the interim Condensed Consolidated Financial Statements, we have evaluatedthere were no subsequent events through August 6, 2019, which issince June 30, 2020 other than the datefollowing:
Subsequent to June 30, 2020, the Condensed Consolidated Financial Statements were issued.
Duringglobal economy has continued to be severely impacted by the period from July 1, 2019 through August 1, 2019COVID-19 pandemic. We cannot predict when the effects of the pandemic will subside, and thus we purchased 360,929 ordinary shares at an average pricecannot predict when we will be able to reopen all of $7.51 per share.our remaining resorts, whether our resorts will be permitted to remain open or when our business will return to normalized levels. There also can be no guarantee that when the effects of the pandemic subside that there will not be a later resurgence of the virus or that the demand for lodging, and consumer confidence in travel generally, will recover as quickly as other industries. The longer and more severe the pandemic, and the possibility of repeat or cyclical outbreaks of the virus beyond the one currently being experienced, the greater the material adverse effect the pandemic will have on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our indebtedness.
The following discussion and analysis of Playa Hotels & Resorts N.V.'s (“Playa”) financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements (our “Condensed Consolidated Financial Statements”) and the notes related thereto which are included in “Item 1. Financial Statements” of this Quarterly Report on Form 10-Q. Unless the context otherwise requires, “we,” “us,” “our” and the “Company” refer to Playa and its subsidiaries.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning matters that are not historical facts. Forward-looking statements reflect our current views with respect to, among other things, our capital resources, portfolio performance and results of operations. Likewise, all of our statements regarding anticipated growth in our operations, anticipated market conditions, demographics and results of operations are forward-looking statements. In some cases, you can identify these forward-looking statements by the use of terminology such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable words or phrases.
The forward-looking statements contained in this quarterly report reflect our current views about future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause our actual results to differ significantly from those expressed in any forward-looking statement. The factors discussed in this filing and our other filings with the United States Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2018,2019, filed with the SEC on February 28, 2019, together27, 2020 and our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the following factors,SEC on May 11, 2020, could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements:statements. Currently, one of the most significant factors that could cause actual outcomes to differ materially from our forward-looking statements is the adverse effects of the current COVID-19 pandemic on our financial condition, operating results and cash flows, the airlines that service the locations where we own resorts, the short and longer-term demand for travel, the global economy and the local economies where we own resorts, and the financial markets. As a result of the COVID-19 pandemic all of our resorts temporarily suspended operations from March 2020 until July 2020 and operations at [nine] resorts continue to be suspended. The extent to which the COVID-19 pandemic will impact us and consumer behavior will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity and duration of the pandemic, any resurgence of the pandemic after conditions initially improve, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures,including magnitude of its impact on unemployment rates and consumer discretionary spending, among others. Additional factors that could cause actual results and future events to differ materially from those set forth or contemplated in the forward-looking statements include:
general economic uncertainty and the effect of general economic conditions on the lodging industry in particular;
the popularity of the all-inclusive resort model, particularly in the luxury segment of the resort market;
changes in economic, social or political conditions in the regions we operate, including changes in perception of public-safety and changes in the supply of rooms from competing resorts;
the success and continuation of our relationships with Hyatt Hotels Corporation (“Hyatt”) and Hilton Worldwide Holdings, Inc. (“Hilton”);
the volatility of currency exchange rates;
the success of our branding or rebranding initiatives with our current portfolio and resorts that may be acquired in the future, including the rebranding of two of our resorts under the all-inclusive “Panama Jack” brand and rebranding of certain resorts recently acquired from Sagicor in Jamaica;future;
our failure to successfully complete acquisition, expansion, repair and renovation projects in the timeframes and at the costs and returns anticipated;
changes we may make in timing and scope of our development and renovation projects;
significant increases in construction and development costs;
significant increases in utilities;utilities costs;
our ability to obtain and maintain financing arrangements on attractive terms;
our ability to obtain and maintain ample liquidity to fund operations and service debt;
the impact of and changes in governmental regulations or the enforcement thereof, tax laws and rates, accounting guidance and similar matters in regions in which we operate;
the ability of our guests to reach our resorts given government mandated travel restrictions;
the effectiveness of our internal controls and our corporate policies and procedures and the success and timing of the remediation efforts for the material weakness that we identified in our internal control over financial reporting;
changes in personnel and availability of qualified personnel;
environmental uncertainties and risks related to adverse weather conditions and natural disasters;
outbreak of widespread contagious diseases;
dependence on third parties to provide Internet, telecommunications and network connectivity to our data centers;
the volatility of the market price and liquidity of our ordinary shares and other of our securities; and
the increasingly competitive environment in which we operate.
While forward-looking statements reflect our good faith beliefs, they are not guarantees of future performance. The Company disclaims any obligation to publicly update or revise any forward-looking statement to reflect changes in underlying assumptions or factors, new information, data or methods, future events or other changes after the date of this quarterly report, except as required by applicable law. You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties making the forward-looking statements).
Overview
Playa is a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations in popular vacation destinations in Mexico and the Caribbean. As of June 30, 2020, Playa ownsowned and/or managesmanaged a total portfolio consisting of 21 resorts (7,936(8,172 rooms) located in Mexico, Jamaica, and the Dominican Republic. In Mexico, Playa owns and manages Hyatt Zilara Cancún, Hyatt Ziva Cancún, Panama Jack Resorts Cancún, Panama Jack Resorts Playa del Carmen, Hilton Playa del Carmen All-Inclusive Resort, Hyatt Ziva Puerto Vallarta and Hyatt Ziva Los Cabos. In Jamaica, Playa owns and manages Hyatt Zilara Rose Hall, Hyatt Ziva Rose Hall, Hilton Rose Hall Resort & Spa, Jewel Dunn’s River Beach Resort & Spa, Jewel Grande Montego Bay Resort & Spa, Jewel Runaway Bay Beach & Golf Resort and Jewel Paradise Cove Beach Resort & Spa. In the Dominican Republic, Playa owns and manages the Hilton La Romana All-Inclusive Family Resort, and the Hilton La Romana All-Inclusive Adult Resort.Resort, Hyatt Zilara Cap Cana and Hyatt Ziva Cap Cana. Playa also owns four resorts in Mexico and the Dominican Republic that are managed by a third party and Playa manages the Sanctuary Cap Cana in the Dominican Republic. We believe that the resorts we own and manage are among the finest all-inclusive resorts in the markets they serve. All of our resorts offer guests luxury accommodations, noteworthy architecture, extensive on-site activities and multiple food and beverage options. Our guests also have the opportunity to purchase upgrades from us such as premium rooms, dining experiences, wines and spirits and spa packages.
For the three months ended June 30, 2020, during which time operations at all of our resorts were temporarily suspended in response to the COVID-19 pandemic, we generated a net loss of $87.5 million, total revenue of $1.0 million, Net Package RevPAR of $0 and Adjusted EBITDA of $(31.4) million. For the three months ended June 30, 2019, we generated net income of $1.0 million, total revenue of $164.0 million, Net Package RevPAR of $205.55 and Adjusted EBITDA of $40.1 million.
For the threesix months ended June 30, 2018,2020, we generated a net incomeloss of $16.8$110.0 million, total revenue of $145.6$178.2 million, Net Package RevPAR of $203.23$100.01 and Adjusted EBITDA of $41.3$18.9 million.
For the six months ended June 30, 2019, we generated net income of $44.0 million, total revenue of $359.8 million, Net Package RevPAR of $225.37 and Adjusted EBITDA of $114.8 million. For
Impact of COVID-19 Pandemic
The COVID-19 pandemic and the six months endedpublic health measures that have been undertaken in response have had a significant adverse impact on the global economy, the travel and hospitality industries and our business starting in the first quarter of 2020. The effects of the COVID-19 pandemic, including related government restrictions, border closings, quarantines, “shelter-in-place” orders and “social distancing,” have significantly disrupted global leisure travel, and has adversely impacted global commercial activity, contributing to
worldwide economic contraction and rising unemployment. We expect that the continuing economic fallout will create headwinds for leisure travel even after the current government restrictions are lifted.
Due to the spread of the COVID-19 pandemic and the associated restrictions placed on international travel, we temporarily suspended operations at all of our resorts in late March 2020 and subsequently began reopening our resorts on July 1, 2020.
As of July 1, 2020, we reopened 8 out of our 21 resorts and subsequently reopened another 4 resorts. Currently, 12 out of our 21 resorts have reopened:
|
| |
Resort | Date Reopened |
Hyatt Ziva Cancún | 7/1/2020 |
Hyatt Zilara Cancún | 7/1/2020 |
Hilton Playa del Carmen All-Inclusive Resort | 7/1/2020 |
Panama Jack Resorts Cancún | 7/15/2020 |
Hyatt Ziva Rose Hall | 7/1/2020 |
Hyatt Zilara Rose Hall | 7/1/2020 |
Hilton Rose Hall Resort & Spa | 7/1/2020 |
Jewel Paradise Cove Beach Resort & Spa | 7/1/2020 |
Jewel Grande Montego Bay Resort & Spa | 7/1/2020 |
Hyatt Ziva Cap Cana | 7/22/2020 |
Hyatt Zilara Cap Cana | 7/22/2020 |
Sanctuary Cap Cana | 7/15/2020 |
We issued a press release on June 16, 2020 with our anticipated reopening schedule and will update this schedule as we move through the year.
The suspension of operations at all of our resorts during the quarter, which account for all of our revenue, has had a significant adverse effect on our liquidity. As of June 30, 2018,2020 we generated net incomehad $251.0 million of $38.6 million, total revenueavailable cash. We have taken the following measures to mitigate the impact of $322.4 million, Net Package RevPARthe effects of $237.08the COVID-19 pandemic on our liquidity position:
| |
• | we announced on June 12, 2020 that we had raised $224.0 million of additional capital from affiliates of Davidson Kempner Capital Management LP (“DK”) in the form of $204.0 million of additional debt financing and $20.0 million of equity financing at a price of $4.10 per share; |
| |
• | we sold the Jewel Dunn's River Beach Resort & Spa and the Jewel Runaway Bay Beach Resort & Waterpark for a total cash consideration of $60.0 million. The transaction closed in May 2020 and the cash consideration is reflected in our available cash; |
| |
• | we borrowed an additional $40.0 million under our Revolving Credit Facility in March 2020, increasing the amount outstanding on the facility to $85.0 million; |
| |
• | the temporary suspension of operations of all of our resorts significantly reduced the variable cost components of our resort-level operating expenses, including resort franchise and franchise-related fees, management fees and expenses related to our resort employees; |
| |
• | we have deferred all of our non-critical capital expenditures planned for 2020 and intend to spend a minimal amount on emergency capital expenditures; |
| |
• | we adopted voluntary senior executive salary reductions, including reducing our Chief Executive Officer’s salary by 100%, these reductions are being phased back in during the third quarter with the exception of our Chief Executive Officer; |
| |
• | we imposed compensation cuts broadly throughout our corporate workforce and canceled all non-essential corporate travel and spending; |
| |
• | we have temporarily suspended repurchases of our ordinary shares under our share repurchase program until we have more visibility into the longer-term impact of COVID-19 and economic conditions improve; and |
| |
• | we also significantly reduced marketing expenditures during the second quarter. |
In addition, the recent reduction in the size of our Board of Directors to align with the Company’s size and Adjusted EBITDAneeds will further reduce our expenses.
We cannot predict when the effects of $115.9 million.the pandemic will subside, and thus we cannot predict when we will be able to reopen our remaining resorts, whether our resorts will be permitted to remain open or when our business will return to normalized levels. There also can be no guarantee that when the effects of the pandemic subside that there will not be a later resurgence of the virus or that the demand for lodging, and consumer confidence in travel generally, will recover as quickly as other industries. The longer and more severe the pandemic, and the possibility of repeat or cyclical outbreaks of the virus beyond the one currently being experienced, the greater the material adverse effect the pandemic will have on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our indebtedness. See “Part II - Item 1A. Risk Factors” included in our Quarterly Report on Form 10-Q for additional information.
Our Portfolio of Resorts
The following table presents an overview of our resorts at June 30, 2019.2020. None of the resorts we own individually contributed more than 13.8%13.1% of our Total Net Revenue or 16.5%31.3% of our consolidated Adjusted EBITDA for the six months ended June 30, 2019.2020. The table below is organized by our four geographic business segments: the Yucatán Peninsula, the Pacific Coast, the Dominican Republic and Jamaica. | | Name of Resort | | Location | | Brand and Type | | Operator | | Year Built; Significant Renovations | | Rooms | | Location | | Brand and Type | | Operator | | Year Built; Significant Renovations | | Rooms |
Owned Resorts | | |
Yucatán Peninsula | | | | | | | | | | | | | | | | |
Hyatt Ziva Cancún | | Cancún, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1975; 1980; 1986; 2002; 2015 | | 547 | | Cancún, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1975; 1980; 1986; 2002; 2015 | | 547 |
Hyatt Zilara Cancún | | Cancún, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2006; 2009; 2013; 2017 | | 310 | | Cancún, Mexico | | Hyatt Zilara (adults-only) | | Playa | | 2006; 2009; 2013; 2017 | | 310 |
Panama Jack Resorts Cancún | | Cancún, Mexico | | Panama Jack (all ages)(1) | | Playa | | 1985; 2009; 2017 | | 458 | | Cancún, Mexico | | Panama Jack (all ages) | | Playa | | 1985; 2009; 2017 | | 458 |
Hilton Playa del Carmen All-Inclusive Resort(2)(1) | | Playa del Carmen, Mexico | | Hilton (adults-only) | | Playa | | 2002; 2009; 2019 | | 524 | | Playa del Carmen, Mexico | | Hilton (adults-only) | | Playa | | 2002; 2009; 2019 | | 524 |
Panama Jack Resorts Playa del Carmen | | Playa del Carmen, Mexico | | Panama Jack (all ages)(1) | | Playa | | 1996; 2006; 2012; 2017 | | 287 | | Playa del Carmen, Mexico | | Panama Jack (all ages) | | Playa | | 1996; 2006; 2012; 2017 | | 287 |
Secrets Capri | | Riviera Maya, Mexico | | Secrets (adults-only) | | AMResorts | | 2003 | | 291 | | Riviera Maya, Mexico | | Secrets (adults-only) | | AMResorts | | 2003 | | 291 |
Dreams Puerto Aventuras | | Riviera Maya, Mexico | | Dreams (all ages) | | AMResorts | | 1991; 2009 | | 305 | | Riviera Maya, Mexico | | Dreams (all ages) | | AMResorts | | 1991; 2009 | | 305 |
Pacific Coast | | | | | | | | | | | | | | | | |
Hyatt Ziva Los Cabos | | Cabo San Lucas, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2007; 2009; 2015 | | 591 | | Cabo San Lucas, Mexico | | Hyatt Ziva (all ages) | | Playa | | 2007; 2009; 2015 | | 591 |
Hyatt Ziva Puerto Vallarta | | Puerto Vallarta, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1969; 1990; 2002; 2009; 2014; 2017 | | 335 | | Puerto Vallarta, Mexico | | Hyatt Ziva (all ages) | | Playa | | 1969; 1990; 2002; 2009; 2014; 2017 | | 335 |
Dominican Republic | | | | | | | | | | | | | | | | |
Hilton La Romana All-Inclusive Resort(2) | | La Romana, Dominican Republic | | Hilton (adults-only) | | Playa(3) | | 1997; 2008; 2019 | | 356 | | La Romana, Dominican Republic | | Hilton (adults-only) | | Playa (2) | | 1997; 2008; 2019 | | 356 |
Hilton La Romana All-Inclusive Resort(2) | | La Romana, Dominican Republic | | Hilton (all ages) | | Playa(3) | | 1997; 2008; 2019 | | 414 | | La Romana, Dominican Republic | | Hilton (all ages) | | Playa (2) | | 1997; 2008; 2019 | | 418 |
Dreams Palm Beach | | Punta Cana, Dominican Republic | | Dreams (all ages) | | AMResorts | | 1994; 2008 | | 500 | | Punta Cana, Dominican Republic | | Dreams (all ages) | | AMResorts | | 1994; 2008 | | 500 |
Dreams Punta Cana | | Punta Cana, Dominican Republic | | Dreams (all ages) | | AMResorts | | 2004 | | 620 | | Punta Cana, Dominican Republic | | Dreams (all ages) | | AMResorts | | 2004 | | 620 |
Hyatt Ziva Cap Cana | | | Cap Cana, Dominican Republic | | Hyatt Ziva (all ages) | | Playa | | 2019 | | 375 |
Hyatt Zilara Cap Cana | | | Cap Cana, Dominican Republic | | Hyatt Zilara (adults-only) | | Playa | | 2019 | | 375 |
Jamaica | | |
Hyatt Ziva Rose Hall | | Montego Bay, Jamaica | | Hyatt Ziva (all ages) | | Playa | | 2000; 2014; 2017 | | 276 | | Montego Bay, Jamaica | | Hyatt Ziva (all ages) | | Playa | | 2000; 2014; 2017 | | 276 |
Hyatt Zilara Rose Hall | | Montego Bay, Jamaica | | Hyatt Zilara (adults-only) | | Playa | | 2000; 2014; 2017 | | 344 | | Montego Bay, Jamaica | | Hyatt Zilara (adults-only) | | Playa | | 2000; 2014; 2017 | | 344 |
Hilton Rose Hall Resort & Spa | | Montego Bay, Jamaica | | Hilton (all ages) | | Playa | | 1974; 2008; 2017 | | 495 | | Montego Bay, Jamaica | | Hilton (all ages) | | Playa | | 1974; 2008; 2017 | | 495 |
Jewel Runaway Bay Beach & Golf Resort | | Runaway Bay, Jamaica | | Jewel (all ages) | | Playa | | 1960; 1961; 1965; 2007; 2012 | | 268 | |
Jewel Dunn’s River Beach Resort & Spa | | Ocho Rios, Jamaica | | Jewel (adults-only) | | Playa | | 1957; 1970; 1980; 2010 | | 250 | |
Jewel Paradise Cove Beach Resort & Spa | | Runaway Bay, Jamaica | | Jewel (adults-only) | | Playa | | 2013 | | 225 | | Runaway Bay, Jamaica | | Jewel (adults-only) | | Playa | | 2013 | | 225 |
Jewel Grande Montego Bay Resort & Spa(5) | | Montego Bay, Jamaica | | Jewel (all ages) | | Playa | | 2016; 2017 | | 88 | |
Jewel Grande Montego Bay Resort & Spa (3) | | | Montego Bay, Jamaica | | Jewel (all ages) | | Playa | | 2016; 2017 | | 88 |
Total Rooms Owned | | 7,484 | | 7,720 |
Managed Resorts | | |
Sanctuary Cap Cana(4) | | Punta Cana, Dominican Republic | | Sanctuary (adults-only) | | Playa | | 2008; 2015; 2018 | | 323 | | Punta Cana, Dominican Republic | | Sanctuary (adults-only) | | Playa | | 2008; 2015; 2018 | | 323 |
Jewel Grande Montego Bay Resort & Spa(5) | | Montego Bay, Jamaica | | Sagicor (condo-hotel) | | Playa | | 2016; 2017 | | 129 | |
Jewel Grande Montego Bay Resort & Spa (3) | | | Montego Bay, Jamaica | | Jewel (condo-hotel) | | Playa | | 2016; 2017 | | 129 |
Total Rooms Operated | | 452 | | 452 |
Total Rooms Owned and Operated | | | | | | 7,936 | | | | | | 8,172 |
(1) Pursuant to an agreement with Panama Jack, weEffective November 20, 2018, this resort was rebranded these resorts as Panama Jack resortsinto Hilton all-inclusive resort. Renovations were completed in 2017. The resorts are still owned and operated by Playa.2019.
(2) Pursuant to an agreement with Hilton, we rebranded these resorts as Hilton all-inclusive resorts in November 2018. The resorts are still owned and operated by Playa.
(3) Effective November 20, 2018, this resort was rebranded into two Hilton all-inclusive resorts. Renovations are currently underway and projected to be complete by the end of 2019.
(4) Owned by a third party.
(5) We acquired an 88-unit tower and spa as part of our acquisition of the Sagicor Assets.business combination with Sagicor. Additionally, we manage the majority of the units within the remaining two condo-hotel towers owned by Sagicor that comprise the Jewel Grande Montego Bay Resort & Spa.
(4) Owned by a third party.
Results of Operations
Three Months Ended June 30, 20192020 and 20182019
The following table summarizes our results of operations on a consolidated basis for the three months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Three Months Ended June 30, | | Increase / Decrease | Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Revenue: |
| | | | | | | |
Revenue | | | | | | | | |
Package | $ | 136,095 |
| | $ | 124,286 |
| | $ | 11,809 |
| | 9.5 | % | $ | 302 |
| | $ | 136,095 |
| | $ | (135,793 | ) | | (99.8 | )% |
Non-package | 24,428 |
| | 21,153 |
| | 3,275 |
| | 15.5 | % | 240 |
| | 24,428 |
| | (24,188 | ) | | (99.0 | )% |
Management fees | 551 |
| | 55 |
| | 496 |
| | 901.8 | % | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
Cost reimbursements | 2,949 |
| | 78 |
| | 2,871 |
| | 3,680.8 | % | 458 |
| | 2,949 |
| | (2,491 | ) | | (84.5 | )% |
Total revenue | 164,023 |
| | 145,572 |
| | 18,451 |
| | 12.7 | % | 982 |
| | 164,023 |
| | (163,041 | ) | | (99.4 | )% |
Direct and selling, general and administrative expenses: | | | | | | | | |
Direct and selling, general and administrative expenses | | | | | | | | |
Direct | 92,582 |
| | 78,113 |
| | 14,469 |
| | 18.5 | % | 20,380 |
| | 92,582 |
| | (72,202 | ) | | (78.0 | )% |
Selling, general and administrative | 32,048 |
| | 32,780 |
| | (732 | ) | | (2.2 | )% | 19,739 |
| | 32,048 |
| | (12,309 | ) | | (38.4 | )% |
Pre-opening | 202 |
| | — |
| | 202 |
| | 100.0 | % | — |
| | 202 |
| | (202 | ) | | (100.0 | )% |
Depreciation and amortization | 25,908 |
| | 15,882 |
| | 10,026 |
| | 63.1 | % | 22,400 |
| | 25,908 |
| | (3,508 | ) | | (13.5 | )% |
Reimbursed costs | 2,949 |
| | 78 |
| | 2,871 |
| | 3,680.8 | % | 458 |
| | 2,949 |
| | (2,491 | ) | | (84.5 | )% |
Impairment loss | | 25,268 |
| | — |
| | 25,268 |
| | 100.0 | % |
Loss on sale of assets | | 1,729 |
| | — |
| | 1,729 |
| | 100.0 | % |
Gain on insurance proceeds | | (2,950 | ) | | — |
| | (2,950 | ) | | 100.0 | % |
Direct and selling, general and administrative expenses | 153,689 |
| | 126,853 |
| | 26,836 |
| | 21.2 | % | 87,024 |
| | 153,689 |
| | (66,665 | ) | | (43.4 | )% |
Operating income | 10,334 |
| | 18,719 |
| | (8,385 | ) | | (44.8 | )% | |
Operating (loss) income | | (86,042 | ) | | 10,334 |
| | (96,376 | ) | | (932.6 | )% |
Interest expense | (10,666 | ) | | (5,632 | ) | | (5,034 | ) | | 89.4 | % | (20,916 | ) | | (10,666 | ) | | (10,250 | ) | | 96.1 | % |
Other income | 364 |
| | 378 |
| | (14 | ) | | (3.7 | )% | 4,853 |
| | 364 |
| | 4,489 |
| | 1,233.2 | % |
Net income before tax | 32 |
| | 13,465 |
| | (13,433 | ) | | (99.8 | )% | |
Net (loss) income before tax | | (102,105 | ) | | 32 |
| | (102,137 | ) | | (319,178.1 | )% |
Income tax benefit | 1,008 |
| | 3,356 |
| | (2,348 | ) | | (70.0 | )% | 14,647 |
| | 1,008 |
| | 13,639 |
| | 1,353.1 | % |
Net income | $ | 1,040 |
| | $ | 16,821 |
| | $ | (15,781 | ) | | (93.8 | )% | |
Net (loss) income | | $ | (87,458 | ) | | $ | 1,040 |
| | $ | (88,498 | ) | | (8,509.4 | )% |
The tables below set forth information for our total portfolio and our comparable portfolio with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA Margin. For a description of these operating metrics and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating Performance” below. For discussionsdiscussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures” below.
Our comparable portfolio for the three months ended June 30, 20192020 excludes the following resorts: Hilton La Romana All-Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort, which are currentlywere under renovation Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort,in 2019, Hyatt Ziva and Hyatt Zilara Cap Cana, a ground-up development opened November 2019 and Jewel Dunn’s River Beach Resort & Spa and Jewel Paradise CoveRunaway Bay Beach Resort & Spa and Jewel Grande Montego Bay Resort & Spa,Waterpark, which were acquired on June 1, 2018, and Hyatt Ziva & Zilara Cap Cana, a ground-up development projected to open during the fourth quarter of 2019.sold in May 2020.
Total Portfolio
| | | Three Months Ended June 30, | | Increase / Decrease | Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 79.8 | % | | 83.8 | % | | (4.0 | )pts | | (4.8 | )% | — | % | | 79.8 | % | | (79.8 | )pts | | (100.0 | )% |
Net Package ADR | $ | 257.66 |
| | $ | 242.43 |
| | $ | 15.23 |
| | 6.3 | % | $ | — |
| | $ | 257.66 |
| | $ | (257.66 | ) | | (100.0 | )% |
Net Package RevPAR | 205.55 |
| | 203.23 |
| | 2.32 |
| | 1.1 | % | $ | — |
| | $ | 205.55 |
| | $ | (205.55 | ) | | (100.0 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 130,896 |
| | $ | 120,665 |
| | $ | 10,231 |
| | 8.5 | % | $ | 302 |
| | $ | 130,896 |
| | $ | (130,594 | ) | | (99.8 | )% |
Net Non-package Revenue | 24,007 |
| | 21,033 |
| | 2,974 |
| | 14.1 | % | 240 |
| | 24,007 |
| | (23,767 | ) | | (99.0 | )% |
Management Fee Revenue | 551 |
| | 55 |
| | 496 |
| | 901.8 | % | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
Total Net Revenue | 155,454 |
| | 141,753 |
| | 13,701 |
| | 9.7 | % | 524 |
| | 155,454 |
| | (154,930 | ) | | (99.7 | )% |
Adjusted EBITDA | $ | 40,058 |
| | $ | 41,317 |
| | $ | (1,259 | ) | | (3.0 | )% | $ | (31,422 | ) | | $ | 40,058 |
| | $ | (71,480 | ) | | (178.4 | )% |
Adjusted EBITDA Margin | 25.8 | % | | 29.1 | % | | (3.3 | )pts | | (11.3 | )% | (5,996.6 | )% | | 25.8 | % | | (6,022.4 | )pts | | (23,342.6 | )% |
Comparable Portfolio
| | | Three Months Ended June 30, | | Increase / Decrease | Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 81.0 | % | | 83.2 | % | | (2.2 | )pts | | (2.6 | )% | — | % | | 81.3 | % | | (81.3 | )pts | | (100.0 | )% |
Net Package ADR | $ | 268.59 |
| | $ | 252.54 |
| | $ | 16.05 |
| | 6.4 | % | $ | — |
| | $ | 265.62 |
| | $ | (265.62 | ) | | (100.0 | )% |
Net Package RevPAR | 217.65 |
| | 210.10 |
| | 7.55 |
| | 3.6 | % | $ | — |
| | $ | 215.89 |
| | $ | (215.89 | ) | | (100.0 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 96,320 |
| | $ | 92,940 |
| | $ | 3,380 |
| | 3.6 | % | $ | 535 |
| | $ | 111,412 |
| | $ | (110,877 | ) | | (99.5 | )% |
Net Non-package Revenue | 17,592 |
| | 16,550 |
| | 1,042 |
| | 6.3 | % | 218 |
| | 20,244 |
| | (20,026 | ) | | (98.9 | )% |
Management Fee Revenue | 551 |
| | 55 |
| | 496 |
| | 901.8 | % | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
Total Net Revenue | 114,463 |
| | 109,545 |
| | 4,918 |
| | 4.5 | % | 735 |
| | 132,207 |
| | (131,472 | ) | | (99.4 | )% |
Adjusted EBITDA | $ | 30,668 |
| | $ | 29,041 |
| | $ | 1,627 |
| | 5.6 | % | $ | (24,966 | ) | | $ | 35,216 |
| | $ | (60,182 | ) | | (170.9 | )% |
Adjusted EBITDA Margin | 26.8 | % | | 26.5 | % | | 0.3 | pts | | 1.1 | % | (3,396.7 | )% | | 26.6 | % | | (3,423.3 | )pts | | (12,869.5 | )% |
Total Revenue and Total Net Revenue
Our total revenue for the three months ended June 30, 2019 increased $18.52020 decreased $163.0 million, or 12.7%99.4%, compared to the three months ended June 30, 2018.2019. Our Total Net Revenue for the three months ended June 30, 2019 increased $13.72020 decreased $154.9 million, or 9.7%99.7%, compared to the three months ended June 30, 2018. This increase was driven by an increase in Net Package Revenue of $10.2 million, or 8.5%, and an increase in Net Non-package Revenue of $3.0 million, or 14.1%. This increase in Total Net Revenue was2019. These decreases are due to increasesthe closures of $8.8 million and $4.9 million atall our non-comparable portfolio and comparable portfolio, respectively.resorts during the second quarter as a result of the COVID-19 pandemic. See “Impact of COVID-19 Pandemic” above for more information regarding the effects of the COVID-19 pandemic on our results of operations.
The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the three months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Three Months Ended June 30, | | Increase/Decrease | Three Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Net Package Revenue | | | | | | | | | | | | | | |
Comparable Net Package Revenue | $ | 96,320 |
| | $ | 92,940 |
| | $ | 3,380 |
| | 3.6 | % | $ | 535 |
| | $ | 111,412 |
| | $ | (110,877 | ) | | (99.5 | )% |
Non-comparable Net Package Revenue | 34,576 |
| | 27,725 |
| | 6,851 |
| | 24.7 | % | (233 | ) | | 19,484 |
| | (19,717 | ) | | (101.2 | )% |
Net Package Revenue | 130,896 |
| | 120,665 |
| | 10,231 |
| | 8.5 | % | 302 |
| | 130,896 |
| | (130,594 | ) | | (99.8 | )% |
| | | | | | |
|
| | | | | | |
|
|
Net Non-package Revenue | | | | | | |
|
| | | | | | |
|
|
Comparable Net Non-package Revenue | 17,592 |
| | 16,550 |
| | 1,042 |
| | 6.3 | % | 218 |
| | 20,244 |
| | (20,026 | ) | | (98.9 | )% |
Non-comparable Net Non-package Revenue | 6,415 |
| | 4,483 |
| | 1,932 |
| | 43.1 | % | 22 |
| | 3,763 |
| | (3,741 | ) | | (99.4 | )% |
Net Non-package Revenue | 24,007 |
| | 21,033 |
| | 2,974 |
| | 14.1 | % | 240 |
| | 24,007 |
| | (23,767 | ) | | (99.0 | )% |
| | | | | | | | | | | | | | |
Management Fee Revenue | | | | | | |
|
| | | | | | |
|
|
Comparable Management Fee Revenue | 551 |
| | 55 |
| | 496 |
| | 901.8 | % | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
Non-comparable Management Fee Revenue | — |
| | — |
| | — |
| | — | % | — |
| | — |
| | — |
| | — | % |
Management Fee Revenue | 551 |
| | 55 |
| | 496 |
| | 901.8 | % | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
| | | | | | |
|
| | | | | | |
|
|
Total Net Revenue: | | | | | | |
|
| |
Total Net Revenue | | | | | | | |
|
|
Comparable Total Net Revenue | 114,463 |
| | 109,545 |
| | 4,918 |
| | 4.5 | % | 735 |
| | 132,207 |
| | (131,472 | ) | | (99.4 | )% |
Non-comparable Total Net Revenue | 40,991 |
| | 32,208 |
| | 8,783 |
| | 27.3 | % | (211 | ) | | 23,247 |
| | (23,458 | ) | | (100.9 | )% |
Total Net Revenue | 155,454 |
| | 141,753 |
| | 13,701 |
| | 9.7 | % | 524 |
| | 155,454 |
| | (154,930 | ) | | (99.7 | )% |
Compulsory tips | 5,620 |
| | 3,741 |
| | 1,879 |
| | 50.2 | % | — |
| | 5,620 |
| | (5,620 | ) | | (100.0 | )% |
Cost reimbursements | 2,949 |
| | 78 |
| | 2,871 |
| | 3,680.8 | % | |
Cost Reimbursements | | 458 |
| | 2,949 |
| | (2,491 | ) | | (84.5 | )% |
Total revenue | $ | 164,023 |
| | $ | 145,572 |
| | $ | 18,451 |
| | 12.7 | % | $ | 982 |
| | $ | 164,023 |
| | $ | (163,041 | ) | | (99.4 | )% |
Comparable Total Net Revenue
Our Comparable Total Net Revenue for the three months ended June 30, 2019 increased $4.92020 decreased $131.5 million, or 4.5%99.4%, compared to the three months ended June 30, 2018.2019. This increase was driven by an increase in Comparable Net Package Revenue of $3.4 million, or 3.6%, and an increase in Comparable Net Non-package Revenue of $1.0 million, or 6.3%. Comparable Total Net Revenue increased primarilydecrease is due to the increases in Comparable Total Net Revenue atclosures of all our Jamaica and Mexico resorts compared toduring the three months ended June 30, 2018.second quarter, a result of the COVID-19 pandemic. See “Impact of COVID-19 Pandemic” above for more information regarding the effects of the COVID-19 pandemic on our results of operations.
Direct Expenses
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the three months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Three Months Ended June 30, | | Increase/Decrease | Three Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Direct expenses | $ | 92,582 |
| | $ | 78,113 |
| | $ | 14,469 |
| | 18.5 | % | $ | 20,380 |
| | $ | 92,582 |
| | $ | (72,202 | ) | | (78.0 | )% |
Less: compulsory tips | 5,620 |
| | 3,741 |
| | 1,879 |
| | 50.2 | % | — |
| | 5,620 |
| | (5,620 | ) | | (100.0 | )% |
Net Direct Expenses | $ | 86,962 |
| | $ | 74,372 |
| | $ | 12,590 |
| | 16.9 | % | $ | 20,380 |
| | $ | 86,962 |
| | $ | (66,582 | ) | | (76.6 | )% |
Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our Net Direct Expenses were $20.4 million, or 3,889.3% of Total Net Revenue, for the three months ended June 30, 2020 and $87.0 million, or 55.9% of Total Net Revenue, for the three months ended June 30, 2019 and $74.4 million, or 52.5% of Total Net Revenue, for the three months ended June 30, 2018.2019.
Net Direct Expenses for the three months ended June 30, 2019 increased $12.62020 decreased $66.6 million, or 16.9%76.6%, compared to the three months ended June 30, 2018.2019. Net Direct Expenses increased primarilyat our comparable properties decreased $55.9 million, or 77.7%, compared to the three months ended June 30, 2019. Net Direct Expenses decreases are due to the acquisitionclosures of all our resorts during the SagicorAssets, which accounted for $11.8second quarter and
millioncost cutting measures taken in response to the COVID-19 pandemic. We temporarily suspended operations at all of the change.our resorts from late March 2020 through June 2020. Direct operating expenses fluctuate based on various factors, including changes in occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increaseincrease/decrease as a result of higherchanges in revenues.
Net Direct Expenses consists of the following ($ in thousands):
| | | Three Months Ended June 30, | | Increase/Decrease | Three Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Direct expenses: | | | | | | | | |
Food and beverages | $ | 21,269 |
| | $ | 17,455 |
| | $ | 3,814 |
| | 21.9 | % | $ | 702 |
| | $ | 21,269 |
| | $ | (20,567 | ) | | (96.7 | )% |
Salary and wages | 32,663 |
| | 29,375 |
| | 3,288 |
| | 11.2 | % | |
Salaries and wages | | 11,393 |
| | 32,663 |
| | (21,270 | ) | | (65.1 | )% |
Repairs and maintenance | 4,183 |
| | 3,158 |
| | 1,025 |
| | 32.5 | % | 1,478 |
| | 4,183 |
| | (2,705 | ) | | (64.7 | )% |
Utilities and sewerage | 9,482 |
| | 6,734 |
| | 2,748 |
| | 40.8 | % | 3,312 |
| | 9,482 |
| | (6,170 | ) | | (65.1 | )% |
Licenses and property taxes | 921 |
| | 700 |
| | 221 |
| | 31.6 | % | 898 |
| | 921 |
| | (23 | ) | | (2.5 | )% |
Incentive and management fees | 1,856 |
| | 2,721 |
| | (865 | ) | | (31.8 | )% | (256 | ) | | 1,856 |
| | (2,112 | ) | | (113.8 | )% |
Franchise / license fees | 5,929 |
| | 4,991 |
| | 938 |
| | 18.8 | % | 1,227 |
| | 5,929 |
| | (4,702 | ) | | (79.3 | )% |
Transportation and travel expenses | 1,120 |
| | 795 |
| | 325 |
| | 40.9 | % | 74 |
| | 1,120 |
| | (1,046 | ) | | (93.4 | )% |
Laundry and cleaning expenses | 1,144 |
| | 1,183 |
| | (39 | ) | | (3.3 | )% | 270 |
| | 1,144 |
| | (874 | ) | | (76.4 | )% |
Property and equipment rental expense | 923 |
| | 1,530 |
| | (607 | ) | | (39.7 | )% | (31 | ) | | 923 |
| | (954 | ) | | (103.4 | )% |
Entertainment expenses and decoration | 1,901 |
| | 2,428 |
| | (527 | ) | | (21.7 | )% | 14 |
| | 1,901 |
| | (1,887 | ) | | (99.3 | )% |
Office supplies | 370 |
| | 181 |
| | 189 |
| | 104.4 | % | 59 |
| | 370 |
| | (311 | ) | | (84.1 | )% |
Other operational expenses | 5,201 |
| | 3,121 |
| | 2,080 |
| | 66.6 | % | 1,240 |
| | 5,201 |
| | (3,961 | ) | | (76.2 | )% |
Total Net Direct Expenses | $ | 86,962 |
| | $ | 74,372 |
| | $ | 12,590 |
| | 16.9 | % | $ | 20,380 |
| | $ | 86,962 |
| | $ | (66,582 | ) | | (76.6 | )% |
| | | Three Months Ended June 30, | | Increase/Decrease | Three Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Direct expenses: | | | | | | | | |
Food and beverages | $ | 14,030 |
| | $ | 13,009 |
| | $ | 1,021 |
| | 7.8 | % | $ | 503 |
| | $ | 17,478 |
| | $ | (16,975 | ) | | (97.1 | )% |
Salary and wages | 26,027 |
| | 26,134 |
| | (107 | ) | | (0.4 | )% | |
Salaries and wages | | 8,956 |
| | 26,616 |
| | (17,660 | ) | | (66.4 | )% |
Repairs and maintenance | 2,878 |
| | 2,358 |
| | 520 |
| | 22.1 | % | 1,155 |
| | 3,414 |
| | (2,259 | ) | | (66.2 | )% |
Utilities and sewerage | 6,294 |
| | 4,839 |
| | 1,455 |
| | 30.1 | % | 2,426 |
| | 7,646 |
| | (5,220 | ) | | (68.3 | )% |
Licenses and property taxes | 522 |
| | 351 |
| | 171 |
| | 48.7 | % | 656 |
| | 556 |
| | 100 |
| | 18.0 | % |
Incentive and management fees | 1,799 |
| | 1,986 |
| | (187 | ) | | (9.4 | )% | (256 | ) | | 1,855 |
| | (2,111 | ) | | (113.8 | )% |
Franchise / license fees | 4,995 |
| | 4,743 |
| | 252 |
| | 5.3 | % | 1,183 |
| | 5,456 |
| | (4,273 | ) | | (78.3 | )% |
Transportation and travel expenses | 869 |
| | 567 |
| | 302 |
| | 53.3 | % | 21 |
| | 883 |
| | (862 | ) | | (97.6 | )% |
Laundry and cleaning expenses | 580 |
| | 803 |
| | (223 | ) | | (27.8 | )% | 243 |
| | 853 |
| | (610 | ) | | (71.5 | )% |
Property and equipment rental expense | 702 |
| | 1,246 |
| | (544 | ) | | (43.7 | )% | (16 | ) | | 708 |
| | (724 | ) | | (102.3 | )% |
Entertainment expenses and decoration | 1,587 |
| | 2,079 |
| | (492 | ) | | (23.7 | )% | 19 |
| | 1,705 |
| | (1,686 | ) | | (98.9 | )% |
Office supplies | 314 |
| | 149 |
| | 165 |
| | 110.7 | % | 58 |
| | 327 |
| | (269 | ) | | (82.3 | )% |
Other operational expenses | 2,936 |
| | 2,044 |
| | 892 |
| | 43.6 | % | 1,066 |
| | 4,418 |
| | (3,352 | ) | | (75.9 | )% |
Total Net Direct Expenses | $ | 63,533 |
| | $ | 60,308 |
| | $ | 3,225 |
| | 5.3 | % | $ | 16,014 |
| | $ | 71,915 |
| | $ | (55,901 | ) | | (77.7 | )% |
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the three months ended June 30, 20192020 decreased $0.7$12.3 million, or 2.2%38.4%, compared to the three months ended June 30, 2018. Transaction expense decreased $2.62019. These decreases were driven by the closures of all our resorts during the second quarter and cost cutting measures taken in response to the COVID-19 pandemic. We temporarily suspended operations at all of our resorts from late March 2020 through June 2020 which drove a $9.7 million which was partiallydecrease in advertising and commissions, a $2.0 million
decrease in property selling, general and administrative expenses, a $1.0 million decrease in transaction expenses and a $0.4 million decrease in professional fees. These decreases were offset by increasesan increase of $1.6 million and $0.6$1.0 million in advertising expenses and insurance expenses, respectively, due to the acquisition of the SagicorAssets.
expense.
Depreciation and Amortization Expense
Our depreciation and amortization expense for the three months ended June 30, 2019 increased $10.02020 decreased $3.5 million, or 63.1%13.5%, compared to the three months ended June 30, 2018. This increase2019. The decrease was due to the acquisition of the SagicorAssets, which accounted for $4.1a $5.2 million of the change, and a $5.8 million increase in depreciation from renovationsdecrease at the Hilton La Romana All-Inclusive Resort andour 2019 renovation properties, Hilton Playa del Carmen All-Inclusive Resort which includedand Hilton La Romana All-Inclusive Resort that incurred accelerated depreciation on asset disposals.in 2019. This decrease was partially offset by the opening of Hyatt Ziva and Hyatt Zilara Cap Cana in the fourth quarter of 2019, which accounted for a $2.3 million increase.
Impairment loss
Our impairment loss for the three months ended June 30, 2020 increased $25.3 million, or 100.0%, compared to the three months ended June 30, 2019. The increase was due to property and equipment impairment upon classification of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark as held for sale. For further details see Note 4 to our Condensed Consolidated Financial Statements.
Interest Expense
Our interest expense for the three months ended June 30, 20192020 increased $5.0$10.3 million, or 89.4%96.1%, as compared to the three months ended June 30, 2018.2019. The increase in interest expense was driven primarily by the net impact of $0.2a $5.9 million in additional interest due to the issuance of the $100.0 million add-on to our Term Loan in June 2018 to fund the business combination with Sagicor, a $1.5 million reduction in interest expense due to additional capitalized interest and $6.4 million in additional interest expenseincrease due to the change in accounting forfair value of our interest rate swaps. In March 2019, we elected to adopt hedge accounting and designate our interest rate swaps as cash flow hedges. After the adoption of hedge accounting, we recorded the change in fair value of our interest rate swaps through other comprehensive (loss) income. PriorDue to the drop in interest rates, our adoption ofcash flow hedge accounting,was deemed ineffective and dedesignated in March 2020, resulting in recognizing the change in fair value of our interest rate swaps was recognized through interest expense. The change in fair value ofAdditionally, our interest rate swaps resultedexpense increased due to $2.9 million of capitalized interest recorded in a $6.4 million gain and was a reduction to interest expense for the three months ended June 30, 2018.2019 related to our development projects in 2019. For the three months ended June 30, 2020, we did not record any capitalized interest. Finally, our interest expense increased $0.8 million due to draws on our Revolving Credit Facility.
Cash interest paid, excluding the effects of capitalized interest, decreased $7.7increased $0.9 million for the three months ended June 30, 20192020 as compared to the three months ended June 30, 2018.2019. Cash interest paid increased $0.8 million due to additional interest from draws on the Revolving Credit Facility. As of June 30, 2020, the total amount outstanding under our Term Loan decreased $7.1 million over the comparable periods as we changed from paying interest on a quarterly basis to paying interest on a monthly basis to coincide with our interest rate swaps. In 2018, the interest paid in the second quarter of the year included cash interest for February and March. Additionally, we paid $0.6 million less interest over the comparable periods as we entered into the Second Amendment to Amended & RestatedRevolving Credit Agreement on June 7, 2018, which lowered the interest rate applicable to the Term Loan by 0.50% to LIBOR plus 2.75% from LIBOR plus 3.25%.Facility was $84.7 million.
Income Tax Benefit
TheFor the three months ended June 30, 2020, our income tax benefit was $14.6 million, compared to a $1.0 million tax benefit for the three months ended June 30, 2019 was $1.0 million, a decrease of $2.4 million compared2019. See further details in Note 5 to the three months ended June 30, 2018, where we reported an income tax benefit of $3.4 million. The decrease in our income tax benefit was driven primarily by the net impact of an additional tax expense of $6.1 million associated with foreign exchange rate fluctuations and a reduction in tax expense of $4.2 million due to lower pre-tax book income from the tax paying entities.Condensed Consolidated Financial Statements.
Results of Operations
Six Months Ended June 30, 20192020 and 20182019
The following table summarizes our results of operations on a consolidated basis for the six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Revenue: |
| | | | | | | |
Revenue | | | | | | | | |
Package | $ | 305,887 |
| | $ | 278,994 |
| | $ | 26,893 |
| | 9.6 | % | $ | 153,357 |
| | $ | 305,887 |
| | $ | (152,530 | ) | | (49.9 | )% |
Non-package | 48,910 |
| | 42,952 |
| | 5,958 |
| | 13.9 | % | 22,818 |
| | 48,910 |
| | (26,092 | ) | | (53.3 | )% |
Management fees | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
Cost reimbursements | 3,537 |
| | 122 |
| | 3,415 |
| | 2,799.2 | % | 1,408 |
| | 3,537 |
| | (2,129 | ) | | (60.2 | )% |
Total revenue | 359,819 |
| | 322,419 |
| | 37,400 |
| | 11.6 | % | 178,210 |
| | 359,819 |
| | (181,609 | ) | | (50.5 | )% |
Direct and selling, general and administrative expenses: | | | | | | | | |
Direct and selling, general and administrative expenses | | | | | | | | |
Direct | 186,325 |
| | 159,169 |
| | 27,156 |
| | 17.1 | % | 118,278 |
| | 186,325 |
| | (68,047 | ) | | (36.5 | )% |
Selling, general and administrative | 63,876 |
| | 59,253 |
| | 4,623 |
| | 7.8 | % | 53,571 |
| | 63,876 |
| | (10,305 | ) | | (16.1 | )% |
Pre-opening | 291 |
| | — |
| | 291 |
| | 100.0 | % | — |
| | 291 |
| | (291 | ) | | (100.0 | )% |
Depreciation and amortization | 48,219 |
| | 31,571 |
| | 16,648 |
| | 52.7 | % | 47,359 |
| | 48,219 |
| | (860 | ) | | (1.8 | )% |
Reimbursed costs | 3,537 |
| | 122 |
| | 3,415 |
| | 2,799.2 | % | 1,408 |
| | 3,537 |
| | (2,129 | ) | | (60.2 | )% |
Impairment loss | | 41,441 |
| | — |
| | 41,441 |
| | 100.0 | % |
Loss on sale of assets | | 1,729 |
| | — |
| | 1,729 |
| | 100.0 | % |
Gain on insurance proceeds | — |
| | (1,521 | ) | | 1,521 |
| | (100.0 | )% | (2,950 | ) | | — |
| | (2,950 | ) | | 100.0 | % |
Direct and selling, general and administrative expenses | 302,248 |
| | 248,594 |
| | 53,654 |
| | 21.6 | % | 260,836 |
| | 302,248 |
| | (41,412 | ) | | (13.7 | )% |
Operating income | 57,571 |
| | 73,825 |
| | (16,254 | ) | | (22.0 | )% | |
Operating (loss) income | | (82,626 | ) | | 57,571 |
| | (140,197 | ) | | (243.5 | )% |
Interest expense | (24,860 | ) | | (27,514 | ) | | 2,654 |
| | (9.6 | )% | (41,871 | ) | | (24,860 | ) | | (17,011 | ) | | 68.4 | % |
Other expense | (238 | ) | | (1,446 | ) | | 1,208 |
| | (83.5 | )% | |
Net income before tax | 32,473 |
| | 44,865 |
| | (12,392 | ) | | (27.6 | )% | |
Income tax benefit (provision) | 11,555 |
| | (6,227 | ) | | 17,782 |
| | (285.6 | )% | |
Net income | $ | 44,028 |
| | $ | 38,638 |
| | $ | 5,390 |
| | 13.9 | % | |
Other income (expense) | | 947 |
| | (238 | ) | | 1,185 |
| | (497.9 | )% |
Net (loss) income before tax | | (123,550 | ) | | 32,473 |
| | (156,023 | ) | | (480.5 | )% |
Income tax benefit | | 13,536 |
| | 11,555 |
| | 1,981 |
| | 17.1 | % |
Net (loss) income | | $ | (110,014 | ) | | $ | 44,028 |
| | $ | (154,042 | ) | | (349.9 | )% |
The tables below set forth information for our total portfolio and comparable portfolio with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Management Fee Revenue, Total Net Revenue, Adjusted EBITDA and Adjusted EBITDA Margin. For a description of these operating metrics and non-U.S. GAAP measures, see “Key Indicators of Financial and Operating Performance” below. For discussionsdiscussion of Adjusted EBITDA and reconciliation to the most comparable U.S. GAAP financial measures, see “Key Indicators of Financial and Operating Performance” and “Non-U.S. GAAP Financial Measures” below.
Our comparable portfolio for the six months ended June 30, 20192020 excludes the following resorts: Hilton La Romana All-Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort, which are currentlywere under renovation Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort,in 2019, Hyatt Ziva and Hyatt Zilara Cap Cana, a ground-up development opened November 2019 and Jewel Dunn’s River Beach Resort & Spa and Jewel Paradise CoveRunaway Bay Beach Resort & Spa and Jewel Grande Montego Bay Resort & Spa,Waterpark, which were acquired on June 1, 2018, and Hyatt Ziva & Zilara Cap Cana, a ground-up development projected to open during the fourth quarter of 2019.sold in May 2020.
Total Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 79.9 | % | | 85.6 | % | | (5.7 | )pts | | (6.7 | )% | 33.6 | % | | 79.9 | % | | (46.3 | )pts | | (57.9 | )% |
Net Package ADR | $ | 281.93 |
| | $ | 276.86 |
| | $ | 5.07 |
| | 1.8 | % | $ | 297.28 |
| | $ | 281.93 |
| | $ | 15.35 |
| | 5.4 | % |
Net Package RevPAR | 225.37 |
| | 237.08 |
| | (11.71 | ) | | (4.9 | )% | $ | 100.01 |
| | $ | 225.37 |
| | $ | (125.36 | ) | | (55.6 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 294,683 |
| | $ | 271,555 |
| | $ | 23,128 |
| | 8.5 | % | $ | 148,398 |
| | $ | 294,683 |
| | $ | (146,285 | ) | | (49.6 | )% |
Net Non-package Revenue | 48,227 |
| | 42,999 |
| | 5,228 |
| | 12.2 | % | 22,663 |
| | 48,227 |
| | (25,564 | ) | | (53.0 | )% |
Management Fee Revenue | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
Total Net Revenue | 344,395 |
| | 314,905 |
| | 29,490 |
| | 9.4 | % | 171,688 |
| | 344,395 |
| | (172,707 | ) | | (50.1 | )% |
Adjusted EBITDA | $ | 114,843 |
| | $ | 115,876 |
| | $ | (1,033 | ) | | (0.9 | )% | $ | 18,921 |
| | $ | 114,843 |
| | $ | (95,922 | ) | | (83.5 | )% |
Adjusted EBITDA Margin | 33.3 | % | | 36.8 | % | | (3.5 | )pts | | (9.5 | )% | 11.0 | % | | 33.3 | % | | (22.3 | )pts | | (67.0 | )% |
Comparable Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 82.4 | % | | 85.3 | % | | (2.9 | )pts | | (3.4 | )% | 35.7 | % | | 82.8 | % | | (47.1 | )pts | | (56.9 | )% |
Net Package ADR | $ | 292.33 |
| | $ | 286.83 |
| | $ | 5.50 |
| | 1.9 | % | $ | 300.49 |
| | $ | 289.99 |
| | $ | 10.50 |
| | 3.6 | % |
Net Package RevPAR | 240.97 |
| | 244.59 |
| | (3.62 | ) | | (1.5 | )% | $ | 107.35 |
| | $ | 240.13 |
| | $ | (132.78 | ) | | (55.3 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 212,056 |
| | $ | 215,201 |
| | $ | (3,145 | ) | | (1.5 | )% | $ | 110,816 |
| | $ | 246,236 |
| | $ | (135,420 | ) | | (55.0 | )% |
Net Non-package Revenue | 34,946 |
| | 35,089 |
| | (143 | ) | | (0.4 | )% | 17,829 |
| | 40,157 |
| | (22,328 | ) | | (55.6 | )% |
Management Fee Revenue | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
Total Net Revenue | 248,487 |
| | 250,641 |
| | (2,154 | ) | | (0.9 | )% | 129,272 |
| | 287,878 |
| | (158,606 | ) | | (55.1 | )% |
Adjusted EBITDA | $ | 83,192 |
| | $ | 87,169 |
| | $ | (3,977 | ) | | (4.6 | )% | $ | 12,130 |
| | $ | 96,094 |
| | $ | (83,964 | ) | | (87.4 | )% |
Adjusted EBITDA Margin | 33.5 | % | | 34.8 | % | | (1.3 | )pts | | (3.7 | )% | 9.4 | % | | 33.4 | % | | (24.0 | )pts | | (71.9 | )% |
Total Revenue and Total Net Revenue
Our total revenue for the six months ended June 30, 2019 increased $37.42020 decreased $181.6 million, or 11.6%50.5%, compared to the six months ended June 30, 2018.2019. Our Total Net Revenue for the six months ended June 30, 2019 increased $29.52020 decreased $172.7 million, or 9.4%50.1%, compared to the six months ended June 30, 2018. This increase was driven by an increase in Net Package Revenue2019. These decreases are due to the closures of $23.1 million, or 8.5%, and an increase in Net Non-package Revenueall our resorts during the second quarter as a result of $5.2 million, or 12.2%. The increase in Total Net Revenue was driven by our non-comparable portfolio, which accounted for a $31.6 million increase over the comparable periods.COVID-19 pandemic.
The following table shows a reconciliation of comparable Net Package Revenue, Net Non-package Revenue and Management Fee Revenue to total revenue for the six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Six Months Ended June 30, | | Increase/Decrease | Six Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Net Package Revenue | | | | | | | | | | | | | | |
Comparable Net Package Revenue | $ | 212,056 |
| | $ | 215,201 |
| | $ | (3,145 | ) | | (1.5 | )% | $ | 110,816 |
| | $ | 246,236 |
| | $ | (135,420 | ) | | (55.0 | )% |
Non-comparable Net Package Revenue | 82,627 |
| | 56,354 |
| | 26,273 |
| | 46.6 | % | 37,582 |
| | 48,447 |
| | (10,865 | ) | | (22.4 | )% |
Net Package Revenue | 294,683 |
| | 271,555 |
| | 23,128 |
| | 8.5 | % | 148,398 |
| | 294,683 |
| | (146,285 | ) | | (49.6 | )% |
| | | | | | |
|
| | | | | | |
|
|
Net Non-package Revenue | | | | | | |
|
| | | | | | |
|
|
Comparable Net Non-package Revenue | 34,946 |
| | 35,089 |
| | (143 | ) | | (0.4 | )% | 17,829 |
| | 40,157 |
| | (22,328 | ) | | (55.6 | )% |
Non-comparable Net Non-package Revenue | 13,281 |
| | 7,910 |
| | 5,371 |
| | 67.9 | % | 4,834 |
| | 8,070 |
| | (3,236 | ) | | (40.1 | )% |
Net Non-package Revenue | 48,227 |
| | 42,999 |
| | 5,228 |
| | 12.2 | % | 22,663 |
| | 48,227 |
| | (25,564 | ) | | (53.0 | )% |
| | | | | | | | | | | | | | |
Management Fee Revenue | | | | | | | | | | | | | | |
Comparable Management Fee Revenue | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
Non-comparable Management Fee Revenue | — |
| | — |
| | — |
| | — | % | — |
| | — |
| | — |
| | — | % |
Management Fee Revenue | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
| | | | | | |
|
| | | | | | |
|
|
Total Net Revenue: | | | | | | |
|
| |
Total Net Revenue | | | | | | | |
|
|
Comparable Total Net Revenue | 248,487 |
| | 250,641 |
| | (2,154 | ) | | (0.9 | )% | 129,272 |
| | 287,878 |
| | (158,606 | ) | | (55.1 | )% |
Non-comparable Total Net Revenue | 95,908 |
| | 64,264 |
| | 31,644 |
| | 49.2 | % | 42,416 |
| | 56,517 |
| | (14,101 | ) | | (25.0 | )% |
Total Net Revenue | 344,395 |
| | 314,905 |
| | 29,490 |
| | 9.4 | % | 171,688 |
| | 344,395 |
| | (172,707 | ) | | (50.1 | )% |
Compulsory tips | 11,887 |
| | 7,392 |
| | 4,495 |
| | 60.8 | % | 5,114 |
| | 11,887 |
| | (6,773 | ) | | (57.0 | )% |
Cost reimbursements | 3,537 |
| | 122 |
| | 3,415 |
| | 2,799.2 | % | |
Cost Reimbursements | | 1,408 |
| | 3,537 |
| | (2,129 | ) | | (60.2 | )% |
Total revenue | $ | 359,819 |
| | $ | 322,419 |
| | $ | 37,400 |
| | 11.6 | % | $ | 178,210 |
| | $ | 359,819 |
| | $ | (181,609 | ) | | (50.5 | )% |
Comparable Total Net Revenue
Our Comparable Total Net Revenue for the six months ended June 30, 20192020 decreased $2.2$158.6 million, or 0.9%55.1%, compared to the six months ended June 30, 2018.2019. This decrease was driven by a decrease in Comparable Net Package Revenue of $3.1 million, or 1.5%, and a decrease in Comparable Net Non-package Revenue of $0.1 million, or 0.4%. These decreases were partially offset by an increase of $1.1 million in Comparable Management Fee Revenue. Comparable Total Net Revenue decreased primarilyis due to the decreases in Comparable Total Net Revenue atclosures of all our Mexico resorts compared toduring the six months ended June 30, 2018.second quarter, a result of the COVID-19 pandemic. See “Impact of COVID-19 Pandemic” above for more information regarding the effects of the COVID-19 pandemic on our results of operations.
Direct Expenses
The following table shows a reconciliation of our direct expenses to Net Direct Expenses for the six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Six Months Ended June 30, | | Increase/Decrease | Six Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Direct expenses | $ | 186,325 |
| | $ | 159,169 |
| | $ | 27,156 |
| | 17.1 | % | $ | 118,278 |
| | $ | 186,325 |
| | $ | (68,047 | ) | | (36.5 | )% |
Less: compulsory tips | 11,887 |
| | 7,392 |
| | 4,495 |
| | 60.8 | % | 5,114 |
| | 11,887 |
| | (6,773 | ) | | (57.0 | )% |
Net Direct Expenses | $ | 174,438 |
| | $ | 151,777 |
| | $ | 22,661 |
| | 14.9 | % | $ | 113,164 |
| | $ | 174,438 |
| | $ | (61,274 | ) | | (35.1 | )% |
Our direct expenses include resort expenses, such as food and beverage, salaries and wages, utilities and other ongoing operational expenses. Our Net Direct Expenses were $174.4$113.2 million, or 50.7%65.9%, of Total Net Revenue for the six months ended June 30, 20192020 and $151.8$174.4 million, or 48.2%50.7%, of Total Net Revenue for the six months ended June 30, 2018.2019.
Net Direct Expenses for the six months ended June 30, 2019 increased $22.72020 decreased $61.3 million, or 14.9%35.1%, compared to the six months ended June 30, 2018.2019. Net Direct Expenses increased primarilyat our comparable properties decreased $58.0 million, or 40.5%, compared to the six months ended June 30, 2019 due to the acquisitionclosures of all our resorts during the SagicorAssets, which accounted for $29.2second quarter and cost cutting measures taken in
million ofresponse to the change.COVID-19 pandemic. Direct operating expenses fluctuate based on various factors, including changes in occupancy, labor costs, utilities, repair and maintenance costs and license and property taxes. Management fees and franchise fees, which are computed as a percentage of revenue, increaseincrease/decrease as a result of higherchanges in revenues.
Net Direct Expenses consists of the following ($ in thousands):
| | | Six Months Ended June 30, | | Increase/Decrease | Six Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Direct expenses: | | | | | | | | |
Food and beverages | $ | 42,862 |
| | $ | 36,783 |
| | $ | 6,079 |
| | 16.5 | % | $ | 21,592 |
| | $ | 42,862 |
| | $ | (21,270 | ) | | (49.6 | )% |
Salaries and wages | 64,360 |
| | 55,936 |
| | 8,424 |
| | 15.1 | % | 49,008 |
| | 64,360 |
| | (15,352 | ) | | (23.9 | )% |
Repairs and maintenance | 7,981 |
| | 6,654 |
| | 1,327 |
| | 19.9 | % | 5,661 |
| | 7,981 |
| | (2,320 | ) | | (29.1 | )% |
Utilities and sewerage | 18,515 |
| | 14,269 |
| | 4,246 |
| | 29.8 | % | 12,975 |
| | 18,515 |
| | (5,540 | ) | | (29.9 | )% |
Licenses and property taxes | 1,825 |
| | 1,494 |
| | 331 |
| | 22.2 | % | 1,697 |
| | 1,825 |
| | (128 | ) | | (7.0 | )% |
Incentive and management fees | 4,462 |
| | 6,887 |
| | (2,425 | ) | | (35.2 | )% | 1,424 |
| | 4,462 |
| | (3,038 | ) | | (68.1 | )% |
Franchise / license fees | 12,300 |
| | 9,647 |
| | 2,653 |
| | 27.5 | % | 8,235 |
| | 12,300 |
| | (4,065 | ) | | (33.0 | )% |
Transportation and travel expenses | 2,459 |
| | 2,024 |
| | 435 |
| | 21.5 | % | 1,449 |
| | 2,459 |
| | (1,010 | ) | | (41.1 | )% |
Laundry and cleaning expenses | 2,310 |
| | 1,837 |
| | 473 |
| | 25.7 | % | 1,475 |
| | 2,310 |
| | (835 | ) | | (36.1 | )% |
Property and equipment rental expense | 1,910 |
| | 3,117 |
| | (1,207 | ) | | (38.7 | )% | 802 |
| | 1,910 |
| | (1,108 | ) | | (58.0 | )% |
Entertainment expenses and decoration | 3,687 |
| | 3,576 |
| | 111 |
| | 3.1 | % | 2,036 |
| | 3,687 |
| | (1,651 | ) | | (44.8 | )% |
Office supplies | 869 |
| | 1,142 |
| | (273 | ) | | (23.9 | )% | 309 |
| | 869 |
| | (560 | ) | | (64.4 | )% |
Other operational expenses | 10,898 |
| | 8,411 |
| | 2,487 |
| | 29.6 | % | 6,501 |
| | 10,898 |
| | (4,397 | ) | | (40.3 | )% |
Total Net Direct Expenses | $ | 174,438 |
| | $ | 151,777 |
| | $ | 22,661 |
| | 14.9 | % | $ | 113,164 |
| | $ | 174,438 |
| | $ | (61,274 | ) | | (35.1 | )% |
| | | Six Months Ended June 30, | | Increase/Decrease | Six Months Ended June 30, | | Increase/Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Direct expenses: | | | | | | | | |
Food and beverages | $ | 27,858 |
| | $ | 28,714 |
| | $ | (856 | ) | | (3.0 | )% | $ | 15,350 |
| | $ | 34,691 |
| | $ | (19,341 | ) | | (55.8 | )% |
Salaries and wages | 51,106 |
| | 50,474 |
| | 632 |
| | 1.3 | % | 37,997 |
| | 52,428 |
| | (14,431 | ) | | (27.5 | )% |
Repairs and maintenance | 5,318 |
| | 5,227 |
| | 91 |
| | 1.7 | % | 4,232 |
| | 6,420 |
| | (2,188 | ) | | (34.1 | )% |
Utilities and sewerage | 12,160 |
| | 10,789 |
| | 1,371 |
| | 12.7 | % | 9,257 |
| | 14,809 |
| | (5,552 | ) | | (37.5 | )% |
Licenses and property taxes | 1,008 |
| | 826 |
| | 182 |
| | 22.0 | % | 1,289 |
| | 1,180 |
| | 109 |
| | 9.2 | % |
Incentive and management fees | 4,487 |
| | 4,929 |
| | (442 | ) | | (9.0 | )% | 1,424 |
| | 4,543 |
| | (3,119 | ) | | (68.7 | )% |
Franchise / license fees | 9,687 |
| | 9,399 |
| | 288 |
| | 3.1 | % | 6,201 |
| | 10,816 |
| | (4,615 | ) | | (42.7 | )% |
Transportation and travel expenses | 1,731 |
| | 1,628 |
| | 103 |
| | 6.3 | % | 904 |
| | 1,820 |
| | (916 | ) | | (50.3 | )% |
Laundry and cleaning expenses | 1,160 |
| | 1,377 |
| | (217 | ) | | (15.8 | )% | 1,026 |
| | 1,691 |
| | (665 | ) | | (39.3 | )% |
Property and equipment rental expense | 1,449 |
| | 2,789 |
| | (1,340 | ) | | (48.0 | )% | 678 |
| | 1,523 |
| | (845 | ) | | (55.5 | )% |
Entertainment expenses and decoration | 3,047 |
| | 3,122 |
| | (75 | ) | | (2.4 | )% | 1,565 |
| | 3,283 |
| | (1,718 | ) | | (52.3 | )% |
Office supplies | 737 |
| | 953 |
| | (216 | ) | | (22.7 | )% | 239 |
| | 765 |
| | (526 | ) | | (68.8 | )% |
Other operational expenses | 6,080 |
| | 6,840 |
| | (760 | ) | | (11.1 | )% | 5,019 |
| | 9,164 |
| | (4,145 | ) | | (45.2 | )% |
Total Net Direct Expenses | $ | 125,828 |
| | $ | 127,067 |
| | $ | (1,239 | ) | | (1.0 | )% | $ | 85,181 |
| | $ | 143,133 |
| | $ | (57,952 | ) | | (40.5 | )% |
Selling, General and Administrative Expenses
Our selling, general and administrative expenses for the six months ended June 30, 2019 increased $4.62020 decreased $10.3 million, or 7.8%16.1%, compared to the six months ended June 30, 2018. This increase was primarily driven by2019. These decreases are due to the acquisitionclosures of all our resorts during the Sagicor Assets,second quarter and cost cutting measures taken in response to the COVID-19 pandemic, which accounted fordrove a $7.2decrease of $10.4 million increase, partially offset byin advertising and commissions, a $3.0$2.3 million decrease in transaction expenses and a $1.7 million decrease in property selling, general and administrative expenses. These decreases were offset by an increase of $1.5 million in insurance expense, a $1.2 million increase in share-based compensation, a $1.0 million increase in corporate personnel expense and a $0.2 million increase in professional fees.
Depreciation and Amortization Expense
Our depreciation and amortization expense for the six months ended June 30, 2019 increased $16.62020 decreased $0.9 million, or 52.7%1.8%, compared to the six months ended June 30, 2018. This increase2019. The decrease was due to the acquisition of the SagicorAssets, which accounted for $8.0a $5.0 million of the increase, and an $8.3 million increase in depreciation from renovationsdecrease at the Hilton La Romana All-Inclusive Resort andour 2019 renovation properties, Hilton Playa del Carmen All-Inclusive Resort which includedand Hilton La Romana All-Inclusive Resort that incurred accelerated depreciation on asset disposals.in 2019. This decrease was partially offset by the opening of Hyatt Ziva and Hyatt Zilara Cap Cana in the fourth quarter of 2019, which accounted for a $4.9 million increase.
Impairment Loss
Our impairment loss for the six months ended June 30, 2020 increased $41.4 million, or 100.0%, compared to the six months ended June 30, 2019. The increase was driven by $25.3 million of property and equipment impairment recognized upon classification of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark as held for sale (see Note 4 to our Condensed Consolidated Financial Statements). The remaining increase was due to goodwill impairment resulting from the decrease in forecasted future cash flows in the first quarter of 2020 from the temporary suspension of operations from COVID-19 (see Note 14 to our Condensed Consolidated Financial Statements).
Interest Expense
Our interest expense for the six months ended June 30, 2019 decreased $2.72020 increased $17.0 million, or 9.6%68.4%, as compared to the six months ended June 30, 2018.2019. The decreaseincrease in interest expense was driven primarily by the net impact of a $2.9$10.3 million reduction in interest expense due to additional capitalized interest, an additional $2.9 million in interest expense due to the issuance of the $100.0 million add-on to our Term Loan in 2018 to fund the business combination with Sagicor and a reduction of $2.6 million in interest expenseincrease due to the change in accounting forfair value of our interest rate swaps. In March 2019, we elected to adopt hedge accounting and designate our interest rate swaps as cash flow hedges. After the adoption of hedge accounting, we recorded the change in fair value of our interest rate swaps through other comprehensive (loss) income. PriorDue to the drop in interest rates, our adoption ofcash flow hedge accounting,was deemed ineffective and dedesignated in March 2020, resulting in recognizing the change in fair value of our interest rate swaps was recognized through interest expense. The change in fair value ofAdditionally, our interest rate swaps resultedexpense increased due to $5.0 million of capitalized interest recorded in a $2.6 million loss and generated additional interest expense for the six months ended June 30, 2018.2019 for our development projects in 2019. For the six months ended June 30, 2020, we did not record any capitalized interest. Finally, our interest expense increased $1.5 million due to draws on our Revolving Credit Facility.
Cash interest paid, excluding the effects of capitalized interest, decreased $2.7increased $1.3 million for the six months ended June 30, 20192020 as compared to the six months ended June 30, 2018.2019. Cash interest paid on our Term Loan decreased $4.2 million over the comparable periods as we changed from paying interest on a quarterly basis to paying interest on a monthly basis to coincide with our interest rate swaps. In 2018, the interest paid in the first half of the year included cash interest for November and December of 2017. The decrease in cash interest paid was offset by an increase in interest paid ofincreased $1.5 million due primarily to additional interest from draws on the issuanceRevolving Credit Facility. As of June 30, 2020, the $100.0 million add-on tototal amount outstanding under our Term Loan to fund the business combination with Sagicor.Revolving Credit Facility was $84.7 million.
Income Tax Benefit
TheFor the six months ended June 30, 2020, our income tax benefit was $13.5 million, compared to a $11.6 million income tax benefit for the six months ended June 30, 2019 was $11.6 million, an increase of $17.8 million compared2019. See further details in Note 5 to the six months ended June 30, 2018, during which period we reported an income tax provision of $6.2 million. The increase in our income tax benefit was driven primarily by the net impact of our valuation allowance release of $14.3 million from the newly implemented transfer pricing policy, a $7.0 million decrease due to lower pre-tax book income from our tax paying entities and a $2.5 million increase in the discrete tax expense associated with foreign exchange rate fluctuations.Condensed Consolidated Financial Statements.
Key Indicators of Financial and Operating Performance
We use a variety of financial and other information to monitor the financial and operating performance of our business. Some of this is financial information prepared in accordance with U.S. GAAP, while other information, though financial in nature, is not prepared in accordance with U.S. GAAP. For reconciliations of non-U.S. GAAP financial measures to the most comparable U.S. GAAP financial measure, see “Non-U.S. GAAP Financial Measures.” Our management also uses other information that is not financial in nature, including statistical information and comparative data that are commonly used within the lodging industry to evaluate the financial and operating performance of our portfolio. Our management uses this information to measure the performance of our segments and consolidated portfolio. We use this information for planning and monitoring our business, as well as in determining management and employee compensation. These key indicators include:
Net Package Revenue
Net Non-package Revenue
Owned Net Revenue
Management Fee Revenue
Total Net Revenue
Occupancy
Net Package ADR
Net Package RevPAR
Adjusted EBITDA
Adjusted EBITDA Margin
Owned Resort EBITDA
Owned Resort EBITDA Margin | |
• | Owned Resort EBITDA Margin |
Comparable Non-U.S. GAAP Measures
Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Management Fee Revenue, Cost Reimbursements, Total Net Revenue and Net Direct Expenses
“Net Package Revenue” is derived from the sale of all-inclusive packages, which include room accommodations, food and beverage services and entertainment activities, net of compulsory tips paid to employees in all of our jurisdictions.employees. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Revenue is recognized, net of discounts and rebates, when the rooms are occupied and/or the relevant services have been rendered. Advance deposits received from guests are deferred and included in trade and other payables until the rooms are occupied and/or the relevant services have been rendered, at which point the revenue is recognized.
“Net Non-package Revenue” represents all other revenues earned from the operations of our resorts, other than Net Package Revenue, net of compulsory tips paid to employees in all of our jurisdictions.employees. Government mandated compulsory tips in the Dominican Republic are not included in this adjustment, as they are already excluded from revenue. Net Non-package Revenue includes revenue associated with guests' purchases of upgrades, premium services and amenities, such as premium rooms, dining experiences, wines and spirits and spa packages, which are not included in the all-inclusive package. Revenue not included in a guest’s all-inclusive package is recognized when the goods are consumed.
“Owned Net Revenue” represents Net Package Revenue and Net Non-PackageNon-package Revenue. Owned Net Revenue represents a key indicator to assess the overall performance of our business and analyze trends, such as consumer demand, brand preference and competition. In analyzing our Owned Net Revenues, our management differentiates between Net Package Revenue and Net Non-package Revenue. Guests at our resorts purchase packages at stated rates, which include room accommodations, food and beverage services and entertainment activities, in contrast to other lodging business models, which typically only include the room accommodations in the stated rate. The amenities at all-inclusive resorts typically include a variety of buffet and á la carte restaurants, bars, activities, and shows and entertainment throughout the day.
“Management Fee Revenue” is derived from fees earned for managing hotels owned by third-parties. The fees earned are typically composed of a base fee, which is computed as a percentage of revenue, and an incentive fee, which is computed as a percentage of profitability. Management Fee Revenue had a minor contribution to our operating results for the three and six months ended June 30, 20192020 and 2018,2019, but we expect Management Fee Revenue to be a more relevant indicator to assess the overall performance of our business in the future as we enter into more management contracts.
“Total Net Revenue” represents Net Package Revenue, Net Non-package Revenue and Management Fee Revenue. “Cost Reimbursements” is excluded from Total Net Revenue as it is not considered a key indicator of financial and operating performance. Cost reimbursementsReimbursements is derived from the reimbursement of certain costs incurred by Playa on behalf of resorts managed by Playa and owned by third parties. This revenue is fully offset by reimbursable costs and has no net impact on operating (loss) income or net (loss) income.
“Net Direct Expenses” represents direct expenses, net of compulsory tips paid to employees in all of our jurisdictions.employees.
Occupancy
“Occupancy” represents the total number of rooms sold for a period divided by the total number of rooms available during such period. The total number of rooms available excludes any rooms considered “Out of Order” due to renovation or a temporary problem rendering them inadequate for occupancy for an extended period of time. Occupancy is a useful measure of the utilization of a resort’s total available capacity and can be used to gauge demand at a specific resort or group of properties during a given period. Occupancy levels also enable us to optimize Net Package ADR by increasing or decreasing the stated rate for our all-inclusive packages as demand for a resort increases or decreases.
Net Package ADR
“Net Package ADR” represents total Net Package Revenue for a period divided by the total number of rooms sold during such period. Net Package ADR trends and patterns provide useful information concerning the pricing environment and the nature of the guest base of our portfolio or comparable portfolio, as applicable. Net Package ADR is a commonly used performance measure in the
all-inclusive segment of the lodging industry, and is commonly used to assess the stated rates that guests are willing to pay through various distribution channels.
Net Package RevPAR
“Net Package RevPAR” is the product of Net Package ADR and the average daily occupancy percentage. Net Package RevPAR does not reflect the impact of non-package revenue. Although Net Package RevPAR does not include this additional revenue, it generally is considered the key performance measure in the all-inclusive segment of the lodging industry to identify trend information with respect to net room revenue produced by our portfolio or comparable portfolio, as applicable, and to evaluate operating performance on a consolidated basis or a regional basis, as applicable.
EBITDA, Adjusted EBITDA, Owned Resort EBITDA, Owned Resort EBITDA Margin and Adjusted EBITDA Margin
We define EBITDA, a non-U.S. GAAP financial measure, as net income or loss, determined in accordance with U.S. GAAP, for the period presented, before interest expense, income tax and depreciation and amortization expense. We define Adjusted EBITDA, a non-U.S. GAAP financial measure, as EBITDA further adjusted to exclude the following items:
Other income (expense)or expense
| |
• | Gain on property damage insurance proceeds |
Share-based compensation
| |
• | Loss on extinguishment of debt |
| |
• | Other items which may include, but are not limited to the following: management contract termination fees; gains or losses from legal settlements; repairs from hurricanes and tropical storms;storms and impairment losses and Jamaica delayed opening accrual reversals.losses. |
We include the non-service cost components of net periodic pension (cost)cost or benefit recorded within other income (expense) in the Condensed Consolidated Statements of Operations in calculating Adjusted EBITDA as they are considered part of our ongoing resort operations.
“Owned Resort EBITDA” represents Adjusted EBITDA before corporate expenses and Management Fee Revenue.
“Owned Resort EBITDA Margin” represents Owned Resort EBITDA as a percentage of Owned Net Revenue.
“Adjusted EBITDA Margin” represents Adjusted EBITDA as a percentage of Total Net Revenue.
Non-U.S. GAAP Measures
We believe that each of Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Total Net Revenue, Net Package ADR, Net Package RevPAR and Net Direct Expenses are all useful to investors as they more accurately reflect our operating results by excluding compulsory tips. These tips have a margin of zero and do not represent our operating results.
We also believe that Adjusted EBITDA is useful to investors for two principal reasons. First, we believe Adjusted EBITDA assists investors in comparing our performance over various reporting periods on a consistent basis by removing from our operating results the impact of items that do not reflect our core operating performance. For example, changes in foreign exchange rates (which are the principal driver of changes in other expense), and expenses related to capital raising, strategic initiatives and other corporate initiatives, such as expansion into new markets (which are the principal drivers of changes in transaction expenses), are not indicative of the operating performance of our resorts. The other adjustments included in our definition of Adjusted EBITDA relate to items that occur infrequently and therefore would obstruct the comparability of our operating results over reporting periods. For example, revenue from insurance policies, other than business interruption insurance policies, is infrequent in nature, and we believe excluding these expense and revenue items permits investors to better evaluate the core operating performance of our resorts over time. We believe Adjusted EBITDA Margin provides our investors a useful measurement of operating profitability for the same reasons we find Adjusted EBITDA useful.
The second principal reason that we believe Adjusted EBITDA is useful to investors is that it is considered a key performance indicator by our board of directors (our “Board”) and management. In addition, the compensation committee of our Board determines
the annual variable compensation for certain members of our management based, in part, on consolidated Adjusted EBITDA. We believe that Adjusted EBITDA is useful to investors because it provides investors with information utilized by our Board and management to assess our performance and may (subject to the limitations described below) enable investors to compare the performance of our portfolio to our competitors.
Any of ourOur non-U.S. GAAP financial measures are not substitutes for revenue, net income or any other measure determined in accordance with U.S. GAAP. There are limitations to the utility of non-U.S. GAAP financial measures, such as Adjusted EBITDA. For example, other companies in our industry may define Adjusted EBITDA differently than we do. As a result, it may be difficult to use Adjusted EBITDA or similarly named non-U.S. GAAP financial measures that other companies publish to compare the performance of those companies to our performance. Because of these limitations, our non-U.S. GAAP financial measures should not be considered as a measure of the income or loss generated by our business or discretionary cash available for investment in our business, and investors should carefully consider our U.S. GAAP results presented.
For a reconciliation of EBITDA, Adjusted EBITDA and Owned Resort EBITDA to net income as computed under U.S. GAAP, see “Non-U.S. GAAP Financial Measures.”
Comparable Non-U.S. GAAP Measures
We believe that presenting Adjusted EBITDA, Total Net Revenue, Net Package Revenue, Net Non-package Revenue and Net Direct Expenses on a comparable basis is useful to investors because these measures include only the results of resorts owned and in operation for the entirety of the periods presented and thereby eliminate disparities in results due to the acquisition or disposition of resorts or the impact of resort closures or re-openings in connection with redevelopment or renovation projects. As a result, we believe these measures provide more consistent metrics for comparing the performance of our operating resorts. We calculate comparable Adjusted EBITDA, comparable Total Net Revenue, comparable Net Package Revenue and comparable Net Non-package Revenue as the total amount of each respective measure less amounts attributable to non-comparable resorts, by which we mean resorts that were not owned or in operation during some or all of the relevant reporting period.
Our comparable resorts for the three and six months ended June 30, 2019 exclude2020 excludes the following:following resorts: Hilton La Romana All-Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort, which are currentlywere under renovations, Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort,renovation in 2019, Hyatt Ziva and Hyatt Zilara Cap Cana, a ground-up development opened November 2019 and Jewel Dunn’s River Beach Resort & Spa and Jewel Paradise CoveRunaway Bay Beach Resort & Spa and Jewel Grande Montego Bay Resort & Spa,Waterpark which were acquired on June 1, 2018, and Hyatt Ziva & Zilara Cap Cana, a ground-up development projected to open during the fourth quarter of 2019. sold in May 2020.
A reconciliation of net income as computed under U.S. GAAP to comparable Adjusted EBITDA is presented in “Non-U.S. GAAP Financial Measures,” below. For a reconciliation of comparableComparable Net Package Revenue, comparableComparable Net Non-package Revenue, comparableComparable Management Fee Revenue and comparableComparable Total Net Revenue to total revenue as computed under U.S. GAAP, see “Results of Operations.”
Segment Results
Three Months Ended June 30, 20192020 and 20182019
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for the three months ended June 30, 20192020 and 20182019 ($ in thousands):
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Owned Net Revenue: | | | | | | | |
Yucatán Peninsula | $ | 59,772 |
| | $ | 63,667 |
| | $ | (3,895 | ) | | (6.1 | )% |
Pacific Coast | 22,087 |
| | 19,815 |
| | 2,272 |
| | 11.5 | % |
Dominican Republic | 22,566 |
| | 31,495 |
| | (8,929 | ) | | (28.4 | )% |
Jamaica | 50,464 |
| | 26,730 |
| | 23,734 |
| | 88.8 | % |
Segment Owned Net Revenue | 154,889 |
| | 141,707 |
| | 13,182 |
| | 9.3 | % |
Other | 14 |
| | (9 | ) | | 23 |
| | 255.6 | % |
Management fees | 551 |
| | 55 |
| | 496 |
| | 901.8 | % |
Total Net Revenue | $ | 155,454 |
| | $ | 141,753 |
| | $ | 13,701 |
| | 9.7 | % |
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Owned Net Revenue | | | | | | | |
Yucatán Peninsula | $ | 21 |
| | $ | 59,772 |
| | $ | (59,751 | ) | | (100.0 | )% |
Pacific Coast | (74 | ) | | 22,087 |
| | (22,161 | ) | | (100.3 | )% |
Dominican Republic | 11 |
| | 22,566 |
| | (22,555 | ) | | (100.0 | )% |
Jamaica | 564 |
| | 50,464 |
| | (49,900 | ) | | (98.9 | )% |
Segment Owned Net Revenue | 522 |
| | 154,889 |
| | (154,367 | ) | | (99.7 | )% |
Other | 20 |
| | 14 |
| | 6 |
| | 42.9 | % |
Management fees | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
Total Net Revenue | $ | 524 |
| | $ | 155,454 |
| | $ | (154,930 | ) | | (99.7 | )% |
| | | Three Months Ended June 30, | | Increase / Decrease | Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Owned Resort EBITDA: | | | | | | | | |
Owned Resort EBITDA | | | | | | | | |
Yucatán Peninsula | $ | 21,151 |
| | $ | 25,726 |
| | $ | (4,575 | ) | | (17.8 | )% | $ | (8,004 | ) | | $ | 21,151 |
| | $ | (29,155 | ) | | (137.8 | )% |
Pacific Coast | 8,569 |
| | 6,550 |
| | 2,019 |
| | 30.8 | % | (2,816 | ) | | 8,569 |
| | (11,385 | ) | | (132.9 | )% |
Dominican Republic | 5,043 |
| | 9,586 |
| | (4,543 | ) | | (47.4 | )% | (4,881 | ) | | 5,043 |
| | (9,924 | ) | | (196.8 | )% |
Jamaica | 14,631 |
| | 8,089 |
| | 6,542 |
| | 80.9 | % | (8,097 | ) | | 14,631 |
| | (22,728 | ) | | (155.3 | )% |
Segment Owned Resort EBITDA | 49,394 |
| | 49,951 |
| | (557 | ) | | (1.1 | )% | (23,798 | ) | | 49,394 |
| | (73,192 | ) | | (148.2 | )% |
Other corporate - unallocated | (9,887 | ) | | (8,689 | ) | | (1,198 | ) | | 13.8 | % | |
Other corporate | | (7,606 | ) | | (9,887 | ) | | 2,281 |
| | (23.1 | )% |
Management fees | 551 |
| | 55 |
| | 496 |
| | 901.8 | % | (18 | ) | | 551 |
| | (569 | ) | | (103.3 | )% |
Total Adjusted EBITDA | $ | 40,058 |
| | $ | 41,317 |
| | $ | (1,259 | ) | | (3.0 | )% | $ | (31,422 | ) | | $ | 40,058 |
| | $ | (71,480 | ) | | (178.4 | )% |
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 1915 to our Condensed Consolidated Financial Statements.
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Yucatán Peninsula segment for the three months ended June 30, 2020 and 2019 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 84.4 | % | | (84.4 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 256.75 |
| | $ | (256.75 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 216.78 |
| | $ | (216.78 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | (167 | ) | | $ | 51,626 |
| | $ | (51,793 | ) | | (100.3 | )% |
Net Non-package Revenue | 188 |
| | 8,146 |
| | (7,958 | ) | | (97.7 | )% |
Owned Net Revenue | 21 |
| | 59,772 |
| | (59,751 | ) | | (100.0 | )% |
Owned Resort EBITDA | $ | (8,004 | ) | | $ | 21,151 |
| | $ | (29,155 | ) | | (137.8 | )% |
Owned Resort EBITDA Margin | (38,114.3 | )% | | 35.4 | % | | (38,149.7 | )pts | | (107,767.5 | )% |
Comparable Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 84.7 | % | | (84.7 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 259.07 |
| | $ | (259.07 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 219.39 |
| | $ | (219.39 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | (73 | ) | | $ | 43,864 |
| | $ | (43,937 | ) | | (100.2 | )% |
Net Non-package Revenue | 169 |
| | 6,784 |
| | (6,615 | ) | | (97.5 | )% |
Owned Net Revenue | 96 |
| | 50,648 |
| | (50,552 | ) | | (99.8 | )% |
Owned Resort EBITDA | $ | (6,735 | ) | | $ | 18,458 |
| | $ | (25,193 | ) | | (136.5 | )% |
Owned Resort EBITDA Margin | (7,015.6 | )% | | 36.4 | % | | (7,052.0 | )pts | | (19,373.6 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended June 30, 2020 decreased $50.6 million, or 99.8%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended June 30, 2020 decreased $25.2 million, or 136.5%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Pacific Coast
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Pacific Coast segment for the three months ended June 30, 2020 and 2019 for the total segment portfolio:
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 76.6 | % | | (76.6 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 295.48 |
| | $ | (295.48 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 226.37 |
| | $ | (226.37 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | (89 | ) | | $ | 19,076 |
| | $ | (19,165 | ) | | (100.5 | )% |
Net Non-package Revenue | 15 |
| | 3,011 |
| | (2,996 | ) | | (99.5 | )% |
Owned Net Revenue | (74 | ) | | 22,087 |
| | (22,161 | ) | | (100.3 | )% |
Owned Resort EBITDA | $ | (2,816 | ) | | $ | 8,569 |
| | $ | (11,385 | ) | | (132.9 | )% |
Owned Resort EBITDA Margin | 3,805.4 | % | | 38.8 | % | | 3,766.6 | pts | | 9,707.7 | % |
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended June 30, 2020 decreased $22.2 million, or 100.3%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Segment Owned Resort EBITDA.Our Owned Resort EBITDA for the three months ended June 30, 2020 decreased $11.4 million, or 132.9%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Dominican Republic
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Dominican Republic segment for the three months ended June 30, 2020 and 2019 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 72.6 | % | | (72.6 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 182.37 |
| | $ | (182.37 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 132.34 |
| | $ | (132.34 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | (178 | ) | | $ | 18,171 |
| | $ | (18,349 | ) | | (101.0 | )% |
Net Non-package Revenue | 189 |
| | 4,395 |
| | (4,206 | ) | | (95.7 | )% |
Owned Net Revenue | 11 |
| | 22,566 |
| | (22,555 | ) | | (100.0 | )% |
Owned Resort EBITDA | $ | (4,881 | ) | | $ | 5,043 |
| | $ | (9,924 | ) | | (196.8 | )% |
Owned Resort EBITDA Margin | (44,372.7 | )% | | 22.3 | % | | (44,395.0 | )pts | | (199,080.7 | )% |
Comparable Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 79.7 | % | | (79.7 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 186.98 |
| | $ | (186.98 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 149.03 |
| | $ | (149.03 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | (6 | ) | | $ | 15,189 |
| | $ | (15,195 | ) | | (100.0 | )% |
Net Non-package Revenue | 92 |
| | 3,735 |
| | (3,643 | ) | | (97.5 | )% |
Owned Net Revenue | 86 |
| | 18,924 |
| | (18,838 | ) | | (99.5 | )% |
Owned Resort EBITDA | $ | (1,092 | ) | | $ | 5,751 |
| | $ | (6,843 | ) | | (119.0 | )% |
Owned Resort EBITDA Margin | (1,269.8 | )% | | 30.4 | % | | (1,300.2 | )pts | | (4,277.0 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended June 30, 2020 decreased $18.8 million, or 99.5%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended June 30, 2020 decreased $6.8 million, or 119.0%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Jamaica
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Jamaica segment for the three months ended June 30, 2020 and 2019 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 80.6 | % | | (80.6 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 294.39 |
| | $ | (294.39 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 237.30 |
| | $ | (237.30 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 736 |
| | $ | 42,023 |
| | $ | (41,287 | ) | | (98.2 | )% |
Net Non-package Revenue | (172 | ) | | 8,441 |
| | (8,613 | ) | | (102.0 | )% |
Owned Net Revenue | 564 |
| | 50,464 |
| | (49,900 | ) | | (98.9 | )% |
Owned Resort EBITDA | $ | (8,097 | ) | | $ | 14,631 |
| | $ | (22,728 | ) | | (155.3 | )% |
Owned Resort EBITDA Margin | (1,435.6 | )% | | 29.0 | % | | (1,464.6 | )pts | | (5,050.3 | )% |
Comparable Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Occupancy | — | % | | 80.3 | % | | (80.3 | )pts | | (100.0 | )% |
Net Package ADR | $ | — |
| | $ | 318.98 |
| | $ | (318.98 | ) | | (100.0 | )% |
Net Package RevPAR | $ | — |
| | $ | 256.12 |
| | $ | (256.12 | ) | | (100.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 703 |
| | $ | 33,283 |
| | $ | (32,580 | ) | | (97.9 | )% |
Net Non-package Revenue | (78 | ) | | 6,700 |
| | (6,778 | ) | | (101.2 | )% |
Owned Net Revenue | 625 |
| | 39,983 |
| | (39,358 | ) | | (98.4 | )% |
Owned Resort EBITDA | $ | (6,699 | ) | | $ | 11,774 |
| | $ | (18,473 | ) | | (156.9 | )% |
Owned Resort EBITDA Margin | (1,071.8 | )% | | 29.4 | % | | (1,101.2 | )pts | | (3,745.6 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended June 30, 2020 decreased $39.4 million, or 98.4%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended June 30, 2020 decreased $18.5 million, or 156.9%, compared to the three months ended June 30, 2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the COVID-19 pandemic.
Segment Results
Six Months Ended June 30, 2020 and 2019
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for the six months ended June 30, 2020 and 2019 ($ in thousands):
|
| | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Owned Net Revenue | | | | | | | |
Yucatán Peninsula | $ | 62,338 |
| | $ | 129,985 |
| | $ | (67,647 | ) | | (52.0 | )% |
Pacific Coast | 21,081 |
| | 47,657 |
| | (26,576 | ) | | (55.8 | )% |
Dominican Republic | 35,607 |
| | 55,641 |
| | (20,034 | ) | | (36.0 | )% |
Jamaica | 52,000 |
| | 109,611 |
| | (57,611 | ) | | (52.6 | )% |
Segment Owned Net Revenue | 171,026 |
| | 342,894 |
| | (171,868 | ) | | (50.1 | )% |
Other | 35 |
| | 16 |
| | 19 |
| | 118.8 | % |
Management Fee Revenue | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
Total Net Revenue | $ | 171,688 |
| | $ | 344,395 |
| | $ | (172,707 | ) | | (50.1 | )% |
|
| | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Increase / Decrease |
| 2020 | | 2019 | | Change | | % Change |
Owned Resort EBITDA | | | | | | | |
Yucatán Peninsula | $ | 16,931 |
| | $ | 53,310 |
| | $ | (36,379 | ) | | (68.2 | )% |
Pacific Coast | 6,056 |
| | 20,956 |
| | (14,900 | ) | | (71.1 | )% |
Dominican Republic | 2,908 |
| | 18,506 |
| | (15,598 | ) | | (84.3 | )% |
Jamaica | 10,976 |
| | 38,979 |
| | (28,003 | ) | | (71.8 | )% |
Segment Owned Resort EBITDA | 36,871 |
| | 131,751 |
| | (94,880 | ) | | (72.0 | )% |
Other corporate | (18,577 | ) | | (18,393 | ) | | (184 | ) | | 1.0 | % |
Management Fee Revenue | 627 |
| | 1,485 |
| | (858 | ) | | (57.8 | )% |
Total Adjusted EBITDA | $ | 18,921 |
| | $ | 114,843 |
| | $ | (95,922 | ) | | (83.5 | )% |
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 15 to our Condensed Consolidated Financial Statements.
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Yucatán Peninsula segment for the threesix months ended June 30, 20192020 and 20182019 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
| | | Three Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 84.4 | % | | 86.2 | % | | (1.8 | )pts | | (2.1 | )% | 37.0 | % | | 84.8 | % | | (47.8 | )pts | | (56.4 | )% |
Net Package ADR | $ | 256.75 |
| | $ | 263.11 |
| | $ | (6.36 | ) | | (2.4 | )% | $ | 298.32 |
| | $ | 279.62 |
| | $ | 18.70 |
| | 6.7 | % |
Net Package RevPAR | 216.78 |
| | 226.91 |
| | (10.13 | ) | | (4.5 | )% | $ | 110.45 |
| | $ | 236.98 |
| | $ | (126.53 | ) | | (53.4 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 51,626 |
| | $ | 55,917 |
| | $ | (4,291 | ) | | (7.7 | )% | $ | 54,719 |
| | $ | 114,195 |
| | $ | (59,476 | ) | | (52.1 | )% |
Net Non-package Revenue | 8,146 |
| | 7,750 |
| | 396 |
| | 5.1 | % | 7,619 |
| | 15,790 |
| | (8,171 | ) | | (51.7 | )% |
Owned Net Revenue | 59,772 |
| | 63,667 |
| | (3,895 | ) | | (6.1 | )% | 62,338 |
| | 129,985 |
| | (67,647 | ) | | (52.0 | )% |
Owned Resort EBITDA | $ | 21,151 |
| | $ | 25,726 |
| | $ | (4,575 | ) | | (17.8 | )% | $ | 16,931 |
| | $ | 53,310 |
| | $ | (36,379 | ) | | (68.2 | )% |
Owned Resort EBITDA Margin | 35.4 | % | | 40.4 | % | | (5.0 | )pts | | (12.4 | )% | 27.2 | % | | 41.0 | % | | (13.8 | )pts | | (33.7 | )% |
Comparable Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 84.7 | % | | 87.1 | % | | (2.4 | )pts | | (2.8 | )% |
Net Package ADR | $ | 259.07 |
| | $ | 258.31 |
| | $ | 0.76 |
| | 0.3 | % |
Net Package RevPAR | 219.39 |
| | 224.93 |
| | (5.54 | ) | | (2.5 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 43,863 |
| | $ | 44,930 |
| | $ | (1,067 | ) | | (2.4 | )% |
Net Non-package Revenue | 6,785 |
| | 6,382 |
| | 403 |
| | 6.3 | % |
Owned Net Revenue | 50,648 |
| | 51,312 |
| | (664 | ) | | (1.3 | )% |
Owned Resort EBITDA | $ | 18,458 |
| | $ | 19,772 |
| | $ | (1,314 | ) | | (6.6 | )% |
Owned Resort EBITDA Margin | 36.4 | % | | 38.5 | % | | (2.1 | )pts | | (5.5 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended June 30, 2019 decreased $0.7 million, or 1.3%, compared to the three months ended June 30, 2018. This decrease was primarily driven by a decrease in occupancy of 240 basis points. Excluding Panama Jack Resorts Cancún, Comparable Owned Net Revenue at all other
properties decreased $1.7 million compared to the three months ended June 30, 2018. These decreases were partially offset by the strong performance of Panama Jack Resorts Cancún, which accounted for a $1.0 million increase. Rates in the Yucatán Peninsula have been depressed given several headwinds impacting the market.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended June 30, 2019 decreased $1.3 million, or 6.6%, compared to the three months ended June 30, 2018. Excluding Panama Jack Resorts Cancún and Hyatt Ziva Cancún, Segment Comparable Owned Resort EBITDA at all other properties decreased $1.9 million compared to the three months ended June 30, 2018. These decreases were partially offset by the performance of Panama Jack Resorts Cancún and Hyatt Ziva Cancún, which accounted for a $0.6 million increase. All properties within this segment have also been affected by increased energy costs year over year which contributed to a $0.5 million decrease in Comparable Owned Resort EBITDA compared to the three months ended June 30, 2018.
Pacific Coast
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-Package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Pacific Coast segment for the three months ended June 30, 2019 and 2018 for the total segment portfolio:
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 76.6 | % | | 76.6 | % | | — |
| | — | % |
Net Package ADR | $ | 295.48 |
| | $ | 258.38 |
| | $ | 37.10 |
| | 14.4 | % |
Net Package RevPAR | 226.37 |
| | 197.98 |
| | 28.39 |
| | 14.3 | % |
| ($ in thousands) |
Net Package Revenue | $ | 19,076 |
| | $ | 16,683 |
| | $ | 2,393 |
| | 14.3 | % |
Net Non-package Revenue | 3,011 |
| | 3,132 |
| | (121 | ) | | (3.9 | )% |
Owned Net Revenue | 22,087 |
| | 19,815 |
| | 2,272 |
| | 11.5 | % |
Owned Resort EBITDA | $ | 8,569 |
| | $ | 6,550 |
| | $ | 2,019 |
| | 30.8 | % |
Owned Resort EBITDA Margin | 38.8 | % | | 33.1 | % | | 5.7 | pts | | 17.2 | % |
Segment Owned Net Revenue. Our Owned Net Revenue for the three months ended June 30, 2019 increased $2.3 million, or 11.5%, compared to the three months ended June 30, 2018. This increase was due to the strong performance by both properties within this segment. Hyatt Ziva Los Cabos had an 89.4% increase in group occupancy year over year, which lead to higher Net Package ADR compared to the prior year. Hyatt Ziva Puerto Vallarta continues to show growth in Net Package ADR after the completion of renovations in 2017.
Segment Owned Resort EBITDA.Our Owned Resort EBITDA for the three months ended June 30, 2019 increased $2.0 million, or 30.8%, compared to the three months ended June 30, 2018. This increase was due to increased Owned Net Revenue, as well as continued focus on controlling operating expenses by both properties within this segment.
Dominican Republic
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Dominican Republic segment for the three months ended June 30, 2019 and 2018 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 72.6 | % | | 85.4 | % | | (12.8 | )pts | | (15.0 | )% |
Net Package ADR | $ | 182.37 |
| | $ | 175.98 |
| | $ | 6.39 |
| | 3.6 | % |
Net Package RevPAR | 132.34 |
| | 150.31 |
| | (17.97 | ) | | (12.0 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 18,171 |
| | $ | 25,661 |
| | $ | (7,490 | ) | | (29.2 | )% |
Net Non-package Revenue | 4,395 |
| | 5,834 |
| | (1,439 | ) | | (24.7 | )% |
Owned Net Revenue | 22,566 |
| | 31,495 |
| | (8,929 | ) | | (28.4 | )% |
Owned Resort EBITDA | $ | 5,043 |
| | $ | 9,586 |
| | $ | (4,543 | ) | | (47.4 | )% |
Owned Resort EBITDA Margin | 22.3 | % | | 30.4 | % | | (8.1 | )pts | | (26.6 | )% |
Comparable Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 79.7 | % | | 85.8 | % | | (6.1 | )pts | | (7.1 | )% |
Net Package ADR | $ | 186.98 |
| | $ | 181.54 |
| | $ | 5.44 |
| | 3.0 | % |
Net Package RevPAR | 149.03 |
| | 155.69 |
| | (6.66 | ) | | (4.3 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 15,189 |
| | $ | 15,867 |
| | $ | (678 | ) | | (4.3 | )% |
Net Non-package Revenue | 3,735 |
| | 3,711 |
| | 24 |
| | 0.6 | % |
Owned Net Revenue | 18,924 |
| | 19,578 |
| | (654 | ) | | (3.3 | )% |
Owned Resort EBITDA | $ | 5,751 |
| | $ | 6,049 |
| | $ | (298 | ) | | (4.9 | )% |
Owned Resort EBITDA Margin | 30.4 | % | | 30.9 | % | | (0.5 | )pts | | (1.6 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended June 30, 2019 decreased $0.7 million, or 3.3%, compared to the three months ended June 30, 2018. This decrease was due to a decrease in Net Package RevPAR of 4.3% over the same period in the prior year, driven by a decrease in Occupancy of 610 basis points and partially offset by an increase in Net Package ADR of 3.0%.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended June 30, 2019 decreased $0.3 million, or 4.9%, compared to the three months ended June 30, 2018. This decrease was a direct impact of the decrease in Comparable Owned Net Revenue discussed above. The negative press regarding the Dominican Republic, and corresponding near-term business disruption, had a negative impact on June results in this segment.
Jamaica
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Jamaica segment for the three months ended June 30, 2019 and 2018 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 80.6 | % | | 81.1 | % | | (0.5 | )pts | | (0.6 | )% |
Net Package ADR | $ | 294.39 |
| | $ | 299.40 |
| | $ | (5.01 | ) | | (1.7 | )% |
Net Package RevPAR | 237.30 |
| | 242.68 |
| | (5.38 | ) | | (2.2 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 42,023 |
| | $ | 22,404 |
| | $ | 19,619 |
| | 87.6 | % |
Net Non-Package Revenue | 8,441 |
| | 4,326 |
| | 4,115 |
| | 95.1 | % |
Owned Net Revenue | 50,464 |
| | 26,730 |
| | 23,734 |
| | 88.8 | % |
Owned Resort EBITDA | $ | 14,631 |
| | $ | 8,089 |
| | $ | 6,542 |
| | 80.9 | % |
Owned Resort EBITDA Margin | 29.0 | % | | 30.3 | % | | (1.3 | )pts | | (4.3 | )% |
Comparable Portfolio
|
| | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 77.1 | % | | 74.6 | % | | 2.5 | pts | | 3.4 | % |
Net Package ADR | $ | 418.05 |
| | $ | 367.11 |
| | $ | 50.94 |
| | 13.9 | % |
Net Package RevPAR | 322.43 |
| | 274.02 |
| | 48.41 |
| | 17.7 | % |
| ($ in thousands) |
Net Package Revenue | $ | 18,192 |
| | $ | 15,460 |
| | $ | 2,732 |
| | 17.7 | % |
Net Non-Package Revenue | 4,047 |
| | 3,334 |
| | 713 |
| | 21.4 | % |
Owned Net Revenue | 22,239 |
| | 18,794 |
| | 3,445 |
| | 18.3 | % |
Owned Resort EBITDA | $ | 7,226 |
| | $ | 5,303 |
| | $ | 1,923 |
| | 36.3 | % |
Owned Resort EBITDA Margin | 32.5 | % | | 28.2 | % | | 4.3 | pts | | 15.2 | % |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the three months ended June 30, 2019 increased $3.4 million, or 18.3%, compared to the three months ended June 30, 2018. This increase was due to the performance of Hyatt Ziva and Zilara Rose Hall, which accounted for the full $3.4 million increase in Comparable Owned Net Revenue compared to the three months ended June 30, 2018. This property continues to show positive growth after the completion of renovations in 2017.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the three months ended June 30, 2019 increased $1.9 million, or 36.3%, compared to the three months ended June 30, 2018. This increase was due to the performance of Hyatt Ziva and Zilara Rose Hall, which accounted for the full $1.9 million increase in Comparable Owned Resort EBITDA compared to three months ended June 30, 2018. This property continues to show positive results after the completion of renovations in 2017 combined with improvements in cost control and expansion of direct sales channels.
Segment Results
Six Months Ended June 30, 2019 and 2018
We evaluate our business segment operating performance using segment Owned Net Revenue and segment Owned Resort EBITDA. The following tables summarize segment Owned Net Revenue and segment Owned Resort EBITDA for the six months ended June 30, 2019 and 2018 ($ in thousands):
|
| | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Owned Net Revenue: | | | | | | | |
Yucatán Peninsula | $ | 129,985 |
| | $ | 142,938 |
| | $ | (12,953 | ) | | (9.1 | )% |
Pacific Coast | 47,657 |
| | 48,870 |
| | (1,213 | ) | | (2.5 | )% |
Dominican Republic | 55,641 |
| | 71,913 |
| | (16,272 | ) | | (22.6 | )% |
Jamaica | 109,611 |
| | 50,490 |
| | 59,121 |
| | 117.1 | % |
Segment Owned Net Revenue | 342,894 |
| | 314,211 |
| | 28,683 |
| | 9.1 | % |
Other (1) | 16 |
| | 343 |
| | (327 | ) | | (95.3 | )% |
Management Fee Revenue | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % |
Total Net Revenue | $ | 344,395 |
| | $ | 314,905 |
| | $ | 29,490 |
| | 9.4 | % |
|
| | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Owned Resort EBITDA: | | | | | | | |
Yucatán Peninsula | $ | 53,310 |
| | $ | 65,330 |
| | $ | (12,020 | ) | | (18.4 | )% |
Pacific Coast | 20,956 |
| | 20,458 |
| | 498 |
| | 2.4 | % |
Dominican Republic | 18,506 |
| | 28,013 |
| | (9,507 | ) | | (33.9 | )% |
Jamaica | 38,979 |
| | 18,733 |
| | 20,246 |
| | 108.1 | % |
Segment Owned Resort EBITDA | 131,751 |
| | 132,534 |
| | (783 | ) | | (0.6 | )% |
Other corporate - unallocated | (18,393 | ) | | (17,009 | ) | | (1,384 | ) | | 8.1 | % |
Management Fee Revenue | 1,485 |
| | 351 |
| | 1,134 |
| | 323.1 | % |
Total Adjusted EBITDA | $ | 114,843 |
| | $ | 115,876 |
| | $ | (1,033 | ) | | (0.9 | )% |
________
(1) Primarily includes a reversal on an expense accrual recorded in 2014 related to our future stay obligations provided to guests affected by the delayed opening of Hyatt Ziva and Hyatt Zilara Rose Hall. This reversal concluded in the first quarter of 2018.
For a reconciliation of segment Owned Net Revenue and segment Owned Resort EBITDA to total revenue and net income, respectively, each as computed under U.S. GAAP, see Note 19 to our Condensed Consolidated Financial Statements.
Yucatán Peninsula
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Yucatán Peninsula segment for the six months ended June 30, 2019 and 2018 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
|
| | | | | | | | | | | | | | |
| Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change |
Occupancy | 84.8 | % | | 88.3 | % | | (3.5 | )pts | | (4.0 | )% |
Net Package ADR | $ | 279.62 |
| | $ | 293.70 |
| | $ | (14.08 | ) | | (4.8 | )% |
Net Package RevPAR | 236.98 |
| | 259.25 |
| | (22.27 | ) | | (8.6 | )% |
| ($ in thousands) |
Net Package Revenue | $ | 114,195 |
| | $ | 127,071 |
| | $ | (12,876 | ) | | (10.1 | )% |
Net Non-package Revenue | 15,790 |
| | 15,867 |
| | (77 | ) | | (0.5 | )% |
Owned Net Revenue | 129,985 |
| | 142,938 |
| | (12,953 | ) | | (9.1 | )% |
Owned Resort EBITDA | $ | 53,310 |
| | $ | 65,330 |
| | $ | (12,020 | ) | | (18.4 | )% |
Owned Resort EBITDA Margin | 41.0 | % | | 45.7 | % | | (4.7 | )pts | | (10.3 | )% |
Comparable Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 85.5 | % | | 88.9 | % | | (3.4 | )pts | | (3.8 | )% | 37.4 | % | | 85.5 | % | | (48.1 | )pts | | (56.3 | )% |
Net Package ADR | $ | 279.82 |
| | $ | 287.92 |
| | $ | (8.10 | ) | | (2.8 | )% | $ | 296.38 |
| | $ | 279.82 |
| | $ | 16.56 |
| | 5.9 | % |
Net Package RevPAR | 239.15 |
| | 256.10 |
| | (16.95 | ) | | (6.6 | )% | $ | 110.77 |
| | $ | 239.15 |
| | $ | (128.38 | ) | | (53.7 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 95,058 |
| | $ | 101,746 |
| | $ | (6,688 | ) | | (6.6 | )% | $ | 44,310 |
| | $ | 95,058 |
| | $ | (50,748 | ) | | (53.4 | )% |
Net Non-package Revenue | 13,094 |
| | 12,999 |
| | 95 |
| | 0.7 | % | 6,044 |
| | 13,094 |
| | (7,050 | ) | | (53.8 | )% |
Owned Net Revenue | 108,152 |
| | 114,745 |
| | (6,593 | ) | | (5.7 | )% | 50,354 |
| | 108,152 |
| | (57,798 | ) | | (53.4 | )% |
Owned Resort EBITDA | $ | 44,272 |
| | $ | 50,129 |
| | $ | (5,857 | ) | | (11.7 | )% | $ | 13,070 |
| | $ | 44,272 |
| | $ | (31,202 | ) | | (70.5 | )% |
Owned Resort EBITDA Margin | 40.9 | % | | 43.7 | % | | (2.8 | )pts | | (6.4 | )% | 26.0 | % | | 40.9 | % | | (14.9 | )pts | | (36.4 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the six months ended June 30, 20192020 decreased $6.6$57.8 million, or 5.7%53.4%, compared to the six months ended June 30, 2018. This decrease was primarily driven by2019. These decreases are a decrease in Occupancyresult of 340 basis points and a decreasethe temporary suspension of 2.8% in Net Package ADR. Excluding Panama Jack Resorts Cancún, Comparable Owned Net Revenueoperations at all other properties decreased $7.8 million comparedof our resorts from late March 2020 through June 2020 in response to the six months ended June 30, 2018. These decreases were partially offset by a $1.2 million increase in Panama Jack Resorts Cancún. Rates in the Yucatán Peninsula have been depressed given several headwinds impacting the market.COVID-19 pandemic.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the six months ended June 30, 20192020 decreased $5.9$31.2 million, or 11.7%70.5%, compared to the six months ended June 30, 2018. Excluding Panama Jack Resorts Cancún, Comparable Owned Resort EBITDA2019. These decreases are a result of the temporary suspension of operations at all other properties decreased $6.4 million comparedof our resorts from late March 2020 through June 2020 in response to the six months ended June 30, 2018. This decrease was offset by the performance of Panama Jack Resorts Cancún, which accounted for a $0.5 million increase in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018. All properties within this segment have also been affected by increased insurance premiums and energy costs year over year which contributed to a $1.3 million decrease in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018.COVID-19 pandemic.
Pacific Coast
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Pacific Coast segment for the six months ended June 30, 20192020 and 20182019 for the total segment portfolio:
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 76.2 | % | | 78.9 | % | | (2.7 | )pts | | (3.4 | )% | 31.2 | % | | 76.2 | % | | (45.0 | )pts | | (59.1 | )% |
Net Package ADR | $ | 321.38 |
| | $ | 308.32 |
| | $ | 13.06 |
| | 4.2 | % | $ | 342.58 |
| | $ | 321.38 |
| | $ | 21.20 |
| | 6.6 | % |
Net Package RevPAR | 244.91 |
| | 243.16 |
| | 1.75 |
| | 0.7 | % | $ | 106.93 |
| | $ | 244.91 |
| | $ | (137.98 | ) | | (56.3 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 41,048 |
| | $ | 40,755 |
| | $ | 293 |
| | 0.7 | % | $ | 18,021 |
| | $ | 41,048 |
| | $ | (23,027 | ) | | (56.1 | )% |
Net Non-package Revenue | 6,609 |
| | 8,115 |
| | (1,506 | ) | | (18.6 | )% | 3,060 |
| | 6,609 |
| | (3,549 | ) | | (53.7 | )% |
Owned Net Revenue | 47,657 |
| | 48,870 |
| | (1,213 | ) | | (2.5 | )% | 21,081 |
| | 47,657 |
| | (26,576 | ) | | (55.8 | )% |
Owned Resort EBITDA | $ | 20,956 |
| | $ | 20,458 |
| | $ | 498 |
| | 2.4 | % | $ | 6,056 |
| | $ | 20,956 |
| | $ | (14,900 | ) | | (71.1 | )% |
Owned Resort EBITDA Margin | 44.0 | % | | 41.9 | % | | 2.1 | pts | | 5.0 | % | 28.7 | % | | 44.0 | % | | (15.3 | )pts | | (34.8 | )% |
Segment Owned Net Revenue. Our Owned Net Revenue for the six months ended June 30, 20192020 decreased $1.2$26.6 million, or 2.5%55.8%, compared to the six months ended June 30, 2018. The decrease was due2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the performance of Hyatt Ziva Los Cabos, which accounted for a $2.4 million decrease in Owned Net Revenue compared to the six months ended June 30, 2018. These results were offset by a $1.2 million increase from Hyatt Ziva Puerto Vallarta, which continues to show growth in Net Package ADR after the completion of renovations in 2017.COVID-19 pandemic.
Segment Owned Resort EBITDA. Our Owned Resort EBITDA for the six months ended June 30, 2019 increased $0.52020 decreased $14.9 million, or 2.4%71.1%, compared to the six months ended June 30, 2018. This increase was due2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the performance of Hyatt Ziva Puerto Vallarta, which increased Owned Resort EBITDA by $1.2 million compared to the six months ended June 30, 2018. These results were offset by Hyatt Ziva Los Cabos, which experienced a decrease in Owned Resort EBITDA of $0.7 million compared to the six months ended June 30, 2018. Group business, which generates higher rates and additional non-package revenue, was significantly lower in the first quarter of 2019 compared to 2018, but was partially offset for the six months ended June 30, 2019 by significant improvement in group business during the second quarter of 2019. All properties within this segment have been affected by increased insurance premiums and energy costs year over year which contributed to a $0.6 million decrease in Owned Resort EBITDA compared to the six months ended June 30, 2018.COVID-19 pandemic.
Dominican Republic
The following tables set forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Dominican Republic segment for the six months ended June 30, 20192020 and 20182019 for the total segment portfolio and comparable segment portfolio:
Total Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 72.2 | % | | 87.4 | % | | (15.2 | )pts | | (17.4 | )% | 28.6 | % | | 72.2 | % | | (43.6 | )pts | | (60.4 | )% |
Net Package ADR | $ | 210.59 |
| | $ | 205.72 |
| | $ | 4.87 |
| | 2.4 | % | $ | 226.04 |
| | $ | 210.59 |
| | $ | 15.45 |
| | 7.3 | % |
Net Package RevPAR | 152.10 |
| | 179.79 |
| | (27.69 | ) | | (15.4 | )% | $ | 64.74 |
| | $ | 152.10 |
| | $ | (87.36 | ) | | (57.4 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 46,646 |
| | $ | 61,049 |
| | $ | (14,403 | ) | | (23.6 | )% | $ | 31,152 |
| | $ | 46,646 |
| | $ | (15,494 | ) | | (33.2 | )% |
Net Non-package Revenue | 8,995 |
| | 10,864 |
| | (1,869 | ) | | (17.2 | )% | 4,455 |
| | 8,995 |
| | (4,540 | ) | | (50.5 | )% |
Owned Net Revenue | 55,641 |
| | 71,913 |
| | (16,272 | ) | | (22.6 | )% | 35,607 |
| | 55,641 |
| | (20,034 | ) | | (36.0 | )% |
Owned Resort EBITDA | $ | 18,506 |
| | $ | 28,013 |
| | $ | (9,507 | ) | | (33.9 | )% | $ | 2,908 |
| | $ | 18,506 |
| | $ | (15,598 | ) | | (84.3 | )% |
Owned Resort EBITDA Margin | 33.3 | % | | 39.0 | % | | (5.7 | )pts | | (14.6 | )% | 8.2 | % | | 33.3 | % | | (25.1 | )pts | | (75.4 | )% |
Comparable Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 84.5 | % | | 87.9 | % | | (3.4 | )pts | | (3.9 | )% | 36.7 | % | | 84.5 | % | | (47.8 | )pts | | (56.6 | )% |
Net Package ADR | $ | 213.01 |
| | $ | 207.46 |
| | $ | 5.55 |
| | 2.7 | % | $ | 180.36 |
| | $ | 213.01 |
| | $ | (32.65 | ) | | (15.3 | )% |
Net Package RevPAR | 179.89 |
| | 182.34 |
| | (2.45 | ) | | (1.3 | )% | $ | 66.19 |
| | $ | 179.89 |
| | $ | (113.70 | ) | | (63.2 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 36,468 |
| | $ | 36,964 |
| | $ | (496 | ) | | (1.3 | )% | $ | 13,493 |
| | $ | 36,468 |
| | $ | (22,975 | ) | | (63.0 | )% |
Net Non-package Revenue | 7,048 |
| | 6,814 |
| | 234 |
| | 3.4 | % | 2,579 |
| | 7,048 |
| | (4,469 | ) | | (63.4 | )% |
Owned Net Revenue | 43,516 |
| | 43,778 |
| | (262 | ) | | (0.6 | )% | 16,072 |
| | 43,516 |
| | (27,444 | ) | | (63.1 | )% |
Owned Resort EBITDA | $ | 15,976 |
| | $ | 17,292 |
| | $ | (1,316 | ) | | (7.6 | )% | $ | 2,787 |
| | $ | 15,976 |
| | $ | (13,189 | ) | | (82.6 | )% |
Owned Resort EBITDA Margin | 36.7 | % | | 39.5 | % | | (2.8 | )pts | | (7.1 | )% | 17.3 | % | | 36.7 | % | | (19.4 | )pts | | (52.9 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the six months ended June 30, 20192020 decreased $0.3$27.4 million, or 0.6%63.1%, compared to the six months ended June 30, 2018. This decrease was driven by2019. These decreases are a decreaseresult of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in Occupancy of 340 basis points, which was partially offset by an increase of 2.7% in Net Package ADR.response to the COVID-19 pandemic.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the six months ended June 30, 20192020 decreased $1.3$13.2 million, or 7.6%82.6%, compared to the six months ended June 30, 2018. This decrease was due2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the performance of all properties in this segment, but was primarily driven by Dreams Punta Cana due to a non-recurring gain from business interruption insurance proceeds of $1.5 million during the six months ended June 30, 2018. The negative press regarding the Dominican Republic, and corresponding near-term business disruption, had a negative impact on June results in this segment.COVID-19 pandemic.
Jamaica
The following table sets forth information with respect to our Occupancy, Net Package ADR, Net Package RevPAR, Net Package Revenue, Net Non-package Revenue, Owned Net Revenue, Owned Resort EBITDA and Owned Resort EBITDA Margin for our Jamaica segment for the six months ended June 30, 20192020 and 20182019 for the total segment portfolio and comparable segment portfolio.portfolio:
Total Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 81.9 | % | | 80.5 | % | | 1.4 | pts | | 1.7 | % | 37.0 | % | | 81.9 | % | | (44.9 | )pts | | (54.8 | )% |
Net Package ADR | $ | 322.63 |
| | $ | 357.92 |
| | $ | (35.29 | ) | | (9.9 | )% | $ | 355.09 |
| | $ | 322.63 |
| | $ | 32.46 |
| | 10.1 | % |
Net Package RevPAR | 264.10 |
| | 288.14 |
| | (24.04 | ) | | (8.3 | )% | $ | 131.43 |
| | $ | 264.10 |
| | $ | (132.67 | ) | | (50.2 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 92,794 |
| | $ | 42,680 |
| | $ | 50,114 |
| | 117.4 | % | $ | 44,506 |
| | $ | 92,794 |
| | $ | (48,288 | ) | | (52.0 | )% |
Net Non-package Revenue | 16,817 |
| | 7,810 |
| | 9,007 |
| | 115.3 | % | 7,494 |
| | 16,817 |
| | (9,323 | ) | | (55.4 | )% |
Owned Net Revenue | 109,611 |
| | 50,490 |
| | 59,121 |
| | 117.1 | % | 52,000 |
| | 109,611 |
| | (57,611 | ) | | (52.6 | )% |
Owned Resort EBITDA | $ | 38,979 |
| | $ | 18,733 |
| | $ | 20,246 |
| | 108.1 | % | $ | 10,976 |
| | $ | 38,979 |
| | $ | (28,003 | ) | | (71.8 | )% |
Owned Resort EBITDA Margin | 35.6 | % | | 37.1 | % | | (1.5 | )pts | | (4.0 | )% | 21.1 | % | | 35.6 | % | | (14.5 | )pts | | (40.7 | )% |
Comparable Portfolio
| | | Six Months Ended June 30, | | Increase / Decrease | Six Months Ended June 30, | | Increase / Decrease |
| 2019 | | 2018 | | Change | | % Change | 2020 | | 2019 | | Change | | % Change |
Occupancy | 77.3 | % | | 77.1 | % | | 0.2 | pts | | 0.3 | % | 35.3 | % | | 81.7 | % | | (46.4 | )pts | | (56.8 | )% |
Net Package ADR | $ | 455.08 |
| | $ | 413.02 |
| | $ | 42.06 |
| | 10.2 | % | $ | 380.91 |
| | $ | 349.98 |
| | $ | 30.93 |
| | 8.8 | % |
Net Package RevPAR | 351.83 |
| | 318.44 |
| | 33.39 |
| | 10.5 | % | $ | 134.64 |
| | $ | 285.95 |
| | $ | (151.31 | ) | | (52.9 | )% |
| ($ in thousands) | ($ in thousands) |
Net Package Revenue | $ | 39,482 |
| | $ | 35,736 |
| | $ | 3,746 |
| | 10.5 | % | $ | 34,992 |
| | $ | 73,662 |
| | (38,670 | ) | | (52.5 | )% |
Net Non-package Revenue | 8,179 |
| | 6,818 |
| | 1,361 |
| | 20.0 | % | 6,111 |
| | 13,390 |
| | (7,279 | ) | | (54.4 | )% |
Owned Net Revenue | 47,661 |
| | 42,554 |
| | 5,107 |
| | 12.0 | % | 41,103 |
| | 87,052 |
| | (45,949 | ) | | (52.8 | )% |
Owned Resort EBITDA | 18,896 |
| | 15,947 |
| | 2,949 |
| | 18.5 | % | $ | 8,167 |
| | $ | 31,798 |
| | $ | (23,631 | ) | | (74.3 | )% |
Owned Resort EBITDA Margin | 39.6 | % | | 37.5 | % | | 2.1 | pts | | 5.6 | % | 19.9 | % | | 36.5 | % | | (16.6 | )pts | | (45.5 | )% |
Segment Comparable Owned Net Revenue. Our Comparable Owned Net Revenue for the six months ended June 30, 2019 increased $5.12020 decreased $45.9 million, or 12.0%52.8%, compared to the six months ended June 30, 2018. This increase was due2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the performance of Hyatt Ziva and Zilara Rose Hall, which accounted for the full $5.1 million increase in Comparable Owned Net Revenue compared to the six months ended June 30, 2018. This property continues to show positive growth after the completion of renovations in 2017.COVID-19 pandemic.
Segment Comparable Owned Resort EBITDA. Our Comparable Owned Resort EBITDA for the six months ended June 30, 2019 increased $2.92020 decreased $23.6 million, or 18.5%74.3%, compared to the six months ended June 30, 2018. This increase was due2019. These decreases are a result of the temporary suspension of operations at all of our resorts from late March 2020 through June 2020 in response to the performance of Hyatt Ziva and Zilara Rose Hall, which accounted for the full $2.9 million increase in Comparable Owned Resort EBITDA compared to the six months ended June 30, 2018. This property continues to show positive growth after the completion of renovations in 2017.COVID-19 pandemic.
Non-U.S. GAAP Financial Measures
Reconciliation of Net Income to Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization)
The following is a reconciliation of our U.S. GAAP net (loss) income to EBITDA, Adjusted EBITDA, Owned Resort EBITDA and Comparable Owned Resort EBITDA for the three and six months ended June 30, 20192020 and 20182019 ($ in thousands):
| | | Three Months Ended June 30, | | Six Months Ended June 30, | Three Months Ended June 30, | | Six Months Ended June 30, |
| 2019 | | 2018 | | 2019 | | 2018 | 2020 | | 2019 | | 2020 | | 2019 |
Net income | $ | 1,040 |
| | $ | 16,821 |
| | $ | 44,028 |
| | $ | 38,638 |
| |
Net (loss) income | | $ | (87,458 | ) | | $ | 1,040 |
| | $ | (110,014 | ) | | $ | 44,028 |
|
Interest expense | 10,666 |
| | 5,632 |
| | 24,860 |
| | 27,514 |
| 20,916 |
| | 10,666 |
| | 41,871 |
| | 24,860 |
|
Income tax (benefit) provision | (1,008 | ) | | (3,356 | ) | | (11,555 | ) | | 6,227 |
| |
Income tax benefit | | (14,647 | ) | | (1,008 | ) | | (13,536 | ) | | (11,555 | ) |
Depreciation and amortization | 25,908 |
| | 15,882 |
| | 48,219 |
| | 31,571 |
| 22,400 |
| | 25,908 |
| | 47,359 |
| | 48,219 |
|
EBITDA | 36,606 |
| | 34,979 |
| | 105,552 |
| | 103,950 |
| (58,789 | ) | | 36,606 |
| | (34,320 | ) | | 105,552 |
|
Other (income) expense (a) | (364 | ) | | (378 | ) | | 238 |
| | 1,446 |
| (4,853 | ) | | (364 | ) | | (947 | ) | | 238 |
|
Share-based compensation | 2,014 |
| | 2,104 |
| | 4,762 |
| | 3,890 |
| 2,719 |
| | 2,014 |
| | 5,942 |
| | 4,762 |
|
Pre-opening expenses | 202 |
| | — |
| | 291 |
| | — |
| — |
| | 202 |
| | — |
| | 291 |
|
Transaction expense (b) | 1,273 |
| | 3,887 |
| | 3,240 |
| | 6,231 |
| 289 |
| | 1,273 |
| | 875 |
| | 3,240 |
|
Severance expense (c) | 133 |
| | — |
| | 133 |
| | — |
| 1,246 |
| | 133 |
| | 2,444 |
| | 133 |
|
Other tax expense (d) | 443 |
| | 427 |
| | 802 |
| | 858 |
| 231 |
| | 443 |
| | 468 |
| | 802 |
|
Jamaica delayed opening accrual reversal (e) | — |
| | — |
| | — |
| | (342 | ) | |
Non-service cost components of net periodic pension (cost) benefit (f) | (249 | ) | | 298 |
| | (175 | ) | | (157 | ) | |
Impairment loss (e) | | 25,268 |
| | — |
| | 41,441 |
| | — |
|
Loss on sale of assets | | 1,729 |
| | — |
| | 1,729 |
| | — |
|
Non-service cost components of net periodic pension benefit (cost) (f) | | 738 |
| | (249 | ) | | 1,289 |
| | (175 | ) |
Adjusted EBITDA | 40,058 |
| | 41,317 |
| | 114,843 |
| | 115,876 |
| (31,422 | ) | | 40,058 |
| | 18,921 |
| | 114,843 |
|
Other corporate - unallocated | 9,887 |
| | 8,689 |
| | 18,393 |
| | 17,009 |
| |
Other corporate | | 7,606 |
| | 9,887 |
| | 18,577 |
| | 18,393 |
|
Management fee income | (551 | ) | | (55 | ) | | (1,485 | ) | | (351 | ) | 18 |
| | (551 | ) | | (627 | ) | | (1,485 | ) |
Owned Resort EBITDA | 49,394 |
| | 49,951 |
| | 131,751 |
| | 132,534 |
| (23,798 | ) | | 49,394 |
| | 36,871 |
| | 131,751 |
|
Less: Non-comparable Owned Resort EBITDA(g) | 9,390 |
| | 12,277 |
| | 31,651 |
| | 28,708 |
| |
Comparable Owned Resort EBITDA | $ | 40,004 |
| | $ | 37,674 |
| | $ | 100,100 |
| | $ | 103,826 |
| |
Less: Non-comparable Owned Resort EBITDA | | (6,456 | ) | | 4,842 |
| | 6,791 |
| | 18,749 |
|
Comparable Owned Resort EBITDA (g) | | $ | (17,342 | ) | | $ | 44,552 |
| | $ | 30,080 |
| | $ | 113,002 |
|
________
| |
(a) | Represents changes in foreign exchange and other miscellaneous expenses or income. |
| |
(b) | Represents expenses incurred in connection with corporate initiatives, such as: debt refinancing costs; other capital raising efforts including our business combination with Sagicor in 2018;efforts; the redesign and build-out of our internal controls and strategic initiatives, such as the launch of a new resort or possible expansion into new markets. |
| |
(c) | Represents expenses incurred for employee terminations during the Hilton renovations. terminations. |
| |
(d) | Relates primarily to a Dominican Republic asset/revenue tax, which is an alternative tax to income tax in the Dominican Republic. We eliminate this expense from Adjusted EBITDA because it is substantially similar to the income tax provision we eliminate from our calculation of EBITDA. |
| |
(e) | Representsa reversal on an expense accrual recorded in 2014Represents the property and equipment impairment loss related to the sale of Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark recognized during the second quarter of 2020 and the impairment loss on the goodwill of our future stay obligations provided to guests affected by the delayed opening of Hyatt ZivaJewel Paradise Cove Beach Resort & Spa, Jewel Dunn's River Beach Resort and Hyatt Zilara Rose Hall. This reversal concluded inJewel Runaway Bay Beach Resort & Waterpark reporting units recognized during the first quarter of 2018.2020.
|
| |
(f) | Represents the non-service cost components of net periodic pension benefit (cost) benefit recorded within other income (expense) in the Condensed Consolidated StatementsStatement of Operations. Previously, these expensesamounts were presented within direct expense. We include these benefits (costs) benefits for the purposes of calculating Adjusted EBITDA as they are considered part of our ongoing resort operations. |
| |
(g) | Owned Resort EBITDAComparable resorts for the three and six months ended June 30, 2020 exclude the following: Hilton La Romana All-Inclusive Resort and Hilton Playa del Carmen All-Inclusive Resort, Hilton Rose Hall Resort & Spa, Jewel Runaway Bay Beach & Golf Resort,which were under renovation in 2019, Hyatt Ziva and Hyatt Zilara Cap Cana, a ground-up development opened November 2019 and Jewel Dunn’s River Beach Resort & Spa and Jewel Paradise CoveRunaway Bay Beach Resort & Spa, Jewel Grande Montego Bay Resort & Spa and Hyatt Ziva & Zilara Cap Cana. Waterpark which were sold in May 2020. |
Seasonality
The seasonality of the lodging industry and the location of our resorts in Mexico and the Caribbean generally result in the greatest demand for our resorts between mid-December and April of each year, yielding higher occupancy levels and package rates during this period. This seasonality in demand has resulted in predictable fluctuations in revenue, results of operations, and liquidity, which are consistently higher during the first quarter of each year than in successive quarters.
However, the COVID-19 pandemic has altered this seasonal trend in 2020. See “Impact of COVID-19 Pandemic” above for more information regarding the effects of the COVID-19 pandemic on our results of operations.
Inflation
Operators of lodging properties, in general, possess the ability to adjust room rates to reflect the effects of inflation. However, competitive pressures, in addition to the effects of the COVID-19 pandemic, may limit our ability to raise room rates to fully offset inflationary cost increases. See “Impact of COVID-19 Pandemic” above for more information regarding the effects of the COVID-19 pandemic on our results of operations.
Liquidity and Capital Resources
The suspension of operations of all of our resorts, which account for all of our revenue, as a result of the COVID-19 pandemic from late March until July 2020, and the phased re-opening thereafter, has had a significant adverse effect on our liquidity. Our cash flow from operations as of June 30, 2020 was a loss of $28.4 million and could remain negative for the third quarter of 2020 and be adversely affected for the duration of the COVID-19 pandemic. As of July 31, 2020 we had approximately $228.0 million of available cash excluding $25.7 million of restricted cash. See “Impact of COVID-19 Pandemic” above for information regarding the measures we have taken to preserve our available cash.
Our primary short-term cash needs are paying operating expenses, maintaining our resorts, and servicing our outstanding indebtedness, and funding any ongoing development, expansion, renovation, repositioning and rebranding projects.indebtedness. As of June 30, 2019,2020, we had $44.1$45.8 million of scheduled contractual obligations remaining in 2019.2020. We have deferred substantially all development, expansion, renovation, repositioning and rebranding projects until at least 2021, with timing subject to the duration of the COVID-19 pandemic and the pace at which our business returns to more normalized levels.
We expect to meet our short-term liquidity requirements generally through net cash provided by operations, existing cash balances, the sale of non-core assets and, if necessary, short-termadditional borrowings under our Revolving Credit Facility which permits borrowingsor equity issuances. On June 12, 2020, we announced that we had raised $224.0 million of up to $100.0additional capital from affiliates of Davidson Kempner Capital Management LP in the form of $204.0 million of additional debt financing and which matures on April 27, 2022. We had$20.0 million of equity financing at a price of $4.10 per share. In addition, we sold Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark for a total consideration of $60.0 million in cash and cash equivalents of $104.5 million as of June 30, 2019, compared to $145.9 million as of June 30, 2018. We plan to fund our Hyatt Ziva and Zilara Cap Cana development project overin the next 3 to 5 months with the cash we have on hand, as well as our cash generated from operations. As of June 30, 2019, there was $0 outstanding under our Revolving Credit Facility. When assessing liquidity, we also consider the availability of cash resources held within local business units to meet our strategic needs.second quarter.
Long-term liquidity needs may include existing and future property developments, expansions, renovations, repositioning and rebranding projects, potential acquisitions and the repayment of indebtedness. As of June 30, 2019,2020, our total debt obligations were $991.5$1,270.1 million (which represents the principal amounts outstanding under our Revolving Credit Facility, Term Loans and TermProperty Loan, excluding a $2.4$6.3 million issuance discount on our Term Loan and $4.1$11.9 million of unamortized debt issuance costs). We expect to meet our long-term liquidity requirements generally through the sources available for short-term needs, as well as equity or debt issuances or proceeds from the potential disposal of assets.
In an effortWe are continuing to maintain sufficientmonitor our liquidity our cash flow projections and available funds are discussed with our Board and we consider various ways of developing our capital structure and seekingmay pursue additional sources of liquidity ifas needed. The availability of additional liquidity options will depend on the economic and financial environment, our credit, our historical and projected financial and operating performance and continued compliance with financial covenants. AsIf operating conditions do not improve, whether as a result of possible future economic, financial and operating declines, possible declines in our creditworthiness and potential non-compliance with financial covenants,the current pandemic or a resurgence thereof or for other reasons, we may have lessnot be able to maintain our current liquidity than anticipated, fewerposition or access additional sources of liquidity than anticipated, less attractive financingat acceptable terms and less flexibility in determining when and how to use the liquidity that is available.or at all.
Financing Strategy
In addition to our Revolving Credit Facility, weWe intend to use other financing sources that may be available to us from time to time, including financing from banks, institutional investors or other lenders, such as bridge loans, letters of credit, joint ventures and other arrangements. Future financings may be unsecured or may be secured by mortgages or other interests in our assets. In addition, we may issue publicly or privately placed debt or equity securities. When possible and desirable, we will seek to replace short-term financing with long-term financing. We may use the proceeds from any financings to refinance existing indebtedness, to finance resort projects or acquisitions or for general working capital or other purposes.
Our indebtedness may be recourse, non-recourse or cross-collateralized and may be fixed rate or variable rate. If the indebtedness is non-recourse, the obligation to repay such indebtedness will generally be limited to the particular resort or resorts pledged to secure such indebtedness. In addition, we may invest in resorts subject to existing loans secured by mortgages or similar liens on the resorts or may refinance resorts acquired on a leveraged basis.
Cash Flows
The following table summarizes our net cash provided by or used in operating activities, investing activities and financing activities for the periods indicated and should be read in conjunction with our Condensed Consolidated Statements of Cash Flows and accompanying notes thereto ($ in thousands): |
| | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
Net cash provided by operating activities | $ | 86,076 |
| | $ | 68,440 |
|
Net cash used in investing activities | $ | (88,947 | ) | | $ | (134,504 | ) |
Net cash (used in) provided by financing activities | $ | (8,972 | ) | | $ | 94,699 |
|
|
| | | | | | | |
| Six Months Ended June 30, |
| 2020 | | 2019 |
Net cash (used in) provided by operating activities | $ | (28,396 | ) | | $ | 86,076 |
|
Net cash provided by (used in) investing activities | $ | 58,862 |
| | $ | (88,947 | ) |
Net cash provided by (used in) financing activities | $ | 227,544 |
| | $ | (8,972 | ) |
Net Cash Provided by Operating Activities
Our net cash (used in) provided by operating activities is generated primarily from operating (loss or) income from our resorts. For the six months ended June 30, 2020, our net cash used in operating activities was $28.4 million. For the six months ended June 30, 2019 and 2018, our net cash provided by operating activities totaledwas $86.1 million and $68.4 million, respectively. million.
Net incomeloss of $44.0$110.0 million for the six months ended June 30, 20192020 included significant non-cash expenses, including $48.2$47.4 million of depreciation and amortization, $4.8$41.4 million of impairment losses, $5.9 million of share-based compensation, and a $1.1$11.4 million loss on the fair value of our interest rate swaps, offset by changes in our assets and liabilities through the normal course of operations.
Net income of $38.6$44.0 million for the six months ended June 30, 20182019 included significant non-cash and cash expenses, including $31.6$48.2 million of depreciation and amortization, $6.2 million of transaction expenses, $3.9$4.8 million of share based compensation, and a $3.7$1.1 million loss on the fair value of our interest rates swaps, offset by changes in our assets and liabilities through the normal course of operations.
Activity for the six months ended June 30, 2019:
Net decrease in interest expense of $2.7 million, primarily due to the change in how we are accounting for our interest rate swap. In March 2019, we elected to adopt hedge accounting and designate our interest rate swaps as cash flow hedges. After the adoption of hedge accounting, we recorded the change in fair value of our interest rate swaps through other comprehensive (loss) income. Prior to our adoption of hedge accounting, the change in fair value of our interest rate swaps was recognized through interest expense.
Transaction expenses of $3.2 million;
Share-based compensation expense of $4.8 million.
Activity for the six months ended June 30, 2018:
Net decrease in interest expense of $0.6 million, which was due to the net impact of the following:
| |
◦ | $2.1 million in capitalized interest, which is an offset to interest expense. |
| |
◦ | The paydown of our former Senior Notes due 2020 in April and December 2017, which accounted for an additional $2.2 million decrease in interest expense. |
| |
◦ | The change in valuation of our interest rate swaps, which resulted in a $3.7 million increase in interest expense. We had no interest rate swaps in 2017. |
Transaction expenses of $6.2 million;
Share-based compensation expense of $3.9 million.
Net Cash Provided by or Used in Investing Activities
For the six months ended June 30, 2020, our net cash provided by investing activities was $58.9 million. For the six months ended June 30, 2019 and 2018, our net cash used in investingfinancing activities was $88.9 millionmillion.
Activity for the six months ended June 30, 2020:
Net proceeds from the sale of assets of $58.1 million;
Purchases of property and $134.5 million, respectively.equipment of $7.4 million; and
Receipt of key money of $8.5 million.
Activity for the six months ended June 30, 2019:
Purchases of property and equipment of $92.0 million;
Purchase of intangibles of $1.4 million;
Property damage insurance proceeds of $2.0 million.million; and
Receipt of key money of $2.5 million.
Activity for the six months ended June 30, 2018:
| |
• | Acquisition of a portfolio of all-inclusive resorts and adjacent developable land sites from Sagicor of $93.1 million
|
Purchases of property and equipment of $40.1 million;
Purchase of intangibles of $1.3 million.
Capital Expenditures
We maintain each of our properties in good repair and condition and in conformity with applicable laws and regulations, franchise and license agreements and management agreements. Capital expenditures made to extend the service life or increase the capacity of
our assets, including expenditures for the replacement, improvement or expansion of existing capital assets (“Maintenance
Capital Expenditures”), differ from ongoing repair and maintenance expense items, which do not in our judgment extend the service life or increase the capacity of assets and are charged to expense as incurred. We have approval rights over capital expenditures made by our third-party manager as part of the annual budget process for each property they manage. From time to time, certain of our resorts may be undergoing renovations as a result of our decision to upgrade portions of the resorts, such as guestrooms, public space, meeting space, gyms, spas and/or restaurants, in order to better compete with other hotels in our markets (“Development Capital Expenditures”).
The following table summarizes Due to the impacts of the COVID-19 pandemic on our cash paid forliquidity, we have deferred all non-critical capital expenditures for the six months ended June 30, 2019 and 2018 ($ in thousands):remainder of the year.
|
| | | | | | | |
| Six Months Ended June 30, |
| 2019 | | 2018 |
Development Capital Expenditures | | | |
Hyatt Ziva and Zilara Rose Hall | $ | — |
| | $ | 1,157 |
|
Hyatt Ziva Puerto Vallarta | — |
| | 614 |
|
Panama Jack Resorts Cancún | — |
| | 2,234 |
|
Hyatt Zilara Cancún | — |
| | 605 |
|
Panama Jack Resorts Playa del Carmen | — |
| | 759 |
|
Hilton Playa del Carmen All-Inclusive Resort | 5,945 |
| | — |
|
Hilton La Romana All-Inclusive Resort | 22,570 |
| | — |
|
Hyatt Ziva and Zilara Cap Cana | 55,169 |
| | 29,285 |
|
Total Development Capital Expenditures | 83,684 |
| | 34,654 |
|
Maintenance Capital Expenditures (1) | 8,354 |
| | 5,404 |
|
Total Capital Expenditures | $ | 92,038 |
| | $ | 40,058 |
|
________
| |
(1)
| Typically, maintenance capital expenditures approximate 3% to 4% of Total Net Revenue.
|
Net Cash Used in and Provided by Financing Activities
Our net cash used inprovided by financing activities was $9.0$227.5 million for the six months ended June 30, 20192020 compared to $94.7$9.0 million in cash provided byused in financing activities for the six months ended June 30, 2018.2019.
Activity for the six months ended June 30, 2020:
Net proceeds from debt issuance of $199.6 million;
Proceeds from borrowings on our Revolving Credit Facility of $40.0 million;
Net proceeds from equity issuance of $19.6 million;
Principal payments on our Term Loan of $5.1 million;
Issuance costs of debt of $8.7 million;
Repayments on our Revolving Credit Facility of $15.3 million; and
Repurchases of ordinary shares of $2.5 million.
Activity for the six months ended June 30, 2019:
Principal payments on our Term Loan of $5.1 million; and
PurchasesRepurchases of ordinary shares of $3.9 million.
Activity for the six months ended June 30, 2018:
Principal payments on our existing term loan of $4.8 million;
Proceeds from debt issuance of $99.5 million.
Share Repurchases
On December 14, 2018, our Board authorized the repurchase of up to $100.0 million of our outstanding ordinary shares as means of returning capital to our shareholders. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice. During the secondfirst quarter of 2019,2020, we purchased 304,587340,109 ordinary shares at an average price of $7.88$7.35 per share. From July 1, 2019 through August 1, 2019 we purchased an additional 360,929We did not repurchase any shares during the second quarter of our ordinary shares at an average price of $7.51 per share. As of August 1, 2019, we2020. We have purchased a total of 910,9362,178,837 shares and there was approximately $93.1$83.5 million remaining under our share repurchase authorization.authorization as of June 30, 2020. As part of our cash preservation efforts given our liquidity position as a result of the COVID-19 pandemic, we have suspended repurchases of our ordinary shares under our share repurchase program until we have more visibility into the longer-term impact of COVID-19 and economic conditions improve.
Senior Secured Credit Facility
Playa Resorts Holding B.V., a subsidiary of ours, holds a senior secured credit facility (“Senior Secured Credit Facility”), which consists of a term loan facility which matures on April 27, 2024 and our Revolving Credit Facility which matures on April 27, 2022. We borrowed $530.0 million under our initial term loan facility on April 27, 2017 (our “First Term Loan”). We received net proceeds
of $32.5 million from our First Term Loan after prepaying our existing Senior Secured Credit Facility and a portion of our Senior Notes due 2020 and deducting a debt issuance discount of $1.3 million and unamortized debt issuance costs of $2.6 million.
We borrowed an additional $380.0$380.0 million under an incremental term loan facility (our “Second Term Loan” and together with the First Term Loan, the “Term“Initial Term Loan”) on December 6, 2017. We received no proceeds from the Second Term Loan after full repayment of our Senior Notes due 2020 and deducting a debt issuance discount of $1.0$1.0 million and unamortized debt issuance costs of $0.2 million.$0.2 million.
Our Initial Term Loan bore interest at a rate per annum equal to LIBOR plus 3.25% (where the applicable LIBOR rate had a 1.0% floor), and interest continued to be payable in cash in arrears on the last day of the applicable interest period (unless we elected to use the ABR rate in which case, interest was payable on the last business day of each of March, June, September and December).
Effective March 29, 2018, we entered into two interest rate swaps to mitigate the long-term interest rate risk inherent in our variable rate Term Loan. The interest rate swaps have an aggregate fixed notional value of $800.0 million. The fixed rate paid by us is 2.85% and the variable rate received resets monthly to the one-month LIBOR rate.
On June 7, 2018, we entered into the Second Amendment to Amended & Restated Credit Agreement (the “Amendment”), which amended the Amended & Restated Credit Agreement, dated as of April 27, 2017 (the “Existing Credit Agreement”), governing our Senior Secured Credit Facility. The Amendment amended the Existing Credit Agreement to, among other things (i) effect an incremental term loan facility of $100.0 million (the “Third Term Loan” and, together with the Initial Term Loan, the “Term Loan”) that was incurred pursuant to the exercise of our option to request incremental loans under the Existing Credit Agreement and (ii) decrease the interest rate applicable to the Term Loan by 0.50% to, at our option, either a base rate plus a margin of 1.75% or LIBOR plus a margin of 2.75%. The other terms to the Existing Credit Agreement were not affected by the Amendment.
Our Term Loan requires quarterly payments of principal equal to 0.25% of the original principal amount of the Term Loan on the last business day of each March, June, September and December. The remaining unpaid amount of our Term Loan is due and payable at maturity on April 27, 2024. We may voluntarily prepay borrowings at any time without premium or penalty, subject to customary breakage costs in the case of LIBOR-based loans.
Our Revolving Credit Facility bears interest at variable interest rates that are, at the Borrower's option, either based on LIBOR or based on an alternate base rate derived from the greatest of the federal funds rate plus a spread, prime rate, or a one-month euro-currency rate plus a spread. We are required to pay a commitment fee ranging from 0.25% to 0.5% per annum (depending on the level of our consolidated secured leverage ratio in effect from time to time) on the average daily undrawn balance.
The Senior Secured Facility requires that most of our subsidiaries, and in some limited cases the Company, comply with covenants relating to customary matters, including with respect to incurring indebtedness and liens, paying dividends or making certain other distributions or redeeming equity interests, making acquisitions and investments, effecting mergers and asset sales, prepaying junior indebtedness, and engaging in transactions with affiliates.
Contractual ObligationsFourth Amendment to Amended and Restated Credit Agreement
On June 12, 2020, we entered into the Fourth Amendment to the Amended & Restated Credit Agreement (the “Fourth Amendment”, and collectively with the unamended terms of the Senior Secured Credit Facility, the “Existing Credit Agreement”). The terms of the Senior Secured Credit Facility remain in effect except for the following table sets forth our obligations and commitments to make future payments under contracts and contingent commitments as of June 30, 2019 ($ in thousands): |
| | | | | | | | | | | | | | | | | | | | |
| | Less than 1 Year(1) | | Due in 1 to 3 years | | Due in 3 to 5 years | | Due in Over 5 years | | Total |
Revolving Credit Facility (2) | | $ | 260 |
| | $ | 1,015 |
| | $ | 161 |
| | $ | — |
| | $ | 1,436 |
|
Term Loan principal payments | | 5,050 |
| | 20,200 |
| | 20,200 |
| | 946,048 |
| | 991,498 |
|
Term Loan interest payments (3) | | 27,470 |
| | 106,404 |
| | 97,623 |
| | 14,695 |
| | 246,192 |
|
Cap Cana land purchase obligation | | 10,625 |
| | — |
| | — |
| | — |
| | 10,625 |
|
Operating lease obligations | | 481 |
| | 2,027 |
| | 1,860 |
| | 3,580 |
| | 7,948 |
|
Pension obligation | | 258 |
| | 1,163 |
| | 1,405 |
| | 4,966 |
| | 7,792 |
|
Total contractual obligations | | $ | 44,144 |
| | $ | 130,809 |
| | $ | 121,249 |
| | $ | 969,289 |
| | $ | 1,265,491 |
|
________terms modified by the Fourth Amendment:
| |
(1) i. | The period less than 1 year represents remaining obligations in 2019.replace the total net leverage ratio requirement of the financial covenant with a minimum liquidity test until September 30, 2021 (the “Relief Period”); |
| |
(2) ii. | The commitment on our Revolving Credit Facility is calculated based onmodify the contractual commitment fee of 0.5% applied tofinancial covenant for certain test dates after the undrawn balance of $100.0 million as we had no outstanding balance on our Revolving Credit Facility as of June 30, 2019.Relief Period; and |
| |
(3) iii. | The interest commitmentadd certain restrictions on, among other things, the incurrence of additional debt and making of investments, dispositions and restricted payments during the Relief Period.
|
Additional Credit Facility
On June 12, 2020, we entered into an additional senior secured credit facility with an average interest rate of 9.25% that matures on April 27, 2024 and ranks pari passu with the Existing Credit Agreement (the “Additional Credit Facility”). The Additional Credit Facility consists of the following term loans:
| |
i. | $35.0 million term loan at fixed rate of 11.4777% (the “Term A1 Loan”); |
| |
ii. | $31.0 million term loan at fixed rate of 11.4777% (the “Term A2 Loan”); and |
| |
iii. | $28.0 million term loan at our option of either a base rate plus a margin of 2.00% or LIBOR plus 3.00% (the “Term A3 Loan”). Term A3 Loan is calculated based on LIBOR plus 275 basis pointssubject to a 1.0% floor consistent with a 1% LIBOR floor and the estimated net settlement of the related interest rate swaps. Projected interest rates range from 4.16% to 5.60%. Payments were calculated using the average forecasted one-month forward-looking LIBOR curve.Existing Credit Agreement. |
We intend to use the proceeds from the Additional Credit Facility for general corporate purposes. The obligations under the Additional Credit Facility are collateralized in a manner that is substantially identical to the Existing Credit Agreement.
Prior to the maturity date, the Additional Credit Facility does not require principal payments, but does include mandatory prepayment requirements for the Term A3 Loan that are consistent with the Existing Credit Agreement. Mandatory prepayments are required for certain asset sales, casualty events and condemnation events (the “Triggering Events”) that are not reinvested in our business where our total net leverage ratio is above 4.00x. We may not voluntarily prepay any portion of the Additional Credit Facility prior to June 2023 without paying a make-whole premium equal to 100% of the interest that would have otherwise accrued from the date of such payment through June 2022 plus 50% of the interest that otherwise would have accrued from June 2022 to June 2023. Subsequent to June 2023, we may prepay any portion of the Additional Credit Facility without penalty.
In connection with the Additional Credit Facility, we terminated the remaining $15.0 million of unused capacity of our Revolving Credit Facility under the Existing Credit Agreement. The Additional Credit Facility contains covenants (including a springing financial maintenance covenant) identical to those contained in the Existing Credit Agreement.
Property Loan Agreement
On June 12, 2020, we entered into a property loan agreement in the amount of $110.0 million that has a fixed interest rate of 9.25% and matures on July 1, 2025 (the “Property Loan”). Prior to maturity, the Property Loan does not require principal payments. The Property Loan is collateralized by the mortgages of our Hyatt Ziva and Hyatt Zilara Cap Cana properties located in the Dominican Republic and the Hilton Rose Hall Resort & Spa located in Jamaica (collectively the “Properties”). We intend to use the proceeds of the Property Loan to finance the operation and management of the Properties and for general corporate purposes.
During the term of the Property Loan, we are required to deposit certain cash reserves including reserves for operating expenses, debt service and certain property improvement plan required work. We will continue to fund the reserves until the Properties achieve a debt service coverage ratio of 1.50x for two consecutive calendar quarters. These reserves are presented as restricted cash on our Condensed Consolidated Balance Sheet, which had a balance of $27.9 million as of June 30, 2020.
Contractual Obligations
Total debt increased $223.7 million from $1,046.4 million as of December 31, 2019 to $1,270.1 million as of June 30, 2020. This increase was driven by an increase in the amount outstanding on our Revolving Credit Facility, additional proceeds from Term Loans and addition of a Property Loan (see Note 11), which was offset by scheduled principal payments. We do not anticipate making any further payments on our Revolving Credit Facility in 2020. Additionally, in connection with the terms of the Existing Credit Agreement, we are required to use the net proceeds from the sale of assets to prepay the proportionate balance on our Senior Secured Credit Facility if our net leverage ratio is above 4.00x. In November 2021, we anticipate that we will prepay the net proceeds, which was $56.5 million as of June 30, 2020, from the sale of the Jewel Dunn’s River Beach Resort & Spa and Jewel Runaway Bay Beach Resort & Waterpark less incremental transaction costs and capital expenditures incurred across our portfolio leading up to the prepayment date.
Off Balance Sheet Arrangements
We had no off balance sheet arrangements for the three and six months ended June 30, 20192020 and 2018.2019.
Critical Accounting Policies and Estimates
Our Condensed Consolidated Financial Statements included herein have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and assumptions that affect the reported amounts and related disclosures. A number of our significant accounting policies are critical due to the fact that they require us to exercise a higher degree of judgment and estimation based on assumptions that are inherently uncertain. While we believe our estimates, assumptions and judgments are reasonable, they are based upon information presently available. Actual results may differ significantly from these estimates under different assumptions, judgments or conditions, which could have a material effect on our financial position, results of operations and related disclosures. The impacts of the COVID-19 pandemic have increased uncertainty, which has reduced our ability to use past results to estimate future performance. Accordingly, our estimates and judgments may be subject to greater volatility than has been the case in the past.
We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our 2018 Consolidated Financial Statements included within our Annual Report on Form 10-K for the year ended December 31, 2018,2019, filed with the SEC on February 28, 2019.27, 2020. There have been no material changes to our critical accounting policies or the methodologies or assumptions we apply under them except for those disclosed in Note 2 to our Condensed Consolidated Financial Statements.
Fair Value of Financial Instruments
Our financial instruments consist of cash and cash equivalents, restricted cash, trade and other receivables, accounts receivable from related parties, certain prepayments and other assets, trade and other payables, payables to related parties, derivative financial instruments, other liabilities including our pension obligation and debt. See Note 16,13, “Fair value of financial instruments,” to our Condensed Consolidated Financial Statements for more information.
Related Party Transactions
See Note 7,6, “Related party transactions,” to our Condensed Consolidated Financial Statements for information on these transactions.
Recent Accounting Pronouncements
See the recent accounting pronouncements in Note 2 to our Condensed Consolidated Financial Statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
In the normal course of operations, we are exposed to interest rate risk and foreign currency risk which may impact future income and cash flows.
Interest Rate Risk
The risk from market interest rate fluctuations mainly affects long-term debt bearing interest at a variable interest rate. We currently use an interest rate swap (see Note 1512 of our Condensed Consolidated Financial Statements) to manage exposure to this risk. As of June 30, 2019, 19%2020, 23% of our outstanding indebtedness bore interest at floating rates and 81%77% bore interest at fixed rates. If market rates of interest on our floating rate debt were to increase by 1.0%, the increase in interest expense on our floating rate debt would decrease our future earnings and cash flows by approximately $1.9$1.2 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $0.$84.7 million. If market rates of interest on our floating rate debt were to decrease by 1.0%, the decrease in interest expense on our floating rate debt would increase our future earnings and cash flows by approximately $1.9$0.2 million annually, assuming the balance outstanding under our Revolving Credit Facility remained at $0.$84.7 million and given the current LIBOR rate our debt can not fall below the 1% LIBOR floor.
Foreign Currency Risk
We are exposed to exchange rate fluctuations because all of our resort investments are based in locations where the local currency is not the U.S. dollar, which is our reporting currency. For the six months ended June 30, 20192020 approximately 4.5%3.0% of our revenues were denominated in currencies other than the U.S. dollar. As a result, our revenues reported on our Condensed Consolidated Statements of Operations are affected by movements in exchange rates.
Approximately 80%81.1% of our operating expenses for the six months ended June 30, 20192020 were denominated in the local currencies in the countries in which we operate. As a result, our operating expenses reported on our Condensed Consolidated Statements of Operations are affected by movements in exchange rates.
The foreign currencies in which our expenses are primarily denominated are the Mexican Peso, Dominican Peso and the Jamaican Dollar. The effect of an immediate 5% adverse change in foreign exchange rates on Mexican Peso-denominated expenses at June 30, 20192020 would have impacted our net income before tax by approximately $4.2$2.5 million on a year-to-date basis. The effect of an immediate 5% adverse change in foreign exchange rates on Dominican Peso-denominated expenses at June 30, 20192020 would have impacted our net income before tax by approximately $1.5$1.3 million on a year-to-date basis. The effect of an immediate 5% adverse change in foreign exchange rates on Jamaican Dollar-denominated expenses at June 30, 20192020 would have impacted our net income before tax by approximately $3.1$1.9 million on a year-to-date basis.
At this time, we do not have any outstanding derivatives or other financial instruments designed to hedge our foreign currency exchange risk.
Item 4. Controls and Procedures.
Disclosure Controls and Procedures.
We maintain a set of disclosure controls and procedures (as that term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms, and that such information is accumulated and communicated to our management, including our Principal Executive Officer and Principal Financial Officer, as appropriate, to allow timely decisions regarding required disclosures. In accordance with Rule 13a-15(b) of the Exchange Act, as of the end of the period covered by this quarterly report, an evaluation was carried out under the supervision and with the participation of our management, including our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures. Based on that ongoing evaluation, and considering the continuing review of controls and procedures that is being conducted by our Chief Executive Officer and Chief Financial Officer, including the remedial actions and the material weakness in internal control over financial reporting disclosed below, our Principal Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective as of June 30, 2019.2020.
Changes in Internal Control Over Financial Reporting.
There has been no change in our internal control over financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act) during the Company's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. As previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC on February 28, 2019 (“Form 10-K”), we have identified, and Deloitte & Touche, LLP, the independent registered public accounting firm that audited our Consolidated Financial Statements as of December 31, 2018 and 2017, and for each of the three years in the period ended December 31, 2018, included in our Form 10-K and the related Condensed Financial Information of Registrant included in this
quarterly report, has communicated, a material weakness in our internal control over financial reporting that existed as December 31, 2018. A “material weakness” is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement in our annual or interim financial statements will not be prevented or detected on a timely basis. We previously reported the following material weakness in our internal control over financial reporting that existed as of December 31, 2018, which has not been remediated as of June 30, 2019:
Our information technology controls, including system access, change management, and segregation of duties are not sufficiently designed and implemented to address certain information technology risks and, as a result, could expose our systems and data to unauthorized use or alteration.
We continue to take steps to remediate the identified material weakness. The Company has engaged a third-party consulting firm to assist the Company with the implementation of SAP, which is a global information technology solution designed to address the elements which give rise to our material weakness. As of June 30, 2019, SAP was successfully implemented in our corporate entities, several of our properties located in Mexico, the Dominican Republic and Jamaica. We expect to implement SAP in our remaining operational entities, in phases, throughout the remainder of 2019. However, effectiveness will need to be successfully tested over several quarters before we can conclude that the material weakness has been remediated. There can be no assurance that we will be successful in making these improvements and in remediating our current material weakness in a timely manner, or at all, and we may not prevent future material weaknesses from occurring.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In the ordinary course of our business, we are subject to claims and administrative proceedings, none of which we believe are material or would be expected to have, individually or in the aggregate, a material adverse effect on our financial condition, cash flows or results of operations. The outcome of claims, lawsuits and legal proceedings brought against us, however, is subject to significant uncertainties. Refer to Note 87 to our financial statements included in “Item 1. Financial Statements” of this Form 10-Q for a more detailed description of such proceedings and contingencies.
Item 1A. Risk Factors.
At June 30, 2019, there have been no material changes fromWe are supplementing the risk factors previously discloseddescribed under “Item 1A. Risk Factors” in the Company'sour Annual Report on Form 10-K for the year ended December 31, 2018, filed2019 with the Securitiesadditional risk factor set forth below, which supplements, and Exchange Commission (“SEC”)to the extent inconsistent, supersedes such risk factors.
The effects of the ongoing COVID-19 pandemic are having a significant material adverse effect on February 28, 2019, whichour business, results of operations, cash flows and financial condition and if the pandemic is accessiblelong-lasting these effects could be severe.
The outbreak of the coronavirus (COVID-19) pandemic has led governments and other authorities around the world to impose measures intended to control its spread, including restrictions on freedom of movement and business operations such as travel bans, border closings, business closures, quarantines and shelter-in-place orders. As a result, the pandemic has significantly disrupted global travel, and has adversely impacted global commercial activity across the travel, lodging and hospitality industries. The COVID-19 pandemic has had, and is expected to continue to have, significant adverse impacts on economic and market conditions and resulted in global economic contraction.
The effects of the COVID-19 pandemic on the SEC’s websitehospitality industry are unprecedented with global demand for lodging drastically reduced and occupancy levels reaching historic lows. Due to the spread of the COVID-19 pandemic and in response to related governmental restrictions and advisories, reductions in scheduled airline services and potential health risks to our employees and guests, we temporarily suspended operations at www.sec.gov.all of our resorts in late March 2020. Our resorts began reopening in July, in stages, based on incremental easing of government restrictions and advisories and increases in scheduled commercial airline service. As a result of the suspension of operations at all of our resorts, we had no revenues from resort operations in the second quarter of 2020. As of July 1, 2020, we reopened 8 out of our 21 resorts and subsequently reopened another 4 resorts. Currently, 12 out of our 21 resorts have reopened. We cannot predict when the effects of the pandemic will subside, or if there will be a resurgence of the virus, and thus we cannot predict when we will be able to reopen our remaining resorts, whether our opened resorts will be permitted to remain open or when our business at opened resorts will return to normalized levels. The longer and more severe the pandemic, and if there are repeat or cyclical outbreaks of the COVID-19 virus beyond the one being currently experienced, the greater the material adverse effect will be on our business, results of operations, cash flows, financial condition, access to credit markets and ability to service our indebtedness.
There also can be no guarantee that when the effects of the pandemic subside the demand for lodging, and consumer confidence in travel generally, will recover as quickly as other industries. Additionally, the effects of the pandemic have had, and we expect will continue to have, a material adverse effect on our ability to consummate acquisitions and dispositions of resorts and our ability to timely complete planned capital expenditures and other projects.
Additional risks to our business relating to the COVID-19 pandemic include the following:
We have substantial debt outstanding currently, and our ability to service our significant financial obligations depends on our ability to generate significant cash flow from operations. Our cash flow from operations has been materially reduced as a result of the temporary suspension of operations at our resorts and will continue to be materially reduced as long as operations at some of our resorts remain suspended or opened resorts are operating at well-below historical levels. We cannot assure you that our business will generate cash flow from operations, that future borrowings will be available to us under our revolving credit facility, or that we will be able to complete any necessary financings or refinancings, in amounts sufficient to enable us to pay our debts and other obligations and fund our other liquidity needs;
The agreements which govern our various debt obligations impose restrictions on our business, including certain covenants under our revolving credit facility which currently prevent additional draws on the facility and may materially impact our liquidity and financial position;
Commercial airline service has been reduced or suspended to many of the regions in which our resorts are located. If scheduled airline service does not increase or return to normal levels once our resorts are re-opened it could have a material adverse effect on our resort revenues;
The economic fallout from the effects of the pandemic on the regions in which our resorts are located could result in increases in crime, theft, vandalism and other safety and health concerns in these areas that could directly impact our resorts or could result in the perception of such risks among prospective guests, which could lead to decreased future demand for our resorts;
We have been and may continue to be required to recognize significant non-cash impairment charges as a result of material reductions in our cash flows from operations;
We may be subject to increased risks related to employee matters, including increased employment litigation and claims for severance or other benefits tied to terminations or furloughs as a result of the suspension of operations at our resorts prompted by the effects of the pandemic; and
In order to raise additional capital to fund our operations and service our indebtedness, we have issued equity securities and we may need to issue additional equity securities in the future at prices that may be dilutive to existing stockholders and that may be below what we believe to be the intrinsic value of our ordinary shares.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
(a) Unregistered Sale of Securities
None.The Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”), dated June 12, 2020, with certain funds affiliated with Davidson Kempner Capital Management LP (collectively, the “Buyers”), pursuant to which the Company sold to the Buyers 4,878,049 shares of the Company’s ordinary shares (the “Purchased Shares”) at a purchase price of $4.10 per share, for an aggregate purchase price of $20,000,000. The purchase price per share agreed to by the parties was based on a 25% premium over the 30-day volume-weighted average price of the Company’s ordinary shares on the NASDAQ. The Securities Purchase Agreement contains customary representations and warranties, covenants, and indemnification provisions.
The sale of the Purchased Shares was not registered under the Securities Act of 1933, as amended (the “Securities Act”), at the time of issue in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act and Rule 506(b) of Regulation D as promulgated by the U.S. Securities and Exchange Commission (the “SEC”) thereunder.
(b) Use of Proceeds
None.
(c) Issuer Purchases of Equity Securities
The following table sets forth information regarding our purchases of shares of our common stock during the quarter ended June 30, 2019:
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| | | | | | | | | | | | | | |
| | Total number of shares purchased | | Average price paid per share (1) | | Total number of shares purchased as part of publicly announced program (2) | | Maximum approximate dollar value of shares that may yet be purchased under the program ($ in thousands) (2) |
April 1, 2019 to April 31, 2019 | | 88,087 |
| | $ | 7.81 |
| | 88,087 |
| | $ | 97,476 |
|
May 1, 2019 to May 31, 2019 | | 68,931 |
| | 8.24 |
| | 68,931 |
| | 96,908 |
|
June 1, 2019 to June 30, 2019 | | 147,569 |
| | 7.76 |
| | 147,569 |
| | 95,764 |
|
Total | | 304,587 |
| | $ | 7.88 |
| | 304,587 |
| | $ | 95,764 |
|
________
(1)The average price paid per share and maximum approximate dollar value of shares disclosed above include broker commissions.
(2) In December 2018, our Board of Directors authorized the repurchase of up to $100.0 million of our outstanding ordinary shares as market conditions and our liquidity warrant. Repurchases may be made from time to time in the open market, in privately negotiated transactions or by other means (including Rule 10b5-1 trading plans). Depending on market conditions and other factors, these repurchases may be commenced or suspended from time to time without prior notice.None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The following exhibits are filed as part of this Form 10-Q:
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Exhibit Number | | Exhibit Description |
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3.1* | | |
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10.1 | | |
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10.2* | | Credit Agreement, dated as of June 12, 2020, among Playa Hotels & Resorts N.V., Playa Resorts Holding B.V., as Borrower, the Guarantors party thereto, Cortland Capital Market Services LLC, as Administrative Agent, Acquiom Agency Services LLC, as Mexican Collateral Agent and the lenders party thereto from time to time |
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10.3 | | Loan Agreement, dated as of June 12, 2020, among Hilmobay Resort III, LLC and Playa Dominican Resort III, LLC, collectively, as Borrower, Hilmobay Resort Limited and Playa Dominican Resort B.V., collectively, as Security Guarantor, PHR Lender LLC, as Agent for the lenders and the several lenders party thereto from time to time (incorporated by reference to Exhibit 10.3 to the Current Report on Form 8-K filed by the Registrant on June 12, 2020) |
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10.4 | | |
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31.1 | | |
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31.2 | | |
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32.1 | | |
| | |
32.2 | | |
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101 | |
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104 | | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* filed herewith
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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| | Playa Hotels & Resorts N.V. | |
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Date: | August 6, 20192020 | By: | /s/ Bruce D. Wardinski | |
| | | Bruce D. Wardinski | |
| | | Chairman and Chief Executive Officer | |
| | | (Principal Executive Officer) | |
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the undersigned, in his capacity as the principal financial officer of the registrant.
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| | Playa Hotels & Resorts N.V. | |
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Date: | August 6, 20192020 | By: | /s/ Ryan Hymel | |
| | | Ryan Hymel | |
| | | Chief Financial Officer | |
| | | (Principal Financial Officer) | |